It’s ironic that the job of a DC plan advisor is to make things simple for clients, yet, to do that, advisors have to be able to create and run complex practices.
A plan advisory practice is more complicated than a straight wealth management or benefits practice and, with new laws and demands from clients as retirement planning becomes more important to everyone, it’s only going to get harder.
To run a wealth management practice, an advisor has to know who to sell and market to, understand investments and, depending on the size of the practice, manage people. For plan advisors, tack on understanding ERISA and plan design, plus selling to both corporate entities and individuals. Wealth managers have to answer to FINRA and/or SEC; for plan advisors, add the DOL, which is making things even more interesting with their proposed rule redefining a fiduciary.
And while the DC market is more complex than wealth management, DC clients tend to be less sophisticated, especially plan participants. Plan sponsors are the buyers, but not the users, of the products sold — which means that plan advisors have to extoll the benefits of their services to employees, yet be careful to manage costs, liability and work for employers.
There are a few plan advisors who focus exclusively on selling DC and related retirement plans to companies, but most are leveraging relationship to cross-sell wealth management services to employees, as well as helping with IRA rollovers and roll-ins. Some enlightened advisors are looking at selling health care and even P&C services, with a small percentage already offering a “four corners” practice that includes retirement, wealth management, employee benefits/insurance and P&C.
What’s the ideal situation for most small and mid-sized employers? A relationship with one trusted advisor who can handle all corporate benefits and help employees manage them. That advisor will simplify everything and may, in the future, offer an interface for the company and their employees that serves as a portal to third-party vendors. Advisors will need to get data from these third parties, including record keepers, health care providers, payroll companies and even brokerage houses. That is why the growth of teams is accelerating, and will continue to do so — not just for brand, costs and access to capital, but also to be able to manage the people, technology and third-party vendors using “big data.”
As retirement planning for individuals and companies continues to become more important, plan advisors will have an advantage — certainly over wealth managers and probably over benefits and P&C brokers as well — to be that one trusted advisor. But to ascend to that catbird’s seat, advisors will need to make all their services simple to their clients through complex and capital-intensive advisory practices.
