Convergence, Small Plan Explosion and Wealth Advisor Activation Dominate RPA Broker/Trader Roundtable
The convergence of wealth and workplace retirement and the explosion of small 401(k) plans are colliding to create a powerful wave that savvy broker/dealers are riding. Not only are more wealth advisors interested in defined contribution plans as they see how they can help grow their business by serving valuable clients and keeping out competing advisors, but senior management has become more engaged.
The energy and excitement of pension leaders at leading firms at the sixth annual RPA Broker/Dealer Roundtable & Thinktank (summary of the 2023 Round Table) held in NYC on September 4 and 5 before WealthManagement.com Industry Awards 2024 was vulnerable. Most gatherings organized by providers and associations create a set agenda that guesses what might be of interest or focused on their products and interests – the RPA Roundtable series allows attendees to discuss what's most important for them hearing from their peers enabling a real discussion.
View the winners of the 2024 Wealth Management Industry Awards
Discussions focused on:
- Convergence
- Laws and lawsuits
- Plan sponsor affairs
- advisor issues
- Partner problems
- InveStment
- Broker/dealer issues
Key themes along with convergence, small plans and the emergence of generalists included:
- Advisors using home office solutions (338) more than PEP
- Participant data is prioritized while pension income is not
- How to run in convergence
- How to leverage strategic partners
- Removal of plan formation inefficiencies
- Instilling trust from the generalist through the home office – they make it easier
- How DC plans help generalists grow their practice
- Helping RPAs Make More Wealth
- Hopeful but very early signs for retirement income
- The home office is careful about the data of the participants in the accommodation
- Conflicts with Data Controllers Calling Participants/Clients
- Increasing use of TPAs by generalists – how to verify
- Service issues with fintech data controllers
Freida Lewis from host Broadridge emphasized the importance of execution in the bridge to wealth while Stephan Daigle of Bidmoni emphasized the need to remove inefficiencies especially around plan formation, which is currently so complicated.
While DC plans are a major driver of business for wealth advisors, according to Cetera's Jon Anderson, the DC industry needs to stop discouraging them from doing ERISA plans, which they have done for decades. “Education and referral to specialists have not worked,” he noted. “Is there a third way?
Brian Brashaw of Osiac, a Wealthy Winner in the Broker/Dealers: Wealth and Retirement Integration category, noted that some advisors shy away from DC business with Cerulli's Shawn O'Brien blaming it on advisors of wealth that they think is too complex.
Voya's Lori Commerford, a 2024 Rich Winner in the Data Keepers: Supporting Retirement Plan Advisors category, said both providers and advisors need to be able to help the average participant as they make money by unpacking convergence .
Shelli VanDeMark of Morgan Stanley commented that DC's plans are like a spider's web with many interconnected parties that make strategic partnerships that much more critical. She also noted that many specialists are using the solution for small office plans, while Candic D'Andrea of Raymond James said some RPAs are using the 3(38) home office solution for larger plans.
Regarding retirement income, one broker/dealer quipped that every product provider and recordkeeper has submitted it, but no advisor has asked for it. Even Northwestern Mutual's Adam Younk noted that his firm, steeped in lifetime income and annuities, is working on internal issues while managing risk.
Retirement income may be a low priority (see the 2024 Retirement Income Roundtable summary) but participant data is high—most home office professionals would prefer to let advisors take care of privacy issues and risk.
John Hancock's Jack Barry, the Wealthie 2024 winner in the Retirement Plan Advisory and Support Services: 401(k) Service Category, said data is not a record-keeping asset as Morningstar's Chris Weirath noted that although they have built data pipelines for many data holders, they still have to deal with outstanding issues (Morningstar won a Wealthie in 2024 in the DCIO Providers: Advisor Value Added Programs category). An industry consortium led by SPARK and DCIIA broke up before the pandemic with DCIIA's Lew Minsky commenting that perhaps blockchain will be the solution
Cetera's Anderson said a recent webinar on the topic drew twice as many attendees as normal, also noting that his larger groups of advisors are more interested than ever, such as his managers high perhaps giving a hopeful sign.
Taylor Hammons at Kestra commented that advisors need to build relationships with participants before a rollover event like Shawn O'Brien noted that 85% of referrals come from an existing relationship and have higher account balances.
TPAs are becoming more important in assisting generalists but Bob Carroll of MAP Retirement, a national TPA, said many broker/dealers struggle to verify them. They need to understand their asset stack and cybersecurity resources as many TPAs contain more data than record keepers, while many TPAs are not even digitizing data. He also noted that most specialists do not want to do small plans, which is both a gap and an opportunity.
Highlighting service issues with fintechs, Brashaw noted that his advisors are asking, “Who's going to make my life easier, not harder.”
A heated discussion was provided for data holders who invest and promote services that compete with advisors. One participant said, “We don't mind competing with the record holders, (we crush them!), but then don't come in and ask me to be a partner.” An adviser screamed in their home office after a record keeper went after his biggest client asking, “Why are we still doing business with them?” Another said the same record holder passed a restriction on calling participants above a certain balance in their sales agreement.
Although there is more support from senior managers, one participant noted that it is essential that law and compliance have experience or knowledge of the DC business.
And although the benefits are part of the convergence discussion, very little is being done now, and even HSAs as a broker deal said her advisers aren't looking for them.
Amazing discussion from professionals at the forefront of the convergence and explosion of small plans like 275,000 generalists, compared to 12,000 specialists according to Cerulli, waking up to the reality and opportunity of the workplace with a 1 million 401(k) plan projected to in 2029 and over 100 million accounts at the moment.
Please join us next year scheduled for just after Labor Day on the 7thth Annual RPA Broker/Dealer Roundtable.
Fred Barstein is the founder and CEO of TRAU, TPSU and 401kTV.