It seems that we are at the end of the second of three phases in the evolution of the DC plan advisor, many of which started out as stockbrokers or insurance agents and found that the DC market was lucrative and fed other aspects of their business.
As the third phase of the evolution begins, those advisors which have built significant plan practices must now transition into business managers. This transition will be tough for most, as it will separate firms that will be wildly successful and valuable from those that will do their best just to survive.
DC plans in general, and 401(k) plans in particular, are now mainstream, no longer a niche business. The press, the government and 80 million Americans enrolled in DC plans see the DC business as mainstream. It’s hard to argue with that perception when 250,000 of the 300,000 active financial advisors are getting paid on a DC plan. As the saying goes, the fish are the last ones to notice the water.
The challenge for most plan advisors is that they never had formal business training, succeeding instead based on their ability to sell, not to market or to manage people, capital and technology. Salespeople are usually lone hunters enjoying the kill, leaving others on their team to scavenge what they have killed. It’s hard for them to give this role up or share the limelight.
Three firms making that transition have unique business models. The first has a young, tech-oriented person who understands the advisory business but manages salespeople (and their egos) and is looking for the next opportunity, which includes the convergence of benefits and financial advice.
The second group props up their younger advisors, putting them in front of prospects — even speaking at events at the expense of the ego of the lead advisor.
The third firm is hugely successful, making lots of money with an integrated insurance, benefits, retirement and planning practice. But it is at a difficult crossroads. The lead advisor, a great business person, is equally adept at sales, bringing in the vast majority of the new business in a firm with almost 30 people. Should the advisor give up sales, sacrificing short-term growth, and focus on managing the business, building the team and mentoring newer, less experienced advisors?
While the answer may not be easy, it is obvious.
