How Do Advisers Navigate the Convergence of Retirement Planning, Wealth Management?

Increasingly, retirement advisory practices are branching into wealth management services, and vice versa—an expansionary move that makes sense to Jon Anderson, Cetera Financial Group’s head of workplace and retirement. Anderson is not hung up on whether plan advisers should or should not offer wealth management—he views it as trusted financial professionals getting more resources.

“It’s like saying, ‘What’s better for hydrating in a dry desert—a soda or a juice?’ It doesn’t matter: Either is better than neither,” Anderson said at a November 3 panel at the PLANADVISER 360 Conference in Scottsdale, Arizona.

The panel audience seemed to be on his side: A majority agreed in an informal poll that plan advisers could be wealth managers. Anderson said offering clients wealth management and retirement planning services helps them “through the whole life cycle of the savings cycle—saving and spending,” adding, “I like to assume the best intent from plan advisers and then verify it.”

Other panelists said advisers need to be honest with themselves about whether their push for wealth management is for the benefit of their clients or their bottom line. Shane Hanson, Freedom Fiduciaries’ president and CEO, said it was wrong for advisers to use advisory services “as a Trojan horse to get rollovers and sell annuities.”

Asked how advisers can avoid conflicts of interest in wealth management, Joe DeNoyior, president of Hub Retirement and Wealth Management, said they need to offer full transparency to the employer and the plan committee about how services are offered to plan participants.

Kelli Send, Francis LLC’s co-founder and senior vice president of financial wellness services, said her practice avoids wealth management and refers clients to a retail brokerage network for maneuvers like trading individual equities or building a bond ladder. She warned of fiduciary risks, because while plan administrators subject to Employee Retirement Income Security Act prohibited transaction rules are regarded as “big ‘F’ fiduciaries,” wealth managers are “small ‘F’ fiduciaries” whose actions are only held responsible once they make a sale, but not when they are marketing products to potential clients.

Send rejected that distinction, opining that fiduciary standards should be applied from the moment a financial professional first interacts with an employee. She asked, “Shouldn’t the employee also be considered our client?”

Pay for Play?

Hanson does not recommend wealth management to clients with accounts smaller than $500,000, given its high fees and costs. He will still provide information and answers to participants with smaller accounts.

Send said her preference and her firm’s practice is to offer the same financial services and planning to all clients, regardless of the size of their accounts. When she co-founded her firm with Mike Francis, they decided to collect a flat fee for all their participant services, including help with Medicare and Social Security, taxes and financial planning.

“You wouldn’t pay your accountant or your attorney based on the asset size,” Send said.

DeNoyior agreed with Anderson that it makes sense for retirement plan advisers to extend into wealth management, to build participants’ “confidence in their future,” rather than focus on accumulating assets. He said clients use his company’s financial wellness program most often for budgeting, followed by debt management.

“If we’re the ones working closely with the plan sponsors, helping them design a program to set these folks up for success, wouldn’t it be a disservice if we weren’t offering [participants] other services?” DeNoyior said.

Anderson said that wealth management has led to greater participation in retirement plans, because some high-net-worth wealth management clients were inspired to offer better retirement plans and financial wellness services to their own employees.

“The business owner is now becoming more and more concerned about their overall employee population: ‘How do I provide services to all participants?’” Anderson said. “I think that’s a fruit of this convergence.”

While the panelists shared differing levels of comfort with convergence, they remarked multiple times that they seemed to have underlying agreement on their purpose.

“We all have the same goal, which is to provide equitable, high-quality advice and guidance in a transparent way to plan participants,” Hanson said. “The convergence is already happening. So how do we do it properly?”