Practice Management

Benefits and Challenges in Centralized Investment Decisions

Greater use of centralized portfolio management means advisers are under pressure to prove their value in other ways, such as offering financial wellness programs.

By Lee Barney editors@strategic-i.com | August 22, 2017
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Given the pending Department of Labor (DOL) fiduciary rule and increasing litigation risk, there is a growing trend among retirement plan advisory practices to centralize oversight of investment lineup decisions at the home office, rather than to leave them to the discretion of the adviser.

“This is a very interesting time of disruption in the marketplace,” observes Shelby George, senior vice president of adviser services at Manning & Napier in Rochester, New York. “The question of whether advisers should outsource management of investments is the biggest issue that they are struggling with today. There is not necessarily a right or wrong answer.”

Steve Bogner, managing director of Hightower Treasury Partners in New York, also believes this is a growing development in the retirement planning industry: “There’s a growing trend among certain retirement advisory firms to assume greater control over how investment decisions are being made,” he says. “Companies that are taking greater control in this area are likely attempting to limit their exposure to potential liability issues [as well as] the future implementation of the DOL’s new rule.”

But Cerulli believes that many retirement plan advisers will resist this change, and Sean Hanlon, chief executive officer of Hanlon Investment Management in Egg Harbor Township, New Jersey, agrees, saying, “Giving up more control to the home office could marginalize the role of the adviser and limit flexibility of the solutions he or she can offer. Advisers are closest to the employer and the participant and know their particular needs. Advisers can customize solutions according to those needs [and] don’t want to be a pass-through, fulfilling documentation. They want to add value.”

NEXT: Clients in control of investment changes