Envestnet Expects Financial Advisers to Expand Further Into 401(k) Plan Business

Financial advisers, not just retirement specialists, are expected to pursue the 401(k) plan business at greater rates in 2024 and beyond, while demand for end-to-end technology solutions and personalized services will continue to grow, according to research from Envestnet Inc.

“The opportunity [in the 401(k) business] is significant, as only about half of U.S. workers have access to an employer-sponsored retirement plan today,” Chris Shutler, head of strategic development and market intelligence for Envestnet, says in an emailed response. “The retirement market is expanding, driven by a number of states mandating that small businesses provide employees with a plan, as well as SECURE Act 2.0 increasing available tax credits for such employers.”

Envestnet’s latest report on “Trends to Watch in 2024” revealed a shift among employers to integrate financial wellness tools into their benefits packages as a competitive advantage. This integration is expected to promote higher employee satisfaction, productivity and retention rates. Envestnet’s report anticipated the workplace will become a crucial avenue for financial advisers to attract new assets.

“There are several reasons advisers should consider adding 401(k) capabilities, but chief among them is organic growth—the ability to offer high-quality advice to plan participants expands the potential to capture traditional wealth accounts,” Shutler says.

Shutler notes Envestnet’s recent announcement of a partnership with recordkeeper Empower on a full-service 401(k) plan available to advisers. He says the offering, called Retire Complete, gives advisers an “Easy Button” when they want to offer a plan.

All Together Now

The report also highlighted significant demand among advisers for end-to-end technology platforms and improved integrations for managing client portfolios. Among advisers, 61% want an all-in-one bundled financial technology software, platform and solution. In the report, Envestnet noted that there are more than 400 wealthtech solutions in the market, creating a need for connectivity between systems and software providers.

Firms are also focused on greater adoption and use by advisers of existing tech solutions to maximize investments made in these systems. Key areas highlighted in the report as critical to the adviser experience included the integration of client engagement tools and improvements in custody workflows.

“Increasingly, we’ve seen more of our clients looking to consolidate and streamline the technology and solutions their advisers utilize, to provide a more unified experience for customers and make it easier for them to do business,” Shutler said in a statement accompanying the report.

AI Can Personalize

The research also indicated growing client demand for personalized services by which advisers can provide specific advice and action steps. While 60% of advisers recognize the potential of personalized data insights to improve their business or advice to clients, many have yet to implement them.

Firms leveraging artificial intelligence for client insights, for instance, reported enhanced efficiency and improved client interactions and service delivery. Those positive results are boosted when advisories use AI as part of customer relationship management systems that provide alerts for advice across areas such as wealth, lending or banking.

“AI-powered next best actions will disrupt the standard adviser workflow,” Craig Iskowitz, CEO and founder of the Ezra Group, shared his thoughts on the report. “These systems will drive efficiency, productivity and sales results to unheard of levels.”

The report draws from research published by Envestnet’s Market Intelligence Team, including an analysis of market data, third-party research, as well as an Envestnet survey fielded earlier this year.