PANC 2018: The Future of Retirement Advising

A look at consolidation, the role of recordkeepers and the importance of financial wellness programs.

Advisers at the 2018 PLANADVISER National Conference’s “The Future of Retirement Advising” panel said even though the Department of Labor’s (DOL’s) fiduciary rule has been vacated by the 5th Circuit, it has prompted consolidation of practices.

“We grew 66% last year and expect growth of 80% this year,” said Vincent Morris, president of Resources Investment Advisors. “That was driven by consolidation and advisers needing help on the rule. We are an aggregator. Companies can remain independent and have access to scale, innovation and financial wellness programs. They are under margin pressure and more demand from sponsors for services, so I think we will continue to see that scale.”

Edward O’Connor, managing director with Morgan Stanley Wealth Management, agreed, saying, “We definitely see consolidation. It is harder for generalists to seek out opportunities because there is a higher standard of care for the 401(k) business.”

As for working with recordkeepers, Jon Anderson, head of retirement plan solutions at Cetera Financial Group, said that advisers will become more selective about which companies they work with: “Advisers need to align with organizations that will support them. Advisers can’t do it on their own.”

Resources Investment Advisors works “with  56 recordkeepers, which is unsustainable,” Morris said. “We want to bring that down to 12 in order to have pricing and resource leverage.” Resources Investment Advisors would also prefer to work with recordkeepers that offer “more of a partnership,” he said—“managed accounts, financial advice, an economics play. We will be interested to see how this pans out in the next five to 10 years.”

Currently, Morgan Stanley Wealth Management “scrutinizes recordkeepers, performing due diligence on how they engage with participants,” O’Connor said. Morgan Stanley also prefers to work with recordkeepers that can “train our advisers to be specialists,” he added.

A poll of the audience found that 51% offer proprietary education to plan sponsors and participants, with 39% obtaining the resources from recordkeepers. Ninety-five percent said that these programs include comprehensive financial wellness, such as budgeting, college savings and insurance. Sixty-three percent of the audience members said that they or their team offer investment advice.

Alison Cooke Mintzer, editor-in-chief of PLANADVISER, then asked the panelists how they manage their fiduciary responsibilities while offering holistic financial wellness programs.

O’Connor said that “participation rates have leveled off, because of financial stress. Participants need help budgeting. You need to go there. Financial wellness is about education first.”

Anderson said that offering financial wellness goes a long way towards “driving participant engagement. Working with advisers improves all metrics.”

In order to be able to deliver that education and/or advice, advisers need to rely on “digitization,” Morris said. “It is disrupting the marketplace. We cover 500,000 participants. In order to drill down and touch enough lives, we need a digital process.”

O’Connor said that Morgan Stanley Wealth Management has offered a financial wellness program for the past few years in order to drive participant “engagement and address their issues. There is a giant, growing base of people with debt issues, especially student loans,” he said. “We encourage plan sponsors to hold webinars on budgets and student loans. You shouldn’t be just a retirement specialist but a broad-based adviser. By doing so, you are really helping a core concern and tightening your relationship with the plan sponsor.”

Cooke Mintzer then asked the panelists what tools retirement plan advisers will need in the future. Morris said that the industry model is currently “B to B,” or business to business. In the future, he said, it will be “B to B to C,” or business to business to consumer. “We are in the C-suite, talking about their employees’ financial needs. The end client relationship is what needs to happen. Retirement plan advisers will still be specialists, but their scope will be expanded to talk about people’s holistic financial picture.”

O’Connor agreed with that model, saying, “We know that participants need a lot of help. We can offer a multi-channel solution, or it could be self-directed. We are in a full-employment economy. Companies are hard pressed to find workers. There are 3.5 million jobs that cannot be filled. A financial wellness program is a small investment but reaps many benefits.” By offering such a program, “you are telling your employees you care about them.”