Adviser Interest in Retirement Plan Assets on the Rise

Whether advisers are heavily, moderately or lightly invested in the retirement plan space, all are hoping to capture more plans in 2012.  

Speaking with PLANADVISER, John Meunier, a Cogent Research principal and author of Cogent’s latest report, “2011 Retirement Plan Advisor Trends,” says that for all advisers who already have more than 5% of their assets under management from retirement plans, the goal is to increase that percentage.  

Of the 52% of the estimated 315,000 retail investment advisers in the United States who currently support at least one 401(k) plan, 5% are “Dabblers,” who have less than 5% of their assets with retirement plans. Similarly, only 7% of these advisers are defined by Cogent to be “Heavy” in the retirement space, with $25 million or more in 401(k) AUM. This group supports almost as many plans as all other 401(k) producers combined. In its report, Cogent surveyed the 47% of all advisers who do more than “dabble” in retirement plans – the “light,” “moderate” and “heavy” producers.

On average, Heavy producers support 30 plans, compared to an average of 11 among Moderate producers ($5-<$25 million 401(k) AUM) and five among Light producers (<$5 million 401(k) AUM). However, what distinguishes Heavy 401(k) producers from other advisers is not simply the number of plans they support, but the size of these plans as well. The average plan size for Heavy producers is $4.2 million, compared to $1 million for Light producers and $3 million for Moderate producers. The typical Heavy producers’ book of business includes between five and six plans with assets of at least $5 million, and one or two of these are likely to have assets exceeding $20 million.

“There is no doubt that Heavy 401(k) producers are more successfully targeting larger plans,” said Meunier. “As a result, these advisers compete with retirement plan consultants for the upper tier of their business. However, more than two thirds of plans they support have less than $5 million in plan assets, so the lion’s share of Heavy producers’ competition is still coming from other retail advisers.” 

Cogent found the highest concentration of Heavy 401(k) producers within the RIA channel where 39% of advisers who sell 401(k) plans report $25 million or more in 401(k) plan assets. The result is an average 401(k) AUM of $76 million for all RIA plan producers, four times the average 401(k) AUM at $19 million for plan producers overall. The second highest concentration of Heavy producers can be found within the national wirehouse channel where one in five (18%) plan advisers control $25 million or more in 401(k) plan assets. The proportion of Heavy 401(k) producers in the Regional and Independent channels is 8% and 10% respectively.

In terms of expected growth, Light and Moderate producers on average expect to add about three plans over the next year, while Heavy producers on average plan on adding twice as many, or about six plans over the next year.  However, noted Meunier, the proportion of expected plans is far greater for the Light and Moderate producers.

“What is interesting when we dig into these numbers,” said Meunier, “is the fact that non-RIA channel producers are predicting much higher growth rates next year. To me, this suggests that the adviser-as-retirement-specialist model is spreading and swiftly being adopted across all adviser channels.”