When Merging Retirement Planning and Wealth Management, Participants Must ‘Come First’

As retirement planning and wealth management begin to overlap, a dividing line must be drawn between them for both business and compliance reasons, according to a panel of experts in PLANADVISER’s latest practice management webinar.


As the lines between retirement plan and wealth management advisers get increasingly blurry, it is important for advisers to draw a clear line between practices, according to participants in a PLANADVISER webinar held Tuesday.

In recent years, retirement advisory firms and wealth management practitioners have been teaming up via acquisitions and organic buildouts that use  hiring and training. The benefits of such a relationship are clear, said Stephen Welch, corporate retirement director for the Atlanta-based Foote Welch Group at Morgan Stanley.

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“As important as it is for participants to grow their private wealth through the 401(k) plan, on the other side it’s equally important that they take those assets and then decumulate them on the opposite side,” Welch told the webinar audience. “What good is it to acquire these assets on one side of the equation and then expend them too quickly and run out of money at the tail end?”

As much as the combination of retirement saving and personalized wealth management go hand-in-hand, it’s equally important that advisers keep these two areas siloed, said Welch, who is also financial wellness director and a financial adviser for his firm.

“My partner and I run a 50/50 practice where I mainly focus on retirement plan business and he focuses on private wealth,” Welch says. “When it comes to that hand-off from plan participant to the private wealth side, there is a wall there so my focus and my attention is serving plans and participants, and once that client steps over onto the private wealth side, there is an individual there to meet that need.”

This sentiment of careful division for closely aligned services carried through the hour-long discussion titled, “Wealth Management in a Retirement Plan Practice.”

For Bob Patton, a managing director at SageView Advisory Group, breaching the confidence a retirement adviser builds with plan sponsors and their participants is not only a fiduciary risk, but bad business. “We have an additional layer of responsibility because the plan sponsors hired us, and one unhappy participant could put that relationship at risk,” Patton told the group.

Participants, Patton said, are certainly asking for financial education, and SageView is seen as a trusted source because their services are being offered through the participants’ employer. That’s why, he says, “education must always come first,” with wealth management outside the plan available only when necessary.

“We are not seeking to monetize participants, because we’ve done that on the institutional side already,” Patton said. “We’re here to give advice and help, and where the participant needs more help, we can then have the conversation.”

Patton’s firm has been on an active run of acquisitions of wealth management advisers, focusing on firms who place financial wellness first, CEO Randy Long told PLANADVISER in a recent interview.

Be Clear, Take Notes

One key to advising across retirement plans and wealth is for advisers to be clear on “what they are doing, and for whom, and at what point,” said David Kaleda, a principal at Groom Law Group who works with advisory firms offering this very combination.

“If you’re providing services to a plan, you have to let them know exactly what you are providing them,” Kaleda said.

He noted that an adviser might be talking to a plan sponsor about what to put in the core investment lineup; the adviser might also be talking to a participant about how to invest in those options; and that same adviser might be speaking with a participant about going outside of their retirement plan and into an individual retirement account for personalized investing decisions.

Whatever the service, clarity is important, in part to avoid conflicts of interest, Kaleda said. But it is also vital because, in most cases, advisers do not play the role of recordkeeper, trustee or third-party administrator, despite what some plan sponsors may think. “You’d be surprised how many clients don’t understand [an adviser’s role] – they think that you are doing everything,” Kaleda says.

Legally, advisers also must understand that complying with the Employee Retirement Income Security Act for retirement plans is different from complying with the Securities and Exchange Commission Investment Advisers Act, Kaleda said. Knowing this difference is crucial to having the right team in place, he stressed.

“The needs of an ERISA client, whether it’s at the plan level or participant level, are different [from a financial adviser], and so are your risk exposures as a firm and as an FA,” he said. “You need to understand what you are getting yourself into and manage the conflicts of interest.”

Cultural Compliance

As important as it is to follow regulations, it is equally crucial to have a culture focused on the best interests of the plan sponsor and participants, SageView’s Patton said.

“We can check all the boxes when it comes to ERISA and the Advisers Act, but it’s got to be participants first,” Patton said.

When building out a full-scale retirement and wealth management practice, advisers should think about how to hire and train properly, Patton said. They should not, by contrast, drive success through sales contests or by tracking the top salespeople who are bringing in fees.

Welch agreed, noting that 80% to 90% of retirement plan participants have limited or no experience in asset management, and a 401(k) is often a first entrée into investing. “It’s a daunting task [for participants],” Welch said. “[They] know nothing about this subject, but [they] have to utilize these vehicles to prepare [themselves] for retirement.”

He also noted that group meetings with participants, while useful for giving information, is not good at providing a more personalized conversation.

“No one goes into a group education meeting and raises their hand and says, ‘I have a quarter of a million dollars in my 401(k), and I have no idea how to manage it, I don’t know what the investments are and I have no idea of when or where or how I’m going to retire,” Welch said. “That only really happens in a one-on-one. You have to really meet the participants at their place, at their level of understanding of investments and help carry them through.”

During the conversation, the panelists agreed that the continued aggregation of retirement planning, wealth management and even a third aspect of benefits management will continue to require definitions as the industry matures.

“If you’re getting into the retirement business because you think this is a great place to pick off participants and get rollovers to and get IRAs to go into your wealth management business, that is not the best mentality, and you’re not going to get ahead that way,” Groom Law’s Kaleda said. “From a business standpoint, that’s a bad idea because (1), it sends the wrong message. And (2), it’s also a major compliance problem.”

Workers, Employers, Contributed to Retirement Plans at Record Rates

Retirement contribution rates reached record highs, with combined worker and employer contributions equal to 13.9% of pay in 2021, new data from the Plan Council of America show.


Workers and employers last year contributed to retirement saving contribution rates that hit records when compared to prior studies, according to data from the Plan Council of America show.

Combined retirement contribution rates hit 13.9% of pay in 2021, and employers raised their retirement contribution rate to 5.6% of pay—both all-time highs for the Annual Survey of Profit Sharing and 401(k) Plans

Among employers with a profit-sharing retirement plan, 13% increased profit sharing contributions, and 5% added to their employer match, while almost 90% of eligible workers contributed to a retirement plan, the research showed.

“As the nation emerged from the impact of the COVID-19 pandemic, benefit programs generally, and retirement savings programs particularly, were seen as a key employment differentiator,” said Hattie Greenan, director of research and communications at the council, in a press release.

Workers’ account balances averaged nearly $195,000 last year, up from $180,000 in 2020, the PSCA found.

Many employees decided to defer more to their account—at least in part prompted by their employer’s increase, Greenan added.

Employers were recovering from the myriad financial stressors of the pandemic, in 2021, according to the survey results. Many plan sponsors improved wages and benefits to aid their staff recruitment and retention efforts, the PSCA found.

In addition to contributions at record highs, 401(k) hardship withdrawals and plan loans were fewer in 2021 after a slight uptick of participants accessing their accounts during the pandemic, the survey found.

  • Plan participation grew to 89.2% in 2021, from 88.5% in , with participants deferring an average 8.3% of pay, up from 8.0% in 2020.
  • Plan distributions decreased as 1.9% of workers took a hardship withdrawal in 2021, down from 2.6% in 2020; and 18% borrowed against their account balance, down from 23.6% in 2020.

In addition to the trends noted above, plan sponsors in 2021 added features intended to boost both worker retention and savings rates, including Roth options and managed accounts, the PSCA found. The trend toward immediate vesting for matching contributions continued and has increased by 10 percentage points in the last three years, the data show. 

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  • Immediate vesting of employer contributions increased to 44.2% of plans in 2021, from 41.0% in 2020.
  • Roth options were offered by 87.8% of plans last year, and the percentage of participants making Roth contributions grew to 27.7%.
  • Managed accounts were offered by 48.8% of plans, up from 43.6% in 2020.

Employers responded to the economic dislocation wrought by COVID-19 with other enhanced retirement benefits and features, education and financial wellness tools, the survey found.

PSCA data show that plan sponsors may be rethinking the purpose of financial education programs. “The primary goal of participant education has historically been to increase participation rates, but that shifted to increasing financial literacy of employees in 2020, and that shift held for 2021,” wrote the authors.

The survey found 77.4% of employers named increased financial literacy as the main goal for their financial education programing.

The second most common goal, at 73.5%, to prompt appreciation for the plan, is likely used to retain employees, according to the survey.

Due to the increasingly fierce competition for talent, many employers used the quality of their retirement benefits and financial education to distinguish their company from others, the authors wrote.

Investment advice was provided by 44.2% of plans, up from 32.3% in 2020; and 27% of plans offer a comprehensive financial wellness program, up from 26% the prior year, the PSCA data showed.

“Organizations are not just providing robust contributions and plan designs, they are also moving to support employees with increased education and financial decision-making support through wellness program and advice,” Will Hansen, PSCA’s executive director, said in the release. “These supports, along with enhanced contributions and plan designs, will help buffer savers’ account balances against any future economic downturn.”

The PSCA Survey of Profit Sharing and 401(k) Plans includes data on the 2021 experience of 557 retirement plans. Survey respondents included four profit sharing plans, 294 401(k) plans and 259 combination profit sharing/401(k) plans, according to the survey details.

The full report is available for purchase at https://www.psca.org/research/401k/65thAR

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