Fiduciary Rule Creating Opportunities for Advisers to Small Plans

Many sponsors in the mid- and small-plan market, facing pressure from participants and regulators, are seeking DC specialist advisers for the first time.

The Department of Labor’s (DOL) pending fiduciary rule is just one of many factors causing smaller retirement plans to seek out the services of specialist retirement plan advisers, says George Revoir, head of distribution for John Hancock Retirement Plan Services in Boston.

Related to this trend, broker/dealers are enhancing their service offerings to provide non-retirement specialists with more tools and protections so that they can effectively act as fiduciaries to these plans, he says.

Many small plan sponsors are beginning to realize that the advisers currently servicing them are commission-based brokers, not necessarily fiduciaries, causing them to look for help with the fiduciary rule and participant education, agrees Chris Schaefer, head of MV Financial’s retirement plan practice in Bethesda, Maryland.

“Small plan sponsors are beginning to question what value their adviser brings to them, particularly if that adviser is not acting as a fiduciary,” says Matt Wolniewicz, president of Fi360 in Chicago. “They are now realizing that, rule or no rule, their adviser needs to look out for their best interest.”

“For advisers, this means upping their game and operating as a 3(38) fiduciary to plan sponsors, formally acknowledging their fiduciary responsibility in writing and taking on all the responsibilities for the due diligence, selecting and monitoring of the investments,” says Edward Dressel, president of Retire Ready Solutions in Dallas, Oregon.  “For advisers who combine these duties with participant education, the outcomes can be extraordinary.”

But there are challenges in servicing small plans, the experts say. Advisers who move to the small plan market need “scalable solutions to deliver across multiple plans, as opposed to serving uniquely individualized jumbo plans,” Revoir says. As well, the Department of Labor restricts marketing  communications to plans with less than $50 million in assets, says George Michael Gerstein, counsel at Stradley Ronon Stevens & Young in Washington, D.C. “If, as part of your marketing, you recommend a security or product, the DOL considers that a restricted recommendation,” Gerstein says.

Marc Caras, head of the Retirement Plan Network at Pershing in Jersey City, New Jersey, says specialist retirement plan advisers are beginning to move up market, creating opportunities for more novice advisers to enter the small and micro market. This is why firms like his are creating tools for advisers in the small and micro market, such as the Retirement Plan Network, Geli says.

“It provides the adviser with access to professional recordkeeping data that is integrated with the workstation,” he says. “It shows the adviser plan level and participant level data to give them a better opportunity to understand a plan’s demographics and to service the plan. Another tool that we will launch in early 2018 for the small plan market is a plan oversight tool that will enable advisers to monitor up to four sets of requirements.”

John Geli, president of DST Retirement Plan Solutions in New York, says he sees tools being developed for advisers in the small market in four areas, the first being retirement plan analytics to assess plan health and suggest ways advisers can improve plan design and retirement participant outcomes. “There are also practice management tools, such as our Plan Investment Plus, which provides advisers with the information they need to be in compliance,” Geli says.

The third area includes tools to help advisers aggregate all of their books of business, and the fourth area are retirement income and financial wellness tools. “If the newer advisers take advantage of these types of tools, they will be able to effectively service small plans,” Geli says.