Retirement plans are becoming a gateway for advisors to access wealth management clients, opening doors to a myriad of new business opportunities such as rollovers, financial planning services, and high-net-worth (HNW) engagement.
How can you take advantage of this harmonious combination as you continue to put your time and energy into growing your firm? We’ll outline what the convergence of retirement and wealth means, cover the benefits of utilizing them together, and how the right support can help you scale your retirement business.
Worlds Collide: How Retirement and Wealth Converge
Traditional workplace retirement plans offer a natural segue to wealth management growth opportunities for both advisors and clients. Retirement plan advisors engage with many of their future wealth clients via their support of retirement plan participants.
From C-suite to early-career employees, you as the plan advisor can form a connection in the workplace and make yourself available for extended support. Some of those individual participants, such as highly compensated employees and C-suite executives, are more inclined to have broader financial needs in the near term. But rank-and-file employees can also evolve into meaningful wealth clients as their careers and lives progress.
When you provide basic education to employees in the early stages of their careers, those plan participants will be more inclined to seek your support when they have an individual wealth need.
There are three main reasons why retirement plan advisors may want to cash in on the convergence of retirement and wealth.
Cater to client expectations. The intersection of wealth and retirement services was born from client demand. On the wealth side, individuals are increasingly seeking personalized holistic planning that incorporates their workplace retirement plan savings. On the retirement plan side? Plan participants seek the same thing. Plan participants no longer want advice on how to allocate their 401(k) assets. They do want advice on how to allocate their 401(k) plan assets as a component of their broader investment portfolio and financial planning needs. In other words, they want personalized holistic planning that extends outside their workplace retirement plan. The needs of retail clients and plan participants have evolved and arrived at the same place. This isn’t surprising—at the end of the day, retirement plan participants are individuals who have lives and assets that extend beyond their workplace retirement plans.
Open doors to new clients. For a sense of what workplace engagement can offer to advisors, a 2023 study from the Retirement Leadership Forum found that for every 10 one-on-one meetings with plan participants, the average advisory firm will uncover one wealth management prospect. The average worth of the prospect will vary depending upon the size of the plan: prospects found within medium-to-large plans are typically $1 million, whereas in smaller plans it’s closer to $400,000. Advisors unfamiliar with supporting retirement plans often can’t see past managing the plan itself. But for those who have more experience working with retirement plans, the plan’s participants (and the opportunities they can introduce) come more into focus. The workplace is a channel to engage with large groups of individuals under favorable circumstances. Keep in mind that most participants trust that their employer has done due diligence and will view you, the retirement plan advisor, as a worthy financial professional.
Build your wealth management business. Although relationships with plan participants will start within the context of their retirement plan, many participants will inquire about assistance with broader financial needs (think asset management, financial planning, and specialized assistance for HNW individuals). And these wealth opportunities aren’t always tied to the individual’s retirement plan assets. While workplace retirement plans are the primary savings vehicle and the largest source of wealth for most Americans, many plan participants hold meaningful assets outside those plans. In fact, a recent Consumer Finance study showed that individuals with $500,000–$1 million in assets had, on average, around $112,000 in their retirement plan and another $89,000 in assets outside the plan. On average, individuals with assets between $1 million and $10 million have about $700,000 in their retirement plan and more than $900,000 in assets outside the plan. In general, the greater the wealth participants have inside a retirement plan, the more likely they are to have increasingly higher assets outside the plan.
Cultivate Retirement Plan Business at Scale
Achieving scale at the plan level is critical for cultivating wealth opportunities from retirement plan business. Using third-party support can help achieve this, but not all solutions are created equal. In addition to using marketing services and technology, delegating services for retirement plan investing can help you meet your growth goals faster. The right option should free up your time, relieve you of administrative tasks so you can focus on clients, and significantly reduce your risk.
Commonwealth has a spectrum of solutions—from technology offerings to delegated support—designed to minimize the time an advisor spends on plan-level needs. Through PlanAssist, Commonwealth assumes discretionary control of plan investment decisions, taking the fiduciary burden off plan sponsors and creating scale within your practice. Using solutions like these gives you more time back in your day, so you can nurture current client relationships and explore new ones.
Use vetted resources. One of the more time-consuming parts of exploring a new focus area for your business is access to vetted resources and staying on top of changes from legitimate sources. A trusted third-party solution can keep you informed when it comes to investment monitoring and reporting, investment policy statement (IPS) review, stable value data, proposals, RFPs, and plan cost analysis.
Reduce the fiduciary burden. Using a third-party 3(38) fiduciary service is a great way to delegate work and reduce your fiduciary burden, helping create scale in your practice. When you find a trusted solution, you can cede discretionary control of plan investment decisions and have access to services like IPS creation, fund mapping, fund change coordination with recordkeepers, and share class review.
Educate and Engage Clients
Establishing a recognized presence with plan participants before helping with their personal financial needs increases an advisor’s ability to cultivate wealth opportunities from the retirement plan business. To help establish yourself as a point of value to participants, early and often, consider newsletters and social posts that focus on retirement education, tips, and resources. These can be fun and approachable ways to encourage plan participation from clients.
Educating clients about the options available to them also makes it easy to engage with plan participants on enrollment, saving, investing, and preparing for retirement. Educational materials you might consider include seminars, short videos, and handouts. Ideally, you’ll want to find a turnkey solution with a combination of these things, so you don’t have to spend time and energy creating a program.
Seize the Opportunity Today
Incorporating retirement planning into your service offerings creates natural pathways to deepen client relationships and expand wealth management opportunities. For financial advisors looking to grow their practice and deepen their expertise, tapping into the powerful convergence of retirement and wealth serves as a gateway to lasting, mutually beneficial client relationships.
Looking for the right support to evolve your business? Contact Commonwealth today.
Mathew Powers is the vice president of strategic retirement solutions at Commonwealth. With the firm since 2014, he directs Commonwealth’s plan investment services, including our 3(38) fiduciary plan service, and facilitates ongoing investment due diligence as a member of the firm’s 401(k) Plan Committee. He also is a key member of the Commonwealth ERISA Committee, helping to evaluate issues and opportunities across the firm’s business lines for the benefit of Commonwealth and our advisors. Mathew has a master’s in investment management, and he is a CFA® charterholder.
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This post originally appeared on Insights, a blog authored by subject-matter experts at Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser.
