micro scope | PLANADVISER July/August 2017

The Best Path Forward

How advisers focused on micro plans grow their business

By Lee Barney | July/August 2017
Page 1 of 4
Art by Sonny Ross

Advisers who specialize in the micro retirement plan market—i.e., in plans with $10 million or less in assets under advisement (AUA)—say that fee compression has made it more imperative than ever that they grow by expanding the number of clients they serve and their AUA.

Steve Ulian, head of institutional sales and relationship management for Bank of America Merrill Lynch in New York City, calls this strategy “critical. It is becoming increasingly hard to make money given the fee pressures” and the growing demands of sponsors—including those on the low end of the market, he notes.

When advisers who specialize in the micro-plan market are asked whether they would prefer to grow their business by taking on more clients or moving upmarket, many say they want to remain focused on smaller plans because of the close relationships they have with their clients, the lighter competition they encounter and the greater impact they can have on smaller vs. larger plans.

In fact, the 2016 PLANSPONSOR Defined Contribution (DC) Survey found that only 60.7% of plans with $5 million to $10 million in AUA have an adviser, compared with 78.9%% of plans with $50 million to $100 million—meaning there is significant opportunity for skilled advisers to win new business without competing against each other.

It may make sense for an adviser focused on micro plans to move upmarket if he is a registered investment adviser (RIA) and works alone rather than being part of a team that supplies deep investment, educational and communication support to bring to the client, Ulian says. “If you are unable to scale that across many plans, you may be better off having fewer plans with greater assets,” he says.

But adviser sources for this story who focus on micro plans prefer to remain in that space. “It’s a better customer,” says Jim Sampson, director of retirement advisory services at Hilb Group Retirement Services in Warwick, Rhode Island. “You actually have a relationship because you are dealing with the owner or owners of a small private business as opposed to boards or committees that turn over every three years. It makes for a longer-term client, and there is not as much competition for the business.”