Three Plan Advisers on the Convergence

The convergence of retirement plan advisement and wealth management is often viewed through the lens of the latest mergers and acquisitions. But what role does it play in daily plan advisement? And how do advisers view it in terms of the future of their practice?

Below, PLANADVISER asks three plan adviser of the year finalists about the role of the convergence on their practices now and in coming years.

Andrew Cleary, Partner, Baystate Financial and SFP Wealth

Andrew Cleary

PLANADVISER: How do you rate the retirement and wealth convergence in terms of importance for your practice on a scale of one to five (one being not important, and five being very important)?

Cleary: I would say it’s as high as a five in terms of importance.

We do both in terms of consulting for the plans and participants and offering wealth management services. I think in some ways now you have to do both. When participants get to that point of being ready to retire, they know us and know what we can do for them, so are more likely to look to us. That is a big part of what we are doing and are working to have processes in place that make the services efficient and effective.

We built our infrastructure up on the wealth side, and retirement plans were more of a supplemental business. But the more retirement plans we brought on, the more clear it was that a lot of help was needed in this space, so that’s what we did. When we were serving around 20 retirement plans it was easier to provide education and support to participants. When we got up to more than 200 it was a lot harder in terms of scaling the educator piece. A lot of other providers are struggling with getting to that scale. During COVID-19, we took a step back to really figure out how we were going to be able to meet the needs of all participants.

PLANADVISER: How does the retirement plan/wealth convergence affect your daily business and how you practice?

You have to be able to provide financial wellness today, especially for people who aren’t necessarily wealth management prospects. They need it, and it’s important that our industry provides it for everyone, not just high-income earners. We bifurcate what the client is looking for and what the expectation is that they will get. So, if it’s just rollover questions or paperwork, we can do that to take away the headache and frustration from HR teams. If they are looking for more wealth advisement and management, we can then work with them more in-depth.
 
PLANADVISER: Finally, how do you see the retirement plan/wealth convergence changing the retirement plan space in coming years.

Cleary: Convergence is changing the landscape in terms of the adviser and recordkeeper relationship. Oftentimes I can’t tell if the recordkeeper is a competitor of mine or a friend. If both the participants are being called both by the recordkeeper and the adviser working with the plan sponsor, there is a mixed message that doesn’t help the industry. But there are too many advisers who don’t have the resources to support all participants. 

I think there will be a lot more advisers who are going to scale up to work with participants and be able to offer more resources. Those who don’t will be relying on the recordkeepers, in which case they’ll be losing control and missing out on that business. I don’t necessarily think that’s a bad thing. But they will need to decide who they work with and how they want to run their practice. At the end of the day, we need to give more education to participants and create more lines in the sand about what the providers are offering, and why. The dust must settle somewhere.

Christopher DeAndrea, Director of Retirement Plan Consulting, Webber Advisors

PLANADVISER: How do you rate the retirement and wealth convergence in terms of importance for your practice on a scale of one to five (one being not important, and five being very important)?

Christopher DeAndrea

DeAndrea: Webber Advisors does both retirement plan consulting and wealth management. Cultivating relationships with participants is part of what we do. If they are seeking wealth advisement, they know us and trust us by the time they retire. If they have their own financial adviser already, that’s fine as well. But we want to establish great relationships through our education services and participant engagement. To answer your question, I’d rate the importance of the retirement and wealth convergence for us as a four.

PLANADVISER: How does the retirement plan/wealth convergence affect your daily business and how you practice?

DeAndrea: Whether you are just offering wealth management, and that’s it, and you can’t manage and service plans, that could be a problem going forward. Going the other way, if you service plans but don’t have that wealth management capability, then you could be missing out on opportunities and/or revenue. Certain recordkeepers are now monetizing participants—and I understand why, they have been dealing with so much fee compression that they are now looking for alternative avenues to generate revenue. On the wealth side, if we don’t offer wealth, or if we are not doing a good job of building those relationships with participants by getting our education out to participants, then we are going to miss out on a lot of ‘leakage’ where these assets are going to the recordkeepers.

For us, the relationship must also exist on the planning and education side. We are adding a value, not just saying, ‘hey, you can roll over your retirement plan assets with us.’ The all-encompassing planning conversation with participants is where we can add value and offer something more for them.

PLANADVISER: Finally, how do you see the retirement plan/wealth convergence changing the retirement plan space in coming years.

DeAndrea: Similar to the recordkeepers, I don’t think we should be too surprised if there is fee compression for plan advisers in the future. I see advisers being more involved with participants’ needs in terms of how they are budgeting, how they are managing their taxes and health needs. We’re holding more webinars and seminars around financial education and seminars. We’re really trying to showcase (through financial education and planning) how we are different and add value. These discussions are at the forefront for the convergence of retirement plans/wealth now and going forward.

The other reason I think the convergence will continue is the coverage gap. There are many small businesses that don’t offer plans. This is where I think the wealth managers can come in and start to consult on smaller plans. Our wealth managers can do this, and because we have retirement specialists on our team, we can assist with this work. At the moment, there aren’t enough retirement plan advisers out there to cover all of the plans that don’t currently exist, so that will need to change in the next five to ten years. Retirement plan advisers and wealth management advisers will have to work more together in the future if the private sector wants to successfully shrink the coverage gap.

Ben Duckett, Corporate Retirement Director, Financial Wellness Director, Morgan Stanley Graystone Financial Advisor

PLANADVISER: How do you rate the retirement and wealth convergence in terms of importance for your practice on a scale of one to five (one being not important, and five being very important)?

Ben Duckett

Duckett: The convergence of retirement and wealth management is a five—the most important. The reality is that, for most investors, the largest accumulation of wealth and retirement assets is within their employer sponsored retirement plans. To provide the most effective and impactful guidance, advisers need to take into account retirement savings as well as a client’s full wealth management picture. Within Morgan Stanley, we have the resources and capabilities to be best in class in both aspects of retirement consulting and wealth management.

PLANADVISER: How does the retirement plan/wealth convergence affect your daily business and how you practice?

Duckett: The convergence aligns with our team’s approach that we have been implementing for years. Retirement plan support and financial planning have been, and will continue to be, the key pillars of our practice. Our team is comprised of institutional consultants and corporate retirement directors, and as a CFP, financial planning is at the core of everything that I do for our wealth management clients. We have consciously constructed our team to have an expertise in both retirement plans and wealth management. We feel that the convergence is a healthy step in the right direction for our industry, and the added capabilities and resources that Morgan Stanley provides only help to improve the value we deliver to our clients.

PLANADVISER: Finally, how do you see the retirement plan/wealth convergence changing the retirement plan space in coming years.

Duckett: I see the outcomes of the current trends in the retirement plan space resulting in financially healthier, more retirement ready, and fully supported investors and plan participants. The resources, tools, and education that are currently being provided to participants through the convergence of retirement and wealth management only acts to add value for investors. I believe that the importance of saving for retirement within corporate retirement plans will be significantly highlighted when retirement savings are factored into a wealth management relationship as well as a client’s financial plan. The importance of an employer sponsored plan cannot be overstated, and we will see this trend of alignment between retirement plans and wealth management continuing.