As we emerge from the pandemic, and before we plan for the future, we should first acknowledge that the world has changed as a result of the pandemic. People are ready to come out and live again even with the threats that the coronavirus still presents. It’s time. But hoping to go back to the way things were will not just be futile, it would be dangerous and even tragic if we do not leverage all the opportunities of this new world.
I have been working in the advisor sold 401(k) industry since 1996 when a brave few practitioners decided to focus on workplace retirement planning as defined contribution plans began to replace defined benefit plans. These plans have one major thing in common—payroll deducted at the workplace—but one major difference—DC plans are participant directed, which is why advisors were and are essential.
So while the retirement plan advisor DC market has existed for over 25 years, it feels like we are just getting to the real work of helping people, not just employers, with the pandemic providing extraordinary opportunities. The focus has clearly shifted from plan services, which are table stakes, and plan designs, which are obvious, to working with and helping employees leveraging the $10 trillion, which is really $23 trillion if we count IRAs, as well as access to almost 100 million participants and the protection afforded by worksite savings plans.
RPAs emerged from wirehouses and insurance brokerages, which spawned the RPA aggregators who are taking the lead to show both retail and institutional advisers what is possible. Firms like CAPTRUST have proved that there’s opportunity to serve participants, even if it’s just the wealthy 3% for now, and firms like HUB have shown the power of cross-selling benefits, P&C and retirement plans to employers. Traditional broker/dealers, RIA firms and institutional consultants have already taken heed.
All of which begs the question: What now? What new opportunities lie in the post-pandemic world?
Even though there are millions of fewer jobs since the start of the pandemic in March 2020, there is a war for talent fueled by the great resignation, more people retiring and a temporary decline in lifespans due to the opioid crisis and COVID-19. Jobs are being created at record levels just as the workforce dwindles with more people entering the gig economy.
As a result, benefits, especially financial benefits and specifically 401(k) and 403(b) plans, are one of the main weapons to help employers recruit and retain talent. This seismic shift means that senior management is paying close attention to their DC plan when they were mostly ignored just two years ago.
The key issues for employers before the pandemic had been intellectual: fiduciary liability, financial wellness, and complying with laws and regulations. There has been a shift to dealing with the war for talent, communicating with a remote workforce and helping employees navigate worksite benefits. It is a fundamental and almost emotional shift.
When we add in increased litigation and laws, state and likely federal mandates, as well as the profound improvement and acceptance of virtual communication with the convergence of wealth, retirement and benefits at work, the opportunities seem endless. But these can also be frightening, especially for those hoping to return to the world as it existed on March 11, 2020.
Which is why it seems to me that we are just at the beginning of the evolution of DC plans that took real shape as a way to replace the DB systems and has now evolved into leveraging the worksite to help people with financial issues beyond retirement savings. There needs to be a redefinition of “retirement” to “financial freedom”; we need to figure out how to profitably serve the 97% of workers that do not have access to traditional, customized financial planning and wealth management through hybrid solutions leveraging technology and data deploying virtual financial coaches.
So the time is now to get out there and look for the differences in the new post-pandemic world, listening to clients about their problems and to innovative peers for their solutions. Because those not busy being born are busy dying. Whether they know it or not.
