Aug 27, 2012 --- The professional retirement plan adviser profession will be
fundamentally transformed during the next three years, according to a study
from Diversified. ---
“Advisor Practices of the Future 2012-2015” illustrates how
mandated fee disclosures and health care reform will fuel double-digit growth
for advisers who work primarily or exclusively with retirement plans, as
practices transition from regional to national, and merger and acquisition
The market share of professional retirement plan advisers in
the $10 million to $500 million market, a targeted segment, will grow from 25% to
40%, and the number of plan advisers will increase by nearly 50% during the
next three years, Diversified predicts in the report. To support this growth,
firms will need to focus on recruiting and developing talent, as the pool of
qualified candidates may not be large enough to meet demand.
Thousands of advisers generate some revenue from retirement
plans, but Diversified estimates the number that focuses exclusively on midsize
to large plans at approximately 550 professionals, according to Joe Masterson,
senior vice president and chief sales and marketing officer of Diversified.
“With an increasing number of health and welfare advisers, and wealth
management advisers poised to migrate toward this market to enhance their
practices, the industry is about to embark on a new era of growth and
development,” Masterson said.
The study predicts a number of trends that will shape and
transform adviser practice. Plan sponsors will likely focus more on participant
outcomes. As more companies transition from defined benefit (DB) pension plans
to defined contribution (DC) plans, plan sponsors’ interest in measuring
participant retirement readiness will surge.
As a result, advisers will focus more on outcomes and less
on enrollment, asset allocation and debt management, while service providers
will train their attention on planning tools, participant-level indicators and
plan reports that help advisers monitor progress. By 2015, 51% of retirement
plan advisers expect to offer participant advice directly, and an additional
26% expect to offer the service in partnership with another organization.
Regional firms will be folded into national practices. Increased
merger and acquisition (M&A) activity—90% of advisers expect M&As to increase in the next few
years—coupled with technological innovation that makes it easier for practices
to operate nationally will help many regional firms achieve greater economies
of scale by building national practices. As this trend develops, advisers will
less frequently use plan type and geography to define their target markets.
Reliance on retainer compensation will increase. The percentage
of plan sponsors with $5 million to $500 million in plan assets who rely on an
adviser paid on retainer is expected to increase, to 49% in 2015, from 33% in
2012. Consistent with industry fee compression, the shift toward a retainer
model is expected to spur additional adviser search activity, which will prove
difficult for advisers attuned to an asset-based compensation system while
creating new opportunities for those who successfully operate within the
“Change is inevitable for professional retirement plan adviser
practices,” Masterson said. “The Advisor Practices of the Future 2012-2015
report aims to help advisers anticipate the new challenges and
opportunities that will surface as the industry is transformed.”
Practices of the Future 2012-2015” study is based on insights from more than 50
retirement plan advisers, consultants, and practice leaders
representing the spectrum of the profession and from Diversified, a provider of
retirement plan administration, participant communication and open architecture
To request a copy, email RetirementResearchCouncil@divinvest.com.