Client Service October 23, 2024

Plan Advisers’ Value in 4 Charts

PLANADVISER asks plan sponsors about the services they get from their adviser team.

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Art by Cara Wang
Plan Advisers’ Value in 4 Charts

The 2024 PLANADVISER Adviser Value Survey published in September found that plan sponsors value rigorous plan governance and fiduciary guidance from their adviser teams.

That survey drew on 2,100 plan sponsors from sister publication PLANSPONSOR’s Defined Contribution Plan Benchmarking Survey. In addition, PLANADVISER asked a subset of 83 plan sponsors a few additional questions about their adviser relationships and investment decisionmaking and monitoring. Below are four highlights from that survey, in charts.

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Fees Pay Off

When it comes to adviser value, there is nothing more direct than asking about the fees that plan sponsors pay for services. Here, there were heartening results among the survey pool: 91.3% said the services they received were worth the fees they paid.

In your opinion, are your adviser services worth the fees you pay?

Yes
91.3%
No
2.5%
Unsure
6.2%

That’s a feather in the cap for most of the advisers associated with the plan sponsors in this survey. But as the industry evolves, so must the services that advisers offer to their clients. How often, then, do plan sponsors conduct requests for proposal to make sure the services and fees they are getting are top of the class?

RFP Frequency

When thinking about a plan sponsor’s fiduciary commitment, it is typically better to see them going out for adviser RFPs every couple of years—even if they end up sticking with the same adviser.

For the roughly 39% of firms who have conducted an RFP in the past three years, the results are heartening. That leaves, however, another 60.5% that have not conducted an RFP in at least four years. While that may feel good to an adviser who has maintained that business, it ultimately may not be serving the adviser or the client as a best practice.

When was the last time you did an RFP for an adviser or shopped around for a different adviser?

More than 5 years ago:
40.8%
5 years ago:
7.9%
4 years ago:
11.8%
3 years ago:
10.5%
2 years ago:
10.5%
1 year ago:
18.4%

Participant Services

It has been a trend in recent years for plan advisers to offer a participant education option directly, as opposed to doing so through the recordkeeper. While that can be a resource commitment, it is also a way to add value for plan sponsors who are increasingly looking for more holistic offerings for their employees.

The PLANADVISER survey showed that while the majority of plan sponsors are getting direct participant education and advice, it is still a slim majority. It will be interesting to see if that continues to shift over time toward more direct support.

What is your adviser’s relationship with your participants?

No direct participant education and advice:
38.1%
Provides no-fee participant financial education and advice:
35.7%
Participant financial education and advice with fee paid by plan sponsor:
16.7%
Participant financial education and advice with fee paid by participant:
6%
Provides guidance on third-party financial education and advice:
3.6%

Wealth Management

Finally, the convergence of retirement planning and wealth management has taken the advisement space by storm in recent years—at least when it comes to merger-and-acquisition activity.

But where does the rubber hit the road for plan sponsors working through plan advisers on offering paid wealth management services for employees? According to the survey, the offer is at least there for the majority of plans—with 67.1% of those surveyed saying their adviser provides individual participant investment services.

Here again, it will be interesting to see how the pie changes in coming years—will wealth services take further hold? Or will the market remain somewhat bifurcated, with some plan sponsors keeping such services separate?

What does your adviser provide in regard to wealth management and individual participant investment advisement?

Currently offered
67.1%
Not offered, not interested
24.4%
Not offered, wish was offered
8.5%

Findings from the 2024 PLANADVISER Adviser Value Survey can be found at this link.

 

Practice Management October 23, 2024

AI Can Be Helpful for FAs—but Mostly In-House for Now

Speakers at an eMoney financial adviser summit noted that AI is most useful for wealth managers as a practice management tool, ideally freeing up advisers for more human interaction.

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Technology, particularly artificial intelligence, will continue to play a role in how financial advisers work with clients and could make advice cheaper and more expansive, according to financial service leaders speaking during an eMoney Advisor LLC virtual summit on Wednesday.

“If we go back hundreds of years ago, only the wealthiest Americans had access to some type of financial advisement,” said Maxwell Lane, CEO of Flourish Financial LLC, an adviser financial products and tools platform. “Fast forward to today, and it’s a much larger swath of people.”

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When discussing the potential for technology, and particularly generative AI, to transform financial advisement, the speakers from firms including Allianz Life, Fidelity Investments and Nationwide all pointed to internal, practice management roles for AI, rather than client-facing uses. Examples of AI implementation included back-office administration, summarizing client meeting notes and identifying potential clients.

“I see more AI usage in those areas [such as back office and client identification] in the short term; long term, we will have to see,” said Judy Lee, vice president and platform consulting team lead for Fidelity Investments.

For many retirement plan advisories either working directly in wealth management or via partnerships, staffing correctly for individual advisement can be difficult—but technology, according to the speakers, may be able to help streamline client management.

Erin Tyra, director of registered investment adviser annuity distribution at Nationwide, said the insurer is building its own AI tools to “remain competitive in the marketplace” for emerging technology. One project, she said, is focused on helping financial advisers best manage and interact with clients.

“What is the best cadence for email vs. phone call vs. in-person meeting?” Tyra asked. “We are trying to develop an AI tool that will prompt our advisers to see that it’s a good time to reach out by email to Ms. Smith or this would be a good time to set up an in-person meeting with Mr. Johnson.”

If an adviser has a large book of clients, this type of outreach can be “overwhelming,” she said. The AI tools can help “make advisers better with their relationships and identifying gaps in service.”

Broadening Access

Lane, of Flourish, sees technology as not just helping wealth managers improve their practices, but continuing to lower the threshold of assets a client will need to get advice.

“There’s a real desire from financial advisers who want to help as many people as possible, but they also have to run a successful, sustainable business,” he said. “With AI, as advisers get more efficient over time … the net effect should be, if a firm can serve a $500,000 client today and that was their minimum, in the future, it’s going to be $250,000, and someday $100,000, and then $50,000 … that should allow for more Americans to have access to advice.”

Tyra, of Nationwide, noted that if advisers are going to use technology, they must really understand it and ensure it fits within their fiduciary duties and regulatory framework. Advisers should use the technology where it fits, she said, and then take the time saved to lean into the more human-centric services.

“If the technology is really good at interpreting source data, for example, can you fill that gap by learning more about clients’ behavioral financial issues?” she said. “They can tap into those areas where the algorithm cannot meet those needs and where you can bring in that human angle—really lean in there.”

A report released Wednesday by consultancy Cerulli Associates and Osaic Inc. emphasized the growing demand from investors for services beyond just money management.

According to the report, 55% of investors consider an adviser’s understanding of their financial goals, needs and risk tolerance when choosing an adviser, a larger percentage than those who consider the performance of their investments relative to the overall market (46%). That demand, according to the report, is driven by greater market volatility, the “continued decline of employer pensions as a funding mechanism for retirement” and an increasingly complex array of investment options.

Broadening Services

AI and technology may free up advisers to provide “more services like taxes or bill pay or educating the next generation,” noted Fidelity’s Lee. “All of those are going to be part of wealth management. … With technology, [advisers] will be able to pre-empt what their clients will need before they ask.”

John Helmen, head of national accounts for Allianz Life Insurance Co. of North America, agreed, noting that technology should, in time, allow advisers to lean further into their “soft skills” and work with clients on more holistic needs.

During the panel, moderator Brandon Tucker, an advisory financial planning practice management consultant for eMoney, noted that surveying has shown that financial advisers are more concerned about robo-advisers replacing their business than generative AI. The panel agreed that AI will not replace human advisers, though Lane, of Flourish, did note that generative AI is likely more threatening than robo-advice.

“I think it’s interesting that they were more fearful of robo-advisers than they were [of] AI, because I think [AI]’s much more impactful,” he said, reiterating that the “human touch” will always be needed for financial advisement.

Helmen, of Allianz, said that as AI takes on more tasks, it may lead to even more work, and opportunities, for humans.

“We all know that holistic advice is now the benchmark, but if you can use [AI] in the right way, you should be able to add more value and build a better experience altogether,” he said. “This AI revolution we are taking about is going to take time, and it’s going to be slow, but the goal here is to provide the better experience for the end user.”

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