With broker/dealers (B/Ds) actively encouraging their advisors to embrace the retirement plan space, a new report by Cerulli suggests that asset managers will need to adapt their approach to product distribution and advisor support in this evolving intermediary landscape.
In fact, most top-tier asset managers have separate wholesaler teams dedicated to covering the defined contribution (DC) market, including B/D-based advisor practices that specialize in advising retirement plans, according to the latest Cerulli Edge—U.S. Asset and Wealth Management Edition.
However, when it comes to “dabbler” and “nonproducer” retirement plan advisors, the coverage areas between retail and DC wholesalers start to blur, adding a layer of “logistical complexity” to engaging and supporting these advisors, the report notes.
“‘Dabbler’ and ‘nonproducer’ retirement plan advisors make up the majority of B/D-based retirement plan advisors and a meaningful portion of B/D advisor-sold DC assets,” explained Shawn O’Brien, director at Cerulli. “However, some asset managers say their firm still employs a siloed approach to covering these advisors, with little communication between retail and DCIO wholesaler teams.”
Cerulli notes that dabblers are advisors for whom 15%–49% of their AUA is with retirement plans and nonproducers are advisors for whom less than 15% of their AUA comes from retirement plans.
As an alternative, asset managers should instead position themselves as strategic partners for B/D-based advisors seeking to bridge their retirement plan and wealth businesses, the report suggests. To that end, close to half of dabblers and nonproducers (44%) say if they received greater support cultivating wealth management clients from their DC business, they would be more inclined to pursue DC plan opportunities.
Another consideration is that, even though most B/D-based advisors have only a small portion of their total AUA with workplace retirement plans, many have small-business owner wealth management clients who administer and sponsor these workplace plans, the report observes. “For advisors, overseeing their wealth management clients’ retirement plans adds an element of stickiness to these relationships,” the report emphasizes.
As such, Cerulli recommends that asset managers’ distribution teams employ a collaborative coverage model to address these advisors who express an interest in improving or growing the retirement plan side of their businesses.
Additionally, having better sales tools to grow their DC businesses is a keen area of interest among 41% of nonspecialist retirement plan advisors, the report notes.
“B/D-based advisors lean on asset managers for nonproduct-related tools, education, and strategic guidance that help them better serve their clients and grow their book of business,” O’Brien further observed. “By helping advisors improve and grow their practices, asset managers win advisors’ loyalty and trust, positioning themselves as strategic partners and laying the foundation for long-term, reciprocal relationships."
That said, employing more collaborative advisor coverage models will require asset managers to revisit their compensation structures to ensure wholesalers are compensated appropriately for their efforts, the report further advises.
