Few RIAs Focus on Retirement Plans

Fidelity Institutional contrasts RIAs who accommodate retirement plan business with those who progressively accelerate their plan-related services and opportunities. More than nine in 10 (91%) independent advisers currently working with retirement plans do so as part of their broader wealth management practices—not as a retirement specialist, according to a survey by the Fidelity division, which provides asset custodian services for RIAs and third-party recordkeepers,.

Meg Kelleher, executive vice president and head of Fidelity Institutional’s retirement adviser and recordkeeper segment, tells PLANADVISER that accommodators typically enter the retirement planning marketplace unintentionally—often on referral from a wealth management client who happens to serve as a sponsor or fiduciary at their employer’s retirement plan. Fidelity’s research finds most of these advisers serve one to five plans and are ill-equipped to take on more.

This presents a range of challenges for both accommodating RIAs and their clients, Fidelity explains. Many accommodators report that it is difficult to keep up with the rigorous fiduciary rules and other regulations that apply to qualified employer-sponsored retirement plans. They also struggle to build scale and grow relationships as quickly as their counterparts, who have taken time to develop specialized retirement services infrastructure and expertise.

A group of “high-performing retirement advisers” have successfully made the shift from accommodating retirement plans to accelerating their retirement business by applying a deliberate approach to growth and client relationship management, Kelleher  says. These advisers have increased their retirement plan business by 50% or more in the last five years, Fidelity finds in its research.

“Retirement planning is not an accommodators’ business for the long term,” Kelleher says. “Advisers who expect to only accommodate plans will not be able to compete with those who are dedicating real time and resources to plan clients.”

There are numerous reasons, she says, but the issue largely boils down to the fact that retirement plan services can be quite different from other services in wealth management and so require different expertise and back-office support. According to Fidelity’s research, nearly seven in 10 (67%) independent advisers who have retirement plan business report that servicing these plans is not a current focus for their firm, and in many cases the advisers said their retirement plan business amounts to “a distraction.”

For RIAs and other service providers, opportunity in the retirement planning market continues to grow, Fidelity says, and for those already involved, it is a bullish market. Fidelity finds 84% of plan sponsors relied on advisers in some capacity last year, a jump of nearly 10% from 2012. Kelleher was hesitant to predict another 10-point jump in adviser usage by retirement plans for 2014, but she feels there is very little chance that the trend will turn negative any time soon as a greater percentage of the U.S. population enters retirement.  

Kelleher says about 60% of the independent advisers identified in the high-performance group (i.e., those successfully positioning themselves as retirement specialists) anticipate their retirement business will double in the next five years. She is quick to warn firms in the accommodating group that this growth comes only through a strong focus on retirement-related expertise and service delivery. 

The research is not all bad news for accommodating RIAs, she says, as Fidelity has turned the best practices from the high-performance group into a new support program designed to help advisory firms improve their retirement services, called Retirement Plan Growth Strategies. The program is tailored for RIAs who have only a handful of retirement plan clients—or are looking to enter the space for the first time—and require a better understanding of the opportunity retirement plan clients present, as well as ways to accelerate growth in the segment through improved service.

The new program helps RIAs capitalize on the opportunity with retirement plans by demonstrating how a fee-based model, strong fiduciary experience and investing acumen can put an adviser in a unique position to grow the retirement-related part of his practice. Retirement Plan Growth Strategies features tools, insights and support to take RIAs through a three-step process that will help accelerate plan-business growth.

The first step Fidelity recommends is to determine if retirement plan clients are the right fit for an RIA firm. To help RIAs do this, the program offers a personalized approach to help advisers assess their level of interest in retirement plans and suggests resources that provide tangible next steps to begin the development process.

Next, Fidelity urges RIAs to apply a deliberate approach to growing their retirement business—not to rely on sales tools and strategies developed for wealth management or other types of financial services. Fidelity’s research found that high-performing retirement advisers dedicated more time and resources to retirement plans (55% of their time and resources, compared with 41% of time for non-specialist firms) and were much likelier to direct marketing efforts toward generating new retirement plan business (39% vs. 19% of other firms). Fidelity's research suggests these strategies can be quite powerful in winning new retirement business. 

Fidelity finds that 40% of high-performing retirement advisers say they are likely to try new ways of growing their retirement business. Once a firm is ready to begin growing their retirement plan business, making connections via clients, centers of influence and prospects are all important launching pads for growth, the firm says. Taking this into account, the Fidelity program offers advisers exclusive access to Referral-EDGE for Retirement, a prospecting tool that provides a database of high-net-worth individuals, retirement plans and centers of influence.

More on the new research and RIA support program is available here.