In Practice April 17, 2023

New Retirement Firm Aims to Partner with Generalist Advisers

Freedom Fiduciaries seeks to manage plan fiduciary duties so smaller financial advisories can focus on client relationships, wealth management.

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During more than a decade of work in the wholesale retirement plan space, Shane Hanson saw a problem: The general financial advisers he was selling to were often not able to fully meet the needs of the plan sponsor and plan participants.

“I would come across generalist advisers who needed to close a plan, and I would come in to help them,” Hanson says. “The issue is that at the end of the day, you can only be so many things to so many people. … I knew when I left that the plan sponsor was not truly being serviced.”

Hanson says that after seeing hundreds of these situations, he saw an opening in the market to provide retirement services to smaller advisers overseeing about 10 to 15 clients. If he could provide the 3(38) fiduciary investment services, along with back-office support, he believed the advisers could focus on client relationships and “higher-fee” areas such as wealth management and insurance.

Those generalist advisers “are trying to do the best that they can, but they just don’t focus on the space or have someone on their team who specializes in it, so they struggle with scale and being bogged down by the day-to-day needs,” he says. “If we can provide that solution, they can focus on their wealth management or financial advice or insurance, and we will take care of the plan sponsor and participant.” 

Freedom

Shane Hanson.

Last Thursday, Hanson and his business partner, Cristina Hansen, made his vision reality by launching a retirement consulting firm called Freedom Fiduciaries LLC, overseeing about $200 million in client assets with six staff members.

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The firm, based in Boise, Idaho, is offering advisers ERISA 3(38) services, as well as what it calls the Bac(k) Office solution to handle the “day-to-day minutiae” of retirement plan servicing, including service issues, payroll consulting and plan design discussions.

Freedom Fiduciaries is also offering participant communication and engagement tools to be used by advisers and plan sponsors, namely ParticipantIQ for participant communication and FiduciaryIQ for fiduciary training and guidance for sponsors.

“Over the past decade, the retirement plan industry has evolved and now demands a specific skill set from retirement plan specialists,” Dick Darian, the CEO of retirement industry consultancy Wise Rhino, said in a statement with the announcement. “The need for a robust back-office solution has never been greater and will only increase as the industry becomes more specialized and complex.”

For the Assist

Hanson says Freedom Fiduciaries is looking to work alongside advisers in a split-fee model depending on what services are requested. The retirement adviser, who was the captain of his college basketball team at Chaminade University of Honolulu in 2010-11, equates the relationship to a sports team.

“Our role on this team is to specialize in consulting on the retirement plan and letting that partner adviser shine with what they are best at, which is going after that ancillary business, which is looked at as a higher-margin business,” he says. “They have the relationship with the business owner, and that’s why the adviser is in the plan.”

In the current plan landscape, large retirement advisories and insurance and benefits aggregators are setting a torrid pace acquiring wealth managers, with the goal of providing the full range of services to employers. Meanwhile, small retirement plan providers are inking deals with registered investment advisories to provide retirement plan backing for clients.

Hanson sees the firm servicing those financial advisers and broker/dealers who fall through the cracks. The big aggregators are not, in his view, looking to acquire an adviser who is managing 10 to 15 employer clients.

“They are not on an acquisition spree for the everyday 10-15 plan adviser,” Hanson says. “Who is going to help these advisers? I’m looking to fill a gap in the marketplace.”

Products April 17, 2023

Millennium Trust Will Add Auto-Portability to IRA Rollover This Year

The new functionality is intended to reduce retirement savings leakage and expand access to savings options. 

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Millennium Trust Company LLC announced it will offer automatic portability functionality for its automatic rollover IRA solution, which has about 3 million participants.  

Auto portability defaults individuals to transfer their retirement savings from a former employer’s retirement plan to an auto-rollover IRA unless they opt out. They can then move savings to their new 401(k) or a similar employer-sponsored retirement plan.  

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According to Millennium Trust, the new feature will be ready for client testing by the end of June 2023. After it will go live Jan. 1, 2024, the start of the new plan year and coincides with the Secure 2.0 provisions that permit auto portability. 

The firm says that data matching is among the aspects it will be client testing for in June. “But overall, we want to ensure clients who choose to add the auto portability feature to their automatic rollover solution are prepared well ahead of the go-live date on Jan. 1, 2024,” said Erik R. Beck, chief commercial officer at Millennium Trust, in an emailed response. 

Reducing Leakage 

The firm’s initiative aims to combat retirement savings leakage by reducing friction for participants when moving savings, expanding access to savings options, and offering more financial education.  

“One thing often left out of the auto portability discussion is that an existing automatic rollover IRA solution is necessary to enable auto portability,” said Beck. “Our new auto portability feature is an expansion of our efforts to eliminate friction in the transfer of funds between accounts within the retirement system. Plan sponsors who choose to offer auto portability will be able to use Millennium Trust’s solution to match their former participants to the individuals’ new employer retirement plans.” 

An industry-wide initiative for auto-portability has been taking off. Earlier this year, both Empower Retirement and TIAA signed on to the Portability Services Network LLC consortium, a group of participating recordkeepers.  

The network is set up to automatically move retirement plan savings of $5,000 or less to a worker’s new provider upon a change of job. 

Millennium Trust says it is leaning into auto-portability as it builds upon existing efforts. “We are investing millions in reducing friction and improving our search-and-engage services, so including an auto portability feature is just a logical extension as we continue to enhance our capabilities,” said Beck.  

“Also, as the country’s largest independent provider of automatic rollovers, we partner with the majority of the largest recordkeepers and thousands of TPAs and plan sponsors, and we want to give them options,” Beck said. “They don’t need to go somewhere else or build out a ton of new technology. We can leverage our scale and technology integrations to quickly and easily bring this feature to any clients who want it.” 

Optional Add-on  

For Millennium Trust, the new functionality is an optional add-on to the Oak Brook, Illinois-based company’s existing auto-rollover solution, which allows low-balance accounts of non-responsive former employees to be rolled over to an IRA. This maintains the tax advantages of the retirement savings system and reduces leakage.  

Plan sponsors have the option to add auto-portability to their existing automatic rollover solution through Millennium Trust or another provider, as the firm offers an open-network approach to this functionality.  

“Millennium Trust wants to make a broad impact on keeping money in the retirement system by partnering with recordkeepers, third-party administrators, plan sponsors and others in our industry,” said Dan Laszlo, Millennium Trust’s CEO, in a statement. “We welcome any current and future retirement industry providers to join us in this mission. No matter the size of the partner, we want to provide a no-cost, fast and easy option to connect so they can offer their clients choice.”  

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