Manage My Wealth, Please

In today’s marketplace, it’s more the rule than the exception that a retirement plan adviser will have an individual wealth management division they’re working alongside with, or at least adjacent to in a parent firm.

A 2023 survey by the March McLennan Agency found that nearly 80% of firms now offer a hybrid model that offers both wealth and retirement services. The trend reflects consolidation within the industry as advisers looking to provide additional services that will drive revenue and continued demand for such services from participants.

“There’s a shift taking place with the role of the adviser, from being really focused on investment performance to needing to be a financial guru and educator on a broader range of financial topics,” says Olivia Eisinger, GM of advisory at Apex Fintech Solutions. “When consumers think about their finances, it’s not retirement over here, and wealth over there, and then insurance there and debt. It’s all one financial life.”

Eighty percent of plan participants are interested in access to a professional, whom they can call with questions to make investment and savings decisions for them, according to a 2023 online survey done by Voya Investment Management. The same survey found that 84% of employees want personalized advice and guidance that constructs investment portfolios based on their risk tolerance levels.

“People, unfortunately, are not generally comfortable or educated to manage their own investment savings for retirement,” says Todd Lacey, chief revenue officer with Stadion Money Management, which is owned by Smart Pension Ltd. In Watkinsville, Georgia. “That’s been the trend for a long time.”

Building On Existing Relationships

The idea of a plan advisory syncing participants—even members of the C-suite—up with individual advisement is still relatively new to the industry, but it’s gaining acceptance quickly. Proponents of the convergence of retirement and wealth management say it’s simple: workplace savers increasingly want wealth management, and the trusted organizations already advising on their employer’s plan are ideally situated to provide the service.  

“We do see that participants that use a financial adviser want some sort of previous relationship or connection to that adviser before they make that transition,” says Elizabeth Chiffer, a retirement analyst at Cerulli Associates in Boston.

Often, the relationship begins within the plan, with financial wellness services for participants. As participants grow older and start to have more complicated lives, they may also begin using in-plan managed account services, Chiffer says. That work may allow advisers to collect other participant data, such as out-of-plan assets, and use that information to start a conversation about wealth management.

Another opportunity for some advisers is capturing individual retirement account rollovers from participants who are leaving the plan entirely.

“Capturing the rollover assets is certainly a point of competition, and a point of interest for the adviser and for the recordkeeper,” Chiffer says.

Opportunity In Life Milestones

While the decade before retirement is an obvious time when many participants start looking for more personalized wealth management, advisers say that other important life milestones, such as receiving an inheritance, expanding a family, or getting a divorce also often motivate such interest. Jason Gerber, managing partner at Prime Capital Investment Advisors in Little Rock, Arkansas, says that in addition to life milestones, market volatility also often drives more plan participants to inquire about wealth management services. He notes that this happened when the market tanked and the economy faced uncertainty in 2020.

“Some of these different market cycles demonstrate the need that people have for someone to help them make decisions about their money,” he says.

Those decisions often lead to broader conversations in which advisers can talk to a participant about when or if it makes sense to move assets out of a plan.

“The biggest thing that people need is often financial planning,” says Jania Stout, senior vice president of the Retirement + Wealth division at One Digital in the Washington, D.C., area. “Then, after they get information, they can choose whether to keep their assets in the plan or to roll them into a wealth solution. It really depends on their wealth tolerance and stress level around doing it on their own.”

Keeping Costs Low

Stout says that such services, typically billed as a percentage of assets under management, generally cost more than what participants are paying for in-plan services, but less than what they might pay to work with a pure wealth management shop.

“We are discounted from what you’d get out in the market,” she says. “The reason for that is that we don’t have to factor in the cost of finding the opportunity.”

Gerber says his firm aims to keep wealth fees between 0.8% to 1.2% of AUM.

“We try to be commensurate with what they’re paying in the plan, but that’s not always the case, given additional needs and planning, but it’s always spelled out very clearly,” he says. “We make sure that participants understand what they’re paying.”

Eisinger says that the shifting role of advisers may also mean it’s time to change how they think about fees and pricing for their services. For clients with low account balances, for example, or who want to keep their assets in plan, it might make sense to consider a non-AUM fee arrangement, such as a flat rate for certain services, or a subscription fee.

“When RIAs get paid by a percentage of AUM, the narrative is that they’re motivated to help clients grow their wealth,” she says. “But that story doesn’t articulate that the adviser is there when a life event takes place or a client needs to think through the implications of another financial decision.”