Retirement plan advisers who strive to develop proprietary tools may very well be overlooking a wealth of resources available from their many providers. Wells Fargo National Sales Manager for Defined Contribution Ron Cohen, based in Boston, has an important warning for advisers seeking to do just that.
“When I’m in conversation with advisers, I often tell them to stop trying to create tools on their own,” Cohen recently observed. “It’s not that advisers couldn’t build some strong tools or technologies going solo, but I can tell you that any idea they’re going to come up with—chances are it’s already built out there and ready to go, better than they could do it on their own.”Story Continued Below
That seems to be the consensus of a number of industry providers, including recordkeepers, third-party administrators (TPAs) and investment managers. Leading firms across all three service provider segments have poured tremendous resources in recent years into the value-add tools they deliver to advisers, to help them better run their practices, supply to sponsor clients and participants—and, in some cases, white label or rebrand, so the tools appear proprietary. Availing themselves of such tools allows advisers to advance their deliverables while freeing up time to sell and service clients, instead of creating the tools themselves.
Traditionally, such tools have helped advisers gain new business or boost reporting efficiency while improving client service and responsiveness, but a whole host of next-generation support services has recently come online. And it is not just “robo-advice” platforms delivering more portfolio automation: Everything from student loan calculators and Social-Security-claiming data to mortgage debt analysis is being offered—making 2017 a great time to reassess your provider tool kit.
The advantages of leveraging externally developed tools over
internally developed ones are obvious, whatever their purpose will be, experts
suggest. Very rarely will an adviser have the technical competency in-house to
compete over the long term with the large national providers, which, given
their tremendous scale, can afford to hire and retain the top technical minds
in the field. In fact, this is one of the driving forces behind the industry
provider consolidations seen in the last several years—small, independent firms
finding it difficult to match the rapid technological developments of larger
peers, making it harder to compete as a standalone entity.
Perhaps the most important perk of leveraging outside
providers’ tools is that there is much less risk of getting stuck with
resources soon to become stale—all the top providers have clearly signaled
their intent to keep investing in new and developing capacities, such as
digital and automated advice, as well as offering services and products
including plan benchmarking support, client management tools and the like to
deliver to advisers and their clients.
According to Kathleen Roche, vice president for retirement
consulting services with Commonwealth Financial Network in Boston, service
providers in today’s marketplace will often let the adviser present planning
tools and other client-facing deliverables with his own practice’s unique brand
and “feel.” Roche highlights how important this practice of “white labeling” is
for many advisory practices—which are generally very keen on maintaining tight
control of the client experience.
“There is so much choice and opportunity out there that it
can, frankly, be overwhelming when thinking about getting the most from service
provider partners and deciding which to work with,” Roche says. “The first step
is to set very clear goals, and once you [do that], it’s about finding the
provider that can be the most consultative.”
Tim Seifert, vice president and national sales manager with
Lincoln Financial Group in Philadelphia, agrees that many powerful tools are
available. Many can be accessed as a paid or complementary add-on to existing
partnerships. Therefore, advisers looking for new support solutions may want to
start their search with providers they already work with. Often advisers find
that their current providers have added new tools and services, or improved
existing ones, since the adviser last inquired. “The large asset management
providers and recordkeepers are pouring millions upon millions of dollars into
developing their tools and services [to] back up advisers on the ground,”
In terms of specific tools and solutions sought by advisers,
“staffing and compensation” has become a hot topic of development lately, Roche
observes. “We have seen a lot of inquiries about tools that help advisers track
their practice growth and determine the equation of plans to manage vs.
staff—and how to reward employees along the line.”
But far and away the most demand is centered around
fiduciary compliance support and investment fee management solutions—spurred,
of course, by the forthcoming Department of Labor (DOL) fiduciary rule reforms
slated to take effect in April. As this article is being written, the future of
the rulemaking is shrouded in uncertainty under a Republican-led federal
government, but many firms have pledged to move ahead with fiduciary reforms
regardless of how the rule changes pan out—in the interest of improving their
competitive profile in a more fee-conscious environment (see “Compliance News”).
Providers of all stripes are clearly keyed into this ongoing
evolution, and PLANADVISER has gotten word of many dozens of new fiduciary
compliance support solutions hitting the defined contribution (DC) advisory
market, including tool kits from firms such as the SEI Advisor Network and
Redtail Technology, which partnered to create the Workflow Your Way to the DOL
Deadline tool kit. This tool will provide financial advisers with “systematized
workflows that help assess business readiness and demonstrate compliance with
the DOL rule through a variety of processes such as moving from commission- to
fee-based investments,” the firms say.
“Everyone is talking about the DOL rule in our industry—what
they should be doing and how they can get help,” says John Anderson, managing
director and head of practice management services for the SEI Advisor Network,
in Philadelphia. “It’s vital for advisers to have the workflows set in place to
execute a plan for their clients and demonstrate compliance with the rule.”
SEI and Redtail are just two of the latest firms to offer
solutions designed to help advisers navigate the regulatory playing field
expected to grow out of the DOL’s implementation of the rule. Others include
PCS, Impact Financial Systems (IFS), Envestnet and fi360.
PCS, for example, introduced an adviser-initiated rollover
system that is fully compliant with the fiduciary rule. “Come April, every
retirement-plan enterprise will have to reassess its procedures,” says PCS CEO
Mark Klein, also in Philadelphia. “Of the $7.3 trillion currently in IRAs
[individual retirement accounts], $4 trillion is in commission-based accounts.
We anticipate that most—if not all—of these accounts will transition to level
fee arrangements. Whether handled by independent registered investment advisers
[RIAs], advisers registered with broker/dealers [B/Ds], or hybrid advisers,
every account will have to be reviewed and converted in accordance with the DOL
mandates, as necessary.”
Fiduciary support may be the hottest topic for the time
being, but TPAs, recordkeepers and investment managers have rolled out
offerings in other areas. For advisers who want to help their clients promote
retirement readiness, loan education or financial wellness to plan
participants, the best approach may be: Promote the provider’s tools, while
offering support to improve engagement.
MassMutual, for example, upgraded its online RetireSMART
Ready tool to give savers in DC plans better guidance, and potentially improved
outcomes, to help them reach their retirement goals. According to MassMutual,
savers can be advised on what steps to take if their current saving strategy is
falling short of their retirement goals. They can choose to implement the
recommended strategies by themselves, or work with a financial adviser on
instituting one. To again highlight the increased interconnectivity of
value-add tools, the actual guidance and managed products are provided by
Envestnet Retirement Solutions (ERS).
Morningstar announced late last year the launch of a linked
student loan and retirement savings calculator. The digital tool is designed to
help investors decide whether to allocate extra income to retirement savings or
pay down student loans. The calculator will gather user input such as his
spending and saving habits with discretionary income, his employer’s match
rates for its retirement savings plan, and the status of his student loans. The
output will show how much more net wealth the individual might have in
retirement if he chooses the optimal savings-vs.-debt strategy proposed by the
Taking a similar approach but applying it to health
insurance and care costs, BenefitGuard announced partnerships with Utah health
care benefit providers Spectra Benefits and the Miller & Wade Group. The
partnership will target “simplifying small-business access for the two most
popular employee benefits: health insurance and retirement savings.”
“Small businesses are turning to one-stop shops, more than
ever for employee benefit programs,” says Matt Bradley, CEO of BenefitGuard, in
Orem, Utah. “Our solution provides a single sign-on experience and displays
401(k) balances in the HSA [health savings account] portal,” he explains. “This
increases retirement-related messaging and notifications to participants, and
improves 401(k) platform access and utilization.”
A similar message is being broadcast by Fidelity
Investments, which notes that “employees don’t leave their financial problems
at home, which leads to distractions and lower productivity at work.” That is
why more advisers are seeking out and offering tools to help with budgeting,
debt management, prioritizing savings goals and managing life events such as a
wedding or buying a new home.
Fidelity also expects to offer more online and on-demand
benefits education. Attendance at the firm’s live Web education sessions is up
52%, and use of on-demand seminars is up 62% since 2012. In addition, the “take
action” rates for on-demand seminars are consistently higher than both virtual
Web sessions and in-person seminars. Employees of all ages are gravitating to
the sessions, which range from the basics, such as the impact of increasing
savings, to the complex, such as Social Security claiming strategies, Fidelity
It all comes together to form a pretty complicated picture
for advisers on the ground.
Seifert, Roche and Cohen all agree that advisers need not
feel daunted by the growing universe of potential value-add solutions and
tools; nor do they have to rush to adopt every flashy new piece of support
technology they see their competition offer. But they cannot afford to ignore
the offerings or get complacent, either. Every day, top advisers are finding
new ways to fold creative service expansions into their client offerings—and
those who don’t strive hard to keep up will struggle to compete.
“How do you know who to partner with?” Cohen asks. “You can
find out a whole lot about how these tools perform through wholesalers and
other advisers who you trust. Ask your peers about what works and what doesn’t.
If you’ve been a little reluctant to take on a meeting with a wholesaler just
because you haven’t used their products in the past, ask them to talk about
forthcoming value-add tools. It may serve you well hearing them out.”
But be mindful of the solutions you select, notes Seifert.
“Make sure you find tools that are actionable … make sure [the tool] is
something that in real, measurable terms will get you an advisory client or
help you keep a client. That’s what matters most to business success and client
- Recordkeepers, third-party administrators and investment management firms are expanding their investments in tools for advisers, to cover such topics as financial wellness and retirement income projections. Automated advice solutions are also in high demand.
- The race to offer the most technologically advanced tools is one of the main drivers of the consolidation among providers.
- In response to the Department of Labor’s pending new fiduciary rule, some of the latest tools cover fiduciary compliance and fees.