Advice Demand Buoys Optimism About Managed Account Growth

Survey data from Edelman Financial Engines suggest that, among those who spoke with a financial professional during a significant life event, virtually all of them found the interaction to be ‘highly valuable.’

In late July, Edelman Financial Engines announced the launch of Momentum, a new financial wellness platform built for the workplace.

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According to the firm’s press release about the new solution, Momentum builds on Edelman’s 401(k) advice and management services with a set of expanded financial wellness, counseling and planning resources. The service seeks to provide individuals with information and support during major life events and milestones, from significant family or health changes to decisions about saving for college and retirement.

The platform features a library of digital content, webinars and educational tools and assessments. Employees also have unlimited access to live, one-on-one counseling and planning sessions with certified Chartered Retirement Planning Counselors and Certified Financial Planners.

Following the announcement of the new service, EFE’s Kelly O’Donnell, head of workplace solutions, sat down for a discussion with PLANADVISER, recounted in the Q&A below, about the evolving financial wellness and managed account landscape. O’Donnell noted that recent Edelman research shows that 73% of employees expect their employers to provide access to a financial professional when they experience a significant life event.

While almost 89% of respondents to Edelman reported experiencing at least one major personal or professional event during the last five years, 79% confirmed that they hadn’t spoken to a financial professional during those moments. Among those who did, 96% found the interaction to be highly valuable.

PLANADVISER: Can you speak about how EFE’s clients are responding to the current moment of market volatility and economic uncertainty?

O’Donnell: As you know, we currently work with more than 800 of the largest retirement plans in the U.S., and that gives us a lot of insight into how people are feeling and responding to unfolding events in the markets. Right now, our clients and the workplace in general are in a very interesting spot. We had such a long and large bull market, and now we are facing a downturn, and people do have some fear that we could enter a period of recession. And, of course, this is all coming in the wake of a pandemic that dramatically reshaped people’s working and financial lives.

Frankly, this is an environment that we haven’t really seen before. What we are finding with the employers we work with is a desire to provide more holistic help for their employees. That’s one main aspect of what is going on in the retirement planning marketplace today.

We see strong evidence that this environment is motivating employers that have sat on the sidelines and waited to embrace things like advisory services and managed accounts to actually step up and get their people more help.

We have conducted surveys that show employees are looking to their employers for professional financial support, especially to help guide them through the critical moments in their lives, such as when they are newly hired or if they are experiencing a major personal milestone—perhaps a marriage or the birth of a child. Retirement planning support is also in great demand among employees.

PLANADVISER: Can you expand on this idea that more employers are moving ‘off the sideline’ when it comes to providing advisory solutions to their people?

O’Donnell: In our experience, it is a few different things. One is the ‘Great Resignation’ and the desire to attract and retain the best talent. The survey I mentioned shows 70% of employees are expecting this kind of support and these solutions. As an employer, if you want to attract the best talent, this is becoming a standard offering.

It’s also a matter of workforce management. As an employer, you want to make sure your people are financially stable, so they can be productive and eventually achieve a stable retirement. Advisory support and personalized investments help to make sure people are prepared and are ready to retire when that time comes.

We feel that another important factor is the growing focus on diversity, equity and inclusion in the workplace. I would also say that, in the past few years, we have seen a renewed focus on DEI issues. Today it is something that so many employers are focused on, and part of this focus is recognizing that there are many communities that have been significantly underserved by the financial community.

Bringing it all together, there is a real desire among employers to provide advice, access and financial wellness support for all—not just the upper managers and executives.

PLANADVISER: What roles are managed account technologies and other approaches to scalable advisory solutions playing in the marketplace today?

O’Donnell: Our approach is all about using technology to get this type of support to the masses. We built our whole retirement business on this theme. The technology is what allows us to build a truly personalized portfolio for people who only have that first $10,000 or $20,000 saved in their DC plan.

I would emphasize that technology has been at the forefront of our firm’s efforts, yes, but we also know the human support is critical, which is part of why we launched Momentum. Frankly, money is always emotional. Many of our licensed investment advisers are spending their time helping clients think and process their emotions—and to make sense of their financial lives at the moments that matter.

Even if you enjoy a tech-first approach, you are probably going to want to talk to someone at these critical life points, even if it is only to get some reassurance about how you are feeling. People are still needed in the most critical areas—for example, when you are deciding whether or when to take a rollover, or even more important, validating your decision of when and how to start drawing Social Security. We feel very confident about the hybrid approach.

PLANADVISER: In what other ways do you feel the advisory industry could grow to become more inclusive and holistic and reach new sets of underserved clients?

O’Donnell: Where we can all keep getting better and better is in recognizing and supporting the communities the traditional financial services industry has overlooked. Take, for example, same-sex couples. If two married men want to have a baby and start a family, their financial considerations are going to be different than those of a heterosexual couple. If you look at women in general, and then at the experience of Black American women, there are big differences there in terms of the financial challenges they face.

As an industry, we are now at the stage of working to solve the advice and retirement income issue for the masses. The highest net-worth people have this solved for them at this point. But the typical employee in America does not have the support when it comes to understanding how to draw down DC plan income, how to balance taxable and non-taxable accounts, when to draw Social Security, etc.

In this environment, we feel really great about our new solution, because it is built as a true planning experience, with the investment management built in. Our view is that you can’t just save and spend money and reach an optimal outcome. You have to have a plan. You have to be able to manage your assets in a way that gets you ready for retirement.  

Why a Regional Bank Feels Well-Positioned for Small-Plan Success

‘We, as the fiduciary adviser, can step in and leverage our investment experience and retirement insights to help business owners look out for their employees and help them prepare for retirement.’

Art by Katherine Streeter


In an effort to help small businesses offer competitive retirement programs, Huntington National Bank and PAi Retirement Services recently announced a partnership through which they will build and launch the Huntington 401(k) Center for Business.

The center seeks to provide small and midsize businesses with better support for their retirement plans. Undergirding the solution is Huntington’s wealth management arm, the Huntington Private Bank, which serves as the 3(38) fiduciary adviser and is responsible for the investment management services. PAi, in turn, handles the plan administration via its CoPilot personalized recordkeeping services. Clients also gain access to PAi’s participant platform.

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In a conversation with PLANADVISER about the new approach, recounted in the Q&A below, Frank Zugaro, head of the Huntington Private Bank’s retirement plan services business, emphasized the opportunity his firm sees in the small retirement plan marketplace. He says the challenges that have long prevented many small businesses from establishing and maximizing retirement savings programs can now be solved with a blend of technology and human support, and that the new fully bundled 401(k) service will position Huntington well in a rapidly evolving and increasingly competitive industry. 

PLANADVISER: Can you speak about the motivation behind the development of the new partnership with PAi and the focus on smaller plans? Is this an underserved marketplace, from your perspective?

Zugaro: We do agree that the small-plan space is historically underserved. I will go so far as to say the marketplace is underserved even by some of the solutions that our competitors have brought forward. Some of them, frankly, are not where they need to be to truly get a small business, a startup plan, into a foundationally good spot with a healthy long-term growth trajectory.

We see parallels with the discount brokerage industry. There are solutions that are marketed as being very simple and straightforward, but on the other hand there are no resources to rely on if a problem emerges or something doesn’t go well.

Why we feel we can be different is because we have embraced our identity as a fiduciary plan adviser, and that’s a step that we took nearly 10 years ago at this point. Prior to that, we were doing recordkeeping and servicing plans, but we looked to the future and identified the fact that we wanted to focus on the fiduciary advising side as a means of sustainable success.  

We have had success because we naturally have many customers of the bank who need these services. One statistic that we pay a lot of attention to is the fact that we are among the largest Small Business Administration-guaranteed loan issuers in the country. For six or seven years running we have achieved this distinction. So we understand what it means to be focused on helping entrepreneurs start a business and expand their business.

I like to say the new approach strives to be digitally powered, but with the support of real people. We are all about connecting technology with human support to bring better value.

PLANADVISER: Why did you choose to develop this partnership with PAi in particular compared with other possible firms?

Zugaro: In terms of partners for creating this solution, we looked seriously at four or five different providers. Our focus was on the technology side first, given how important the technology aspect is when it comes to building the kind of scale we are pursuing. We wanted modern technology that was easy to use for both the business owner and the participants in the plan. For example, we wanted to have a system where the employer can go online and set up their plan and automatically generate their plan document. We didn’t want the traditional conversion meetings and plan document review meetings. PAi is built that way.

The other important element is our relationship with Newport. You may recall that they have assumed the operation of our former retirement recordkeeping and administration business, with Huntington continuing to serve as plan adviser for its retirement plan services clients. You may also recall that Newport acquired PAi in November 2020. It was in the first weeks after that acquisition that Newport’s leadership called us and said we should think about creating a solution for small plans.

PLANADVISER: What do you see as the most critical service elements and deliverables for the small plan marketplace?

Zugaro: To begin with, ease of use is so critical, as is the ease of understanding the fees that are being paid. Some of our competitors in this market certainly have an easy-to-understand cost model—but the tradeoff is that it is all digital. It’s easy to come in with a very low price point when there are no service people involved.

From the adviser perspective, our fees are simple. We charge a base fee and an additional basis point fee based on the level of assets served. From a recordkeeping perspective, the solution has additional fees. Some are subscription- and some are asset-based, depending on the client relationship.

So it is not super difficult to understand how we are compensated. We also take pains to line-item our fees for that added degree of transparency. We know how important this is to our clients. In the end, our pricing might not be as simple as just saying it is X dollars per month for everything, but it is still very transparent.  

PLANADVISER: How do you view the evolving regulatory environment in which today’s DC plan advisers and their partners must operate? Do you worry much about regulatory changes affecting your business, either on the part of federal or state regulators?

Zugaro: Of course; this is something we focus on. We all know we have the Securities and Exchange Commission focused on the adviser and brokerage industries, and the Department of Labor also plays a key role. And we can’t forget about the National Association of Insurance Commissioners.

As a general comment, I would point out that we are a bank, so we are governed primarily by the Office of the Comptroller of the Currency and not the SEC. That said, many of our people have and use their SEC licenses, so we have to stay on top of everything.

Ultimately, our view is that no matter the regulatory body, they should be able to come in and understand quickly and easily what our services are and what our costs are. This point of view is about managing litigation risk—both for our clients and for ourselves.

PLANADVISER: What can you tell us about your hopes and expectations for profitability on this side of the business?

Zugaro: We are actually very optimistic, and we believe that the profitability in this segment, with this service approach, could eventually exceed the profitability in our core business lines. That will obviously require significant volume, but we feel it is achievable.

We have structured this solution to sit between our more traditional adviser relationships and some of the self-serve options our competitors have put on the table. We are doing something in between and we have a lot of confidence that the marketplace will catch on.

Something else to add is that this is not merely about scale. We don’t want to take on plans that we are not going to be serving well. That is a huge reputational pride point for Huntington. We don’t want to throw something out there and say ‘good luck’ to our clients.

So, as we develop this business, we think we can provide additional value that will allow us to match and eventually exceed the profitability in our core businesses. It’s a very streamlined, digitally enabled solution.

PLANADVISER: What will be the principal challenges to this vision, in your estimation?

Zugaro: We hope one of the problems is that we grow fast and then face the normal growing pains associated with this business. We really are trying to work hard on staying ahead of the issue, and that is true across all the different parts of Huntington. We have to be ready to add resources, technology and people. That’s always a big risk, but we can manage it.

The other risk, as it always is, is legislative. We think there is a ton of legislation change coming. When something like that happens, and new opportunities emerge for our clients, communication and proactive engagement becomes so critical on our end. We have to be nimble and to be ready to communicate with as many of our business customers as possible, so that we don’t allow our competition to set the narrative and disrupt our relationships. We have to be faster to market with insights and solutions than our competitors.

The other risk, which is more unique to the small business space, is that we get this thing up and running, and win a lot of clients, but then we could see some of these small businesses either merge or be acquired or simply go out of business. For example, M&A transactions are about 10% year over year in our book. We can’t really control that, but what we can do is get in touch with those business customers who are experiencing big changes.

In the end, we want to create a full continuum of advisory services. If a company goes from a startup to a mega plan, we want to be ready to serve them throughout that growth cycle.

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