Fee-Only FAs Positioned Well to Capture Retirement Plan Assets

Fee-only advisors have a significant opportunity to go into the retirement planning business, said Gary Allen, a principal at Prudent Investor Advisors, an RIA specializing in retirement plans. During NAPFA’s annual conference in Salt Lake City, Utah, this week, Allen told attendees they’re well-positioned to capture retirement plan clients because of their fee transparency and their business model’s alignment with ERISA.

“You’re in the right place to advise plans just by the way you’ve decided to conduct your business,” Allen said.

The fee-only model is in complete agreement with how these plans are supposed to be managed under ERISA, with its conflict-free advice and revenue-neutral approach, he added.

Very few people specialize in the retirement area though, Allen said. In fact, out of 338,000 advisors in the marketplace, there are 188,000 advisors who are not currently serving a retirement plan. Meanwhile, there are a total of $4.5 trillion in defined contribution retirement assets, he added. Also, advisors who provide retirement solutions have a larger share of their clients’ assets.

Moving into the retirement planning space can diversify an advisor’s revenue, as retirement plans provide a continuous cash flow no matter what the market is doing, he said. These plans are also a way for fee-only advisors to reach non-high-net-worth clients, including family, friends and neighbors.

Allen cautioned against the changes to the rollover business coming down the pike in the next 10 to 15 years and the effect those changes could have on advisors’ businesses. Specifically, vendors will continue to come out with income-for-life products to keep participants in the plan beyond retirement. This will heat up the competition for those post-retirement assets, he said. “Every vendor in the industry is working that way.”

His advice for breaking into the retirement plan market: “Do your homework.” The two top reasons plan sponsors leave a firm are service and a change in situation, management or ownership. Where do they go? “It’s who you know.”