Will the squeeze on health benefit brokers caused by Obamacare push them into the 401(k) market? According to an InvestmentNews article, there’s evidence that while individual benefit brokers will have a hard time penetrating the 401(k) market any time soon, large firms are looking into it, with many collaborating with established retirement advisory shops. ERISA attorney Marcia Wagner says that she’s getting more inquiries from benefit firms about the ERISA arena; Jason Roberts of the Pension Resource Institute claims to have helped 10 firms work out deals with DC shops.
There’s margin pressure on both sides of this equation that can create either opportunity or big challenges. While the DC market needs more advisors who are equipped to help plan sponsors and participants, especially in the smaller market, it takes a lot of time and training to become a skilled, successful plan advisor.
Collaboration does work, as evidenced by the Willis/Sageview deal in 2005, but it’s hard for firms to trust each other with their clients. Referral fees or commissions are also an issue.
NFP is trying to be more aggressive, marrying their benefit groups with retirement practices; Gallagher integrates the two disciplines through an aggressive acquisition strategy. Smaller DC shops may have trouble hiring or creating a benefits practice, so it might make sense to collaborate with benefit firms looking for new sources of revenue from their current client base.
