TIAA Research: Retirement Plan Advisers Target Efficiency

Advisers are looking for maximum efficiency while broadening their range of products and services.

Retirement plan advisers have a tricky dance to do in the coming years, as they seek to maximize efficiency in their practices while also offering a broader range of products and services to plan sponsors, according to adviser conversations organized by TIAA.

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When more than 60 retirement plan advisers were asked about their priorities in the next three years, they pointed to, in order of importance: growing and retaining business; improving product and service offerings; and increasing efficiencies, according to research conducted by TIAA and Chatham Partners in October and November 2022.

That combination of priorities has advisers looking both to keep costs down and find new channels for revenue, according to David Swallow, head of consultant relations at TIAA.

“As you look across the marketplace, adviser services are becoming more and more competitive,” Swallow says. “They are bringing additional products and services to the marketplace; they are looking for other ways to scale revenue. … How I’d classify it is that they are broadening their relationship with their clients to really bring a full breadth of services.”

Swallow points to the trend of retirement adviser aggregation in recent years by which boutique advisories have been bought up by larger aggregators who offer more services to clients.

“The reality is that if you can’t scale and you can’t become more efficient, then the question is: ‘Do I join a bigger force that has all the infrastructure in place and can provide all those services to me and I can still do what I love?’” he says.

Swallow believes it is becoming harder for some boutique shops to compete against larger aggregators “because of the scale and what they’re able to do from a pricing standpoint, as well as the breadth and depth of services that does differentiate them.”

Participant Engagement

When advisers were asked what they think plan sponsors need most from their retirement plan provider, they pointed to participant services and education as the lead area of need. That came ahead of plan administration support and strong client service, and Swallow sees it as another sign of the times.

“What we’re hearing is that there really is a desire by plan sponsors to get their populations engaged,” Swallow says. “Consultants and advisers are hearing this from their clients and, in many cases, they are now providing these services.”

He notes that typical institutional advisers had not previously engaged as much with participants, often leaving that to the recordkeeper or another third-party provider.

Now, Swallow says, some retirement consultancies are offering the service and others are not, which is a good thing for the market, so long as specific plan sponsor needs are being met.

Fiduciary Focus

When asked to guess what their clients’ key priorities are over the next three years, retirement consultants led with compliance and governance, followed by retaining and offering competitive benefits, and then pointed to participant engagement.

Swallow does not necessarily think clients would rank compliance and governance at the top themselves. But he does believe advisers see their fiduciary role as a key part of their value offering, both for investment decisions with the plan and in broader areas such as preparing for SECURE 2.0 regulations and opportunities.

One area in particular that advisers spoke about was preparing clients for the Roth catch-up contributions for higher-paid employees that will go into effect in 2024. This is especially true in the nonprofit space, where TIAA focuses a large part of its business, according to Swallow.

“A significant amount of our clients do not have Roth today,” he says. There is an opportunity for advisers in “really making sure that clients are prepared for January of next year, when you need to have a Roth source in your plan in order to allow for catch-up contributions.”

When asked about key trends overall in the retirement advisement space, the advisers said financial wellness, retirement income and fee compression were the biggest areas to watch. Swallow says TIAA was glad to see retirement income come in at number two. He notes the firm has long had a focus on retirement income options, such as annuities ,in 403(b) retirement plans and more recently has been focused on adding them to 401(k) plans.

Overall, the head of consultant relations recommends that advisers try to anticipate key trends in the industry and needs created by pending legislation to cultivate business.

“It’s going to show [clients] your value, as well as the importance of getting out in front of some of these things,” he says.