Product Development Moves Beyond the 401(k) Plan

Retirement plan advisers with established 401(k) businesses are finding new revenue streams and client engagement opportunities among nonprofits and educational institutions, and in the area of estate planning.

PLANADVISER Magazine regularly receives announcements from providers active in the retirement plan space, detailing new services and solutions tailored to help 401(k) plan advisers run their businesses more efficiently and effectively.

In the last year or more, there has been a clear acceleration in the creation of services aimed at helping advisers with established 401(k) plan businesses reach out into other areas—solutions that promise to help with cross-selling to existing clients as well as solutions that aim to open up whole new markets for advisory shops. In fact, cross-selling potential and the goal of entering new markets has also driven a substantial amount of advisory industry merger and acquisition activity in 2018 and 2019.

Chris Shuba, CEO at Helios Quantitative Research, a firm focused on delivering practice management solutions to financial advisers, agrees that the advisory industry is evolving in a way that makes it important for practices to expand beyond the traditional way of doing business. In short, the commoditization of pure investment advice, based in the incredible advance of investment management platforms, means that advisers have to provide more holistic services to their clients to remain relevant.

Shuba points out that Helios has just launched a new online software system geared toward helping advisers develop “attorney-quality estate plans” for their clients “in just days.” According to Shuba, Helios Integrated Planning can help advisers address “the overwhelming need for assistance with estate planning in the advisor space,” and it also allows advisers to add value for their clients and solidify lasting relationships.

“With our new service, advisers gain access to online estate planning, estate plan reviews and legal support with 48-hour document delivery,” Shuba says. “The offering includes comprehensive training for advisers and support throughout the process. The finished product will be reviewed by experienced estate planners or attorneys, giving advisors peace of mind.”

Shuba expects the estate planning service will gives advisers additional opportunities to build multi-generational relationships with their clients and their clients’ children, while driving stronger planning revenue. He says advisers will embrace the fact that they won’t have to outsource estate planning matters to attorneys, “which can take weeks, if not months.”

According to Shuba, in the majority of cases, almost all of the assets an adviser works on will leave a practice after the passing of a second spouse. He says this type of estate planning solution gives advisers the opportunity to be at the center of legacy conversations, “in order to forge necessary bonds with the next generation.”

Shuba says moving into areas like estate planning can help advisers better justify and even increase their annual advisory fees.

“We see this service as a new mechanism for advisers to have a meaningful conversation about value and fees,” he says. “You can go to a client and explain that, instead of them going out and paying an attorney thousands of dollars to do the estate plan, this can be brought into the financial planning relationship instead. The adviser can move their fee from say, $1,000 per year to $1,500 per year, and the client will be saving money on net.”

Looking broadly at the topic of advisory practice evolution, Shuba says, there is good reason to believe that the competitive pressures experienced in the industry today will only grow more intense over time.

“The future of this business is about asking how the financial adviser can shed as much of the minutia of running a business as possible, so that they can focus more on what they are best at, which is working with clients and helping them set and achieve goals,” he says. “The future of financial advice is not a robo platform, nor is it the classic version of the financial adviser. Instead, it is a blend of a highly personable, relationship-driven front end that bring to bear a highly technical and efficient technology-based practice on the back end. This is the new business model for financial advice.”

Right now, Shuba says, a lot of advisers are still thinking about running “practices” instead of “businesses.”

“In the future, I think many more advisers are going to have to embrace the CEO mentality,” he concludes. “The other pressing consideration for practices is how they will navigate the growing amount of consolidation and the emergence of very powerful aggregate competitors. It’s not an elective thing for advisers decide whether to embrace the new, far more efficient way of doing business. It’s an economic necessity to survive in a consolidating industry.”

Moving into new plan markets

Around the same time as the Helios product announcement, Fi360, a provider of fiduciary education, training and technology solutions, unveiled a new adviser-education program called “The Essentials of Public Education, Nonprofit and Government Retirement Plans Course for 403(b) and 457(b) Plans.”

As discussed by Michael Muirhead, Jr., senior vice president, learning and development, the training course will be offered nationwide through an online self-paced module. It is designed to help advisers and other key constituents in the 403(b)/457(b) space “create better outcomes for participants using fiduciary principles.” Among other features, the course highlights some of the major differences from 401(k) plans and offers guidance related to the unique plan features.

Other learning objectives include identifying associated laws, oversight entities and potential market-segment opportunities; improving understanding of plan administrative and operational details; examining key stakeholder roles and responsibilities in managing 403(b) and 457(b) plans; enhancing understanding of governance and fiduciary oversight practices; and increase understanding of plan fees and expenses.

“Accredited Investment Fiduciary designees and advisers working in the corporate 401(k) space are seeking to grow their businesses and they view 403(b) and 457(b) plans as an area where they may be able to leverage their unique fiduciary skills to accelerate their growth,” Muirhead says. “In terms of growth opportunity, this marketplace is a lot larger than many people give it credit for. There is something like $1 trillion in assets in terms of dollars in the 403(b) plan space alone, across some 125,000 plans and 15 million participants.”

Stepping back, Muirhead says, Fi360 sees this new service as part of its broader fiduciary certificate programing, which also continues to develop.

“We are monitoring closely what happens with the SEC’s Regulation Best Interest and the potential for more guidance from DOL,” Muirhead explains. “In my role working on learning and development solutions, I also do a lot of practice management training these days. Across the industry, a lot of attention being paid to developing more strategic and scalable customer relationship management practices. This is a core part of the discussion about future growth and future business success.”