Nearly half of advisors (44%) who do a little work in the defined contribution (DC) market say they’d be more inclined to pursue opportunities there if they received greater support cultivating wealth management clients from their DC business, according to a new report from Cerulli Associates.
They would also be incentivized, they say, if they received additional support for sourcing new DC plan sponsor clients (41%), investment/fiduciary requirements and considerations (31%), assisting plan sponsors with administration (21%), participant communications (19%), and other functions, according to the latest “Cerulli Edge: U.S. Asset and Wealth Management Edition.”
Cerulli refers to these advisors who do not specialize in retirement plans as “dabblers” (those who get 15%-49% of their assets under advisement from retirement plans) and “nonproducers” (less than 15% of AUA from retirement plans).
“‘Dabbler’ and ‘nonproducer’ retirement plan advisors make up the majority of B/D-based retirement plan advisors and a meaningful portion of B/D advisor-sold DC assets,” Shawn O’Brien, director of retirement at Cerulli, said in a press release. “However, some asset managers say their firm still employs a siloed approach to covering these advisors, with little communication between retail and DCIO wholesaler teams.”
Yet “some of the top broker-dealer firms are actively encouraging their advisors to lean into the retirement planning space, citing the opportunity to use their workplace business to source comprehensive, long-term advice relationships with investors,” notes the Cerulli report.
Cerulli also points out in its report that many advisors at broker-dealer firms have wealth-management clients who are small-business owners administering workplace plans. “For advisors, overseeing their wealth management clients’ retirement plans adds cohesion to these relationships,” it says.
The Competition
A B/D retirement-plan program manager quoted in the report cautioned advisors who aren’t helping their business-owner clients manage their retirement plans: “If you aren’t overseeing that plan, there’s a good chance CAPTRUST and SageView are coming in the back door and talking to your clients about it.”
CAPTRUST and mid-market firms have joined Morgan Stanley and other major B/D firms in “spearheading the convergence of the retirement and wealth management industries,” says the Cerulli report. It notes that a handful of large DC recordkeepers (e.g., Fidelity, Empower) are involved in this effort, too. Competition also includes RIA firms who may offer more client-centric services.
Recommendations
Cerulli recommends that asset managers’ distribution teams give advisors what they need and want to grow the retirement-plan side of their businesses.
“B/D-based advisors lean on asset managers for nonproduct-related tools, education, and strategic guidance that help them better serve their clients and grow their book of business,” O’Brien said in the release. “By helping advisors improve and grow their practices, asset managers win advisors’ loyalty and trust, positioning themselves as strategic partners and laying the foundation for long-term, reciprocal relationships.”
Asset managers vary in how much they help advisors manage their practices and grow their businesses in the DC space, according to Cerulli. Some help dabblers and nonproducers build out prospect lists by making introductions and improving their online presence. Other asset managers provide a framework or practice management solution. Those who take less formal approach may simply share specialist advisor “success stories” that detail how they approached their retirement-plan practices.
