Convergence, Small Plan Explosion and Activating Wealth Advisors Dominate RPA Broker/Dealer Roundtable
The convergence of wealth and retirement at the workplace and the explosion of small 401(k) plans are colliding to create a powerful wave that savvy broker/dealers are riding. Not only are more wealth advisors becoming interested in defined contribution plans as they see how they can help grow their business while serving valuable clients and keeping competing advisors out, but senior management have become more engaged.
The energy and excitement of retirement leaders at top firms at the sixth annual RPA Broker/Dealer Roundtable & Thinktank (recap of 2023 Roundtable) held in NYC September 4 and 5 prior to the 2024 WealthManagement.com Industry Awards was palpable. Most gatherings hosted by providers and associations create a set agenda guessing what might be of interest or focused on their products and self-interests—the RPA Roundtable series allow attendees to discuss what is most relevant to them hearing from their peers enabling in a real discussion.
View the winners of the 2024 Wealth Management Industry Awards
The discussions centered around:
- Convergence
- Laws and lawsuits
- Plan sponsor issues
- Advisor issues
- Partner issues
- Investments
- Broker/dealer issues
The main themes along with convergence, small plans and emergence of generalists included:
- Advisors using home office solutions (338) more than PEPs
- Participant data a priority while retirement income is not
- How to execute on convergence
- How to leverage strategic partners
- Removing plan formation inefficiencies
- Instilling trust by generalist through home office—make it easier
- How DC plans help generalists grow their practice
- Helping RPAs do more wealth
- Hopeful but very early signs about retirement income
- Home office wary of housing participant data
- Conflicts with record keepers calling participants/clients
- Growing use of TPAs by generalists—how to vet
- Service issues with fintech record keepers
Freida Lewis from host Broadridge highlighted the importance of executing on the bridge to wealth while Bidmoni’s Stephan Daigle emphasized the need to remove inefficiencies especially around plan formation, which is currently so complicated.
While DC plans are a key business driver for wealth advisors, according to Cetera’s Jon Anderson, the DC industry must stop dissuading them from doing ERISA plans, which they have been doing for decades. “Both education and referrals to specialists have not worked,” he noted. “Is there a third way?
Brian Brashaw from Osiac, a Wealthies winner in the Broker/Dealers: Wealth and Retirement Integration category, noted that some advisors turn away DC business with Cerulli’s Shawn O’Brien blaming it on wealth advisors who think it is too complex.
Lori Commerford of Voya, a 2024 Wealthies winner in the Record Keepers: Retirement Plan Advisor Support category, said both providers and advisors need to be able to help the average participant while making money by unpacking convergence.
Shelli VanDeMark from Morgan Stanley commented that DC plans are like a spider’s web with many interconnected parties making strategic partnerships that much more critical. She also noted that many specialists are tapping into office small plan solutions while Raymond James’ Candic D’Andrea said that some RPAs are using the home office 3(38) solution for larger plans.
Regarding retirement income, one broker/dealer quipped that every product provider and record keeper has presented it but not one advisor has asked for it. Even Northwestern Mutual’s Adam Younk noted that his firm, steeped in lifetime income and annuities, is working through internal issues while managing risk.
Retirement income may be a low priority (see recap of 2024 Retirement Income Roundtable) but participant data is high—most home office professionals would prefer to let the advisors get it wary of privacy issues and risk.
Jack Barry from John Hancock, winner of the 2024 Wealthie in the Retirement Plan Support and Advisor Services: 401(k) Service category, said data is not a record keeper asset as Morningstar’s Chris Weirath noted that even though they have built data pipes to many record keepers, they must still deal with outstanding issues (Morningstar won a 2024 Wealthie in the DCIO Providers: Advisor Value Added Programs category). An industry consortium spearheaded by SPARK and DCIIA fell apart before the pandemic with DCIIA’s Lew Minsky commenting that maybe blockchain will be the solution
Cetera’s Anderson said that a recent webinar on the subject drew two times the normal attendees also noting that his larger advisor groups are interested like never before as are his senior managers providing perhaps a hopeful sign.
Taylor Hammons at Kestra commented that advisors need to form relationships with participants before a rollover event as Shawn O’Brien noted that 85% of advised rollovers come from an existing relationship and have higher account balances.
TPAs are becoming more relevant to help generalists but Bob Carroll MAP Retirement, a national TPA, said many broker/dealers struggle vetting them. They need to understand their wealth stack and cybersecurity resources as many TPAs house more data than record keepers while many TPAs are not even digitizing records. He also noted that most specialists do not want to do small plans which is both a gap and opportunity.
Highlighting service issues with fintechs, Brashaw noted that his advisors are asking, “Who is going to make my life easier, not harder.”
A heated discussion ensured about record keepers investing in and promoting services that compete with advisors. An attendee said, “We have no problem competing with record keepers, (we crush them!), but then do not come in and ask me to be partner.” One advisor screamed at their home office after a record keeper went after his biggest client asking, “Why are we still doing business with them?” Another said that the same record keeper crossed out a restriction to call on participants above a certain balance in their selling agreement.
Though there is more support from senior managers, one attendee noted that it is critical that legal and compliance have either experience or knowledge of the DC business.
And though benefits are part of the convergence discussion, very little is being done right now, even HSAs as one broker deal said her advisors are not asking for them.
Amazing discussion from the professionals at forefront of the convergence and small plan explosion as the 275,000 generalists, compared to 12,000 specialists according to Cerulli, awakening to the reality and opportunity that the workplace offers with a projected 1 million 401(k) plans by 2029 and over 100 million accounts right now.
Please join us next year scheduled right after Labor Day for the 7th annual RPA Broker/Dealer Roundtable.
Fred Barstein is founder and CEO of TRAU, TPSU and 401kTV.
