Skip to main content

You are here


Scale Matters for Plan Advisors More Than Ever

The advisor sold DC world is changing fast and those that don’t adapt will be left behind, according to Troy Hammond, founder and CEO of Pensionmark. “Plan advisors used to be able to get away with using 3rd party investment reports and other tools, but fee compression as well as demand from more sophisticated plan sponsors has shifted expectations,” Hammond explained, “so advisors need scale and greater resources more than ever.”

While record keepers are able to quickly replicate innovations launched by competitors, Hammond claims it’s harder for advisors working solo or in smaller groups. Interestingly, he claims that advisors are largely to blame for many of the problems — offering more and more services for lower fees while raising expectations.

So while emerging and core advisors have quickly adopted third-party tools and more BDs are offering them, advisors that want to stay competitive have to do more in the form of financial wellness, lower cost funds and group pricing for record keeping and administration — and that requires the kind of scale that larger groups like Pensionmark — which sends out 3 million participant communications each month — can bring to the fore.

In addition, larger advisor shops are starting to offer custom investments in the form of CITs that are half the price of active ’40 Act funds. Though MEPs are still being used, there’s a new service called “81-100 trusts” that offer some of the benefits of a MEP, especially around investments, even if each plan has to file its own Form 5500 or conduct audits if applicable. According to Hammond, providers are more willing to work with larger advisory groups that offer customized MEPs, 81-100 trusts and CITs.

So while the DC advisor world is moving toward more and bigger aggregators, Hammond admits that there is room for smaller advisor groups. Though very few people believe that emerging advisors will go away, especially for smaller plans, Hammond believes that in the future, mid-size and larger plans will demand more services and lower pricing from their advisor, which means that scale will matter even more.