PANC 2009: Why Independence Fits the Retirement Plan Adviser

At the PLANADVISER National Conference, a panel of big names in the independent advisory space discussed why independence might be a good choice for retirement plan advisers.

For one, the regulatory environment seems to favor the transparent model of the independent adviser, especially as fee disclosure regulations are on the forefront. There is an opportunity for independent retirement plan advisers to leverage disclosure, said Bruce Harrington, senior vice president Retirement solutions at LPL Financial, an independent broker/dealer that has recently made strides to build up its retirement plan practice (see “Harrington’s In For Retirement at LPL”). “We think if 408(b)(2) or some semblance of that happens, it’s a great opportunity to explain value to clients,” he said.

“My perspective on the marketplace is more opportunity than challenge,” said William Chetney, president and CEO of National Retirement Partners (NRP). He said that finding a broker/dealer is a “necessary evil.” He asserted that NRP is the best home office for retirement plan advisers because its core business is in retirement, enabling the firm to adapt to the changes in the market.

One debate for advisers is whether it is helpful or harmful to be associated with big financial firms, particularly as the financial crisis has caused shakeups. Bo Bohanan, director of Retirement Plan Consulting at Raymond James Financial, which offers varying levels of business models for advisers, said a lot of advisers want to use the Raymond James brand to give their firm visibility. “I think it all depends on what your practice is and what’s important to you,” he said.

Harrington said that some brands are out in front of advisers as a detriment; at LPL advisers get the branding strength behind them.

Harrington suggested other questions advisers might want to ask when deciding on an independent B/D affiliation: Can I be a fiduciary? How are you going to restrict me? How are you going to add value? How are you going to compensate? Harrington, like the other panelists, stressed that what his company offers over the wirehouses is more dedicated support specifically for the 401(k) adviser.

Things to Keep in Mind

Advisers looking for the right business model and broker/dealer have several considerations. Of course, one large consideration is compensation, which could see changes, noted Bohanan. “Keep that in mind if you’re looking to move from a transition perspective,” he said.

Bohanan said health and welfare business will be an area where consultants expand and leverage. “We’re definitely seeing that with our specialists,” he said.  The support offered in that area could be another consideration for advisers. Chetney and Harrington both affirmed that it is an opportunity. Harrington noted that they have some advisers who are health and welfare first and offer a referral program for advisers to work together and do revenue-sharing.

Panel moderator John Mott, SVP and director of the Investment Corporate Client Group at Morgan Stanley Smith Barney, noted that health and welfare is an area where the independent model could offer more than the wirehouses. “I think that’s a big difference between the wirehouses and what you guys have to offer,” he said.

Culture is another consideration for advisers looking for the right broker/dealer. Chetney suggested NRP is not aspiring to grow to 1,000 or 10,000 advisers (they currently have about 250), in order to continue its culture. “We view ourselves as more of a club than a company … We surround ourselves with people who are like-minded,” he said.