In Practice May 24, 2011

Adviser Opportunity Abounds in 403(b) Market

Aaron Friedman, national practice leader for nonprofit consulting at The Principal, says "there is still a huge opportunity for advisers to step in and help." 
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Friedman drew this conclusion based on the latest 403(b) plan sponsor survey results from The Principal and The Profit Sharing/401k Council of America. He pointed out that 11.1% of all 403(b) sponsors are planning on issuing a request for proposals (RFP) in the next 12 months. This jumps to 14.9% for sponsors of plans with 200-999 participants, and 13.2% of large plans (1,000+ participants) are going to market in the next 12 months.  

Specific areas where an adviser can add value: Friedman says many sponsors still don’t know their Employee Retirement Income Security Act (ERISA) status and an adviser can help determine this so sponsors can avoid compliance issues and implement best practices. In addition, the survey found 48.6% of 403(b) plan sponsors have an Investment Policy Statement (IPS), meaning over half either don’t have one or don’t know if they have one (see “403(b) Plans Increase Use of Advisers and Online Communications“). An adviser can help sponsors develop an IPS, as well as governance and due diligence processes.  

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The need for adviser help can also be seen in the number of investment options the survey found sponsors are offering in their plans. For example, in the higher education market segment, sponsors offer an average of 55 investment options, and in this segment, 62% of participants were contributing to their plans, compared to 74% for all 403(b)s. Friedman says this is consistent with studies that show more options actually discourage participation. 

(Cont...)

Friedman adds that sponsors still need help in developing education programs and measuring the effectiveness of their plans to determine if it is helping employees prepare for retirement.  

Friedman says he is seeing an evolution particularly in the higher education market segment. These plans have traditionally been multiple-provider, non-ERISA arrangements, “but, over time they are starting to realize they need better controls, procedures, and plan discipline,” he states.  

One avenue for seeking out 403(b) business is within an adviser’s own community. Advisers can reach out to charitable organizations and talk to them about their retirement plans and whether they are working effectively. Friedman suggests that if the communication uncovers low participation or complicated administration, or no governance, due diligence or education procedures in place, advisers should tell the organization how they can assist.  

“The regulations have been out for several years now, we’ve completed the first full year of 5500 and audit requirements, and this made sponsors realize they need to make changes and need help, and that’s an opportunity for advisers to step in,” Friedman concludes.
Deals & People May 24, 2011

BofA Merrill Lynch Adds to Institutional Client Relationship Team

Cathy Bolz is joining Bank of America Merrill Lynch's Institutional Client Relationships leadership team as an Executive Client Relationship Manager.
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In this newly created role based in New York, Bolz will be responsible for senior level relationship management for a small number of our largest existing institutional retirement clients, according to an internal memo announcing the hire.

When she starts in early August, Bolz will report to Kevin Crain, Head of Institutional Client Relationships.

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“Cathy’s extensive experience working with plan sponsors and within HR and benefit organizations brings a depth of knowledge and skills to our team that will help us to drive growth, and highlights our commitment to delivering the highest level of service to clients,” said Crain in the memo.

Bolz joins the firm from Blackrock, where she was most recently Managing Director responsible for leading the company’s employee benefit programs. In her role at Blackrock, she also served as a member of Bank of America Merrill Lynch’s Institutional Retirement Client Advisory Council.

Prior to her role at Blackrock, Bolz spent 10 years in senior HR and benefits roles at Morgan Stanley and later Merrill Lynch. She holds an MBA and Bachelor of Science degree in Accounting from Canisius College.

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