Skip to main content

You are here


One MAJOR Mistake Advisors Make in the Retirement-to-Wealth Transition

Practice Management

More 401(k) advisors are moving to (and often struggling with) wealth management.

How do they get started, what makes them unique, and how can they effectively capitalize on the retirement plan relationships already in place? All are important questions that, answered correctly, can take advisory businesses in new and exciting directions.

Yet, it’s easy to get tripped up, something Florida-based Chairvolotti Financial’s Ed Chairvolotti sees firsthand, probably due to his unique vantage point from coming the other way—wealth to retirement.

Having started as a stockbroker out of college, the CEFEX-certified Chairvolotti, a 3(38) fiduciary, zeroed in on retirement plans, which now comprise the majority of his book.

“What I see most advisors struggle with is that they provide no education,” he said. “When they meet with 401(k) participants, they let the recordkeeper do the education. That education will not move the needle on private wealth. They don’t really have a value proposition because they’re target-dating everyone.”

Arguing there are three phases of lifetime wealth, the 401(k) is only the first.

“Phase one is accumulation, which lasts 40 years,” he explained. “Our industry hurt the advisor because they forced everyone to auto-enroll and auto-escalate. ‘Just put everyone in a target date; you’ll be fine.’ Last year, that blew up with a bear market in bonds.”

First-rate education is how to get the relationship back. Chairvolotti provides fundamental and technical onsite education and regularly scheduled e-newsletters to his plan sponsors, participants, and retail clients. He uses regular language devoid of “industry speak,” which his clients appreciate.

“We just spoke and wrote about the bank situation. It’s simple. Somebody was asleep at the switch. They weren’t buying risky assets, but they weren’t smart enough to really understand duration. Silicon Valley Bank had long bonds. If the participant of retail prospect has money to invest, they’ll remember those talks. They’re just hurting themselves if they have the recordkeeper do it.”

A major industry question currently surrounds who “owns” the participant relationship—the recordkeeper, the advisor, or somebody else. Are advisors helping recordkeepers to remove them from the relationship by bringing them in?

“Yes, that’s it right there,” Chairvolotti concluded. “When we work with any record keeper, we demand one point of contact, and everything has to go through me. I’m on every plan design call and quarterly meeting, so I don’t let the recordkeeper communicate without me. They’re good people, but if I can’t be on a call or in a meeting, someone on my team is.”