In the beginning of the latest Batman movie, Catwoman warns Bruce Wayne, “There’s a storm coming, Mr. Wayne. You and your friends better batten down the hatches, because when it hits, you're all gonna wonder how you ever thought you could live so large and leave so little for the rest of us.”
It feels the same way for the DC industry, especially plan advisors. Those who survive and thrive must follow Catwoman’s advice – and be adaptable as well.
So while advisors, providers and perhaps especially broker-dealers take shelter in their storm cellars and wait for the final version of the DOL rule and the eventual fallout, let’s look at what changes have already occurred:
- Of today’s 300,000 active financial advisors, 250,000 are either managing or getting paid on a DC plan, with only 25,000 said to be “capable” and 2,500 true experts. Seriously?
- Goldman Sachs buys robo-advisor/record keeper Honest Dollar, which has little to no assets or clients. Any lingering doubts that these fintech companies will have an impact?
- AIG and MetLife sell off their advisor networks, in part because of the DOL rule and the limitations on big front-end-loaded commissions on selling annuities.
- * More states are offering payroll deducted retirement plans (some of which are mandated) for smaller employers, with some state-run plans putting private providers at a disadvantage.
- The departure of Baby Boomers from the workforce is setting off a war to capture and protect IRAs.
- There’s a move to the “gig economy” in which people like Uber drivers don’t work for companies anymore. How do we cover those people?
Think those changes will result in higher fees? Me neither. Here are some predictions:
- Advisors that cannot or will not act as fiduciaries on DC plans and IRAs will be at a severe disadvantage.
- Advisors who want to be successful in a DC market that is highly competitive (and well on its way to becoming even more so) will be pressured to join a team or group that pools intellectual and technological capabilities, as well as brand.
- To get more revenue and compete with robos, advisors need to start thinking about custom funds and technology solutions for smaller account balances, as prices for advisory services will likely continue to drop.
- As everything goes mobile and online, advisors that can get personal with clients — customizing solutions by using big data and financial wellness — will thrive.
If all this seems too daunting and too much work, you might want to get out before the storm gets worse.
Opinions expressed are those of the author, and do not necessarily reflect the views of NAPA or its members.
