Bing Waldert, a director at Cerulli, says the research suggests advisers have benefited from increased regulatory scrutiny of defined contribution (DC) retirement plans coming out of the most recent financial crisis.
“The retirement industry, in particular defined contribution, experienced heightened regulatory scrutiny coming out of the market crisis,” he explains. “The market downturn highlighted the role of the DC plan and its replacement of defined benefit (DB) as the primary retirement savings vehicle for the vast majority of Americans. Given the heightened scrutiny of retirement plans, the class of advisers and consultants who specialize in retirement plans and employee benefits has risen in prominence.”
The findings are from the October 2014 issue of “The Cerulli Edge – U.S. Edition,” which explores the topic of money in motion, analyzing investor switching behavior, adviser movement, and defined contribution investment-only (DCIO) growth.
One challenge for asset managers hoping to leverage adviser relationships is that this class of retirement specialist advisers remains ill-defined. Many advisers use core business models dedicated to wealth management or other financial services, with just a few retirement plan clients, Waldert says. These specialists often believe they sell a process and a business model, rather than a product, Cerulli observes.
Cerulli estimates that close to 13,000 advisers secure 50% or more of their revenue from DC plans. About half of these advisers operate within the insurance broker/dealer channel, Cerulli says, which historically has serviced a significant number of business owners. Retirement specialists increasingly are aligning within the independent registered investment adviser (RIA) channel as its fee-based, fiduciary emphasis suits the needs of plan sponsors.
Asset managers with developed DCIO businesses often divide their sales forces between retail and institutional coverage, Cerulli finds. Retirement specialist advisers say they are more likely to work with asset managers when they can work with sales resources to achieve the joint objective of abandoning turf wars and winning mandates.
Regardless of the channel, asset churn is costly for retirement specialist advisers. Client prospecting, onboarding efforts, signing bonuses, and requests for proposal consume resources that could be spent servicing an adviser’s core accounts, Cerulli says. Limiting money in motion, therefore, can enhance growth, build loyalty, and strengthen the adviser's long-term business success.
Information about how to obtain a full copy of “The Cerulli Edge – U.S. Edition,” is available here.