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As Plan Advisors Enter Their Third Decade, What Lies Ahead?

This year marks both the 10th anniversary of the Pension Protection Act and the unofficial 20th anniversary of advisors specializing in DC plans. So what’s in store for plan advisors as they begin their third decade?

In his “Inside the Marketplace” column in the latest issue of NAPA Net the Magazine, industry insider Fred Barstein takes a look ahead at the future of the DC advisor sold market. Barstein identifies three key trends:

  • Focus on Outcomes – “But only if we can get senior management fully engaged in their DC plan – no small feat,” he writes.

  • Business Management – “Advisors need to learn how to become business managers, not just good salespeople focused on investments,” Barstein believes — which means managing people, technology and capital as well as cross selling other benefits and wealth management services. Look for consolidation to speed up, with more advisors joining specialty groups, he notes.

  • Beyond Fiduciary – Under the new DOL conflict-of-interest rule, practically every advisor will either become a fiduciary or have to partner with one. So in order to distinguish themselves, advisors will need to position themselves as leaders and stewards for their clients, he believes.

According to Barstein, other issues that might influence the industry overall in the next decade include financial wellness, retirement income, and MEPs or some form of omnibus plan and investment menu for groups of small plans.

“In a seminal Harvard Business Review article, ‘The Consolidation Curve,’ there are four stages of consolidation within most industries,” notes Barstein:

1. Opening – with one firm dominating joined by a few others
2. Scale – Larger firms look to build through acquisition
3. Focus – Mega deals and shoring up core competencies
4. Balance and Alliance – Major players cooperate as deals are hard to find

“The plan advisor market is now at the beginning of Stage 2, while record keepers are about to exit Stage 3 and entering the final stage, where airlines now dwell,” he believes. “Advisors that just want to focus on their clients and practice should either stay very small and nimble, sacrificing any hope of succession planning, or align with the right specialty group based on culture and fit. Not adjusting means repeating history.”

In addition to Barstein’s regular “Inside the Marketplace” column, the Fall issue of NAPA Net the Magazine includes our cover story on the impact of the DOL conflict-of-advice rule on DCIOs and record keepers and NAPA’s 2016 Top 100 Wholesalers list. The issue also features insights from regular contributors Jerry Bramlett, Steff Chalk, Nevin Adams, Warren Cormier, Brian Graff, Don Trone, Sam Brandwein, David Levine and Lisa Schneider.

To view Barstein’s column, click here and select “What’s Ahead for Plan Advisors Entering Their Third Decade?” And to view a pdf of the full 64-page issue, click here.