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Practice Management November 15, 2023
100% of Large Retirement Plan Advisories Now Include Wealth Strategy, According to T. Rowe
In 2019, only half of plan advisers were considering a wealth strategy, but the opportunity to enhance profits by offering more integrated solutions has led to a major shift.
Reported by Natalie Lin
There’s no more holding out by large retirement plan advisory firms in offering a built-in wealth strategy for clients, according to researchers at T. Rowe Price.
In the Retirement Leadership Forum 2021 Aggregator Survey, all of advisers reported having a built-in wealth strategy to offer participants in the plan, said Michael Doshier, a senior defined contribution adviser strategist at T. Rowe Price, at a retirement market outlook press event Tuesday at the Nasdaq MarketSite in Times Square, New York.
Doshier said that as recently as a few years ago, many advisers used to look down at chasing rollovers or servicing participants, since their primary incentive was servicing the retirement plan. However, over the last 10 years, retirement plan advisories have gone from acquiring each other and looking for scale to acquiring wealth practices and offering additional services.
“Why is that? … I think it’s the potential benefit for the end investor—integrated solutions all in one place—and profit-margin enhancement for the firms,” Doshier said. “Recently, you’ve started to see retail wealth firms buying retirement plan advisory firms. You hear about the competitive nature of the retirement planning business and the low-margin nature of it.”
One reason for the shift is that most brand enhancement activities catering to younger investors are probably happening via their 401(k) plan. Participants look at their balance a couple of times a year and see the brand name of the provider of that 401(k) or an advisory firm working with them, making them more likely to recognize that company for wealth management, Doshier noted.
“A wealth firm looking to buy a retirement firm might be looking for a low-cost new acquisition methodology for new potential clients,” he said. “As these accelerate, enhanced by the technology, data and AI innovations, [that will make] them more scalable and more efficient for the average advisory or consulting firm to actually change their tune and want to help those participants.”
Among plan advisers surveyed by in the Retirement Leadership Forum 2021 Aggregator Survey, 75% strongly agreed that building wealth relationships with retirement plan participants was a significant opportunity for their practice. Meanwhile 19% agreed with the statement and 6% were neutral. Wealth management is viewed as a part of the firm’s value proposition for the market, both for plan sponsors and their participants. Doshier said this was especially common during the pandemic.
“The first firms that looked like they kind of resurfaced and came out of the quiet period of the early part of the pandemic were the ones that had stepped away from a narrow definition of what they do in retirement or wealth,” he said. “That broadly put them together into a bigger picture of being able to help participants or investors achieve financial security and wellness.”
