PANC 2009: UBS, MSSB Retirement Heads Make Case for Wirehouse

Speaking at the PLANADVISER National Conference, O’Connor said UBS is focusing on building services for advisers working in the 401(k) area, as “that’s really where the future is,” as much of the nation’s wealth is coming from small businesses. Among other things, O’Connor said UBS is making strides through training and embracing open architecture in order to help advisers who want to focus in this area.

Rochelle Silverstrom, executive director at Morgan Stanley Smith Barney (MSSB), added that MSSB is helping advisers with personalized marketing materials to help 401(k) advisers differentiate themselves.

Both UBS and MSSB have responded to the demand for advisers to do fee-for-service work. MSSB has a new institutional consulting group (see “Morgan Stanley Smith Barney Unveils Institutional Consultancy”) and UBS has the DC Advisory Program (see “Ed O’Connor”).

Mass vs. Elite

Many advisers in the wirehouse channel might focus on wealth management but “dabble” in retirement plans. Smith Barney said earlier this year that every one of its advisers has at least one plan on its book of business (see “Smith Barney Reorganizes Retirement Group”). Silverstrom said the company focuses on helping both advisers who dabble and those who specialize.

UBS doesn’t spend a lot of time supporting the retirement plan advisers who dabble, but will help them build that side of the business if they want to, O’Connor said. “We’ll certainly try to help something get into that business,” he said. He encourages those advisers to meet up with 401(k) advisers.

Silverstrom also stressed the importance of partnerships. The firm will not allow mass advisers who don’t focus in the 401(k) area to prospect large plans. “We will force the mass adviser to partner with an elite adviser,” she noted.

O’Connor said he especially sees opportunities for advisers to team up with financial planners for rollover opportunities, and also foresees an evolution of advisers who specialize in areas such as stock options, nonqualified plans, and cash balance plans.

Why Wirehouse?

Silverstrom said the wirehouse is a good venue for elite advisers who want to focus on business building rather than maintaining a business. O’Connor said an independent adviser once told him that when the oil goes up, he’s not thinking about investments—but rather his oil bill—which advisers at wirehouses don’t have to worry about.

In addition to not worrying about the bills, O’Connor said another reason to stay in the wirehouse is the product innovation that comes from a big balance sheet. He specifically noted the innovation developing in retirement income, such as putting guarantees in products. He said it helps to have UBS’ scale when talking to insurance companies about creating a multi-insured solution, which he thinks will be necessary. “You will see firms of our size get their quicker,” he said. He also mentioned that they are in the process of creating a unified rollover solution with all of their providers.

Despite the benefits of product at a wirehouses, it is still not for everyone. For advisers who do decide to go independent, O’Connor said it comes down to being a “lifestyle choice.”

Fiduciary Status

Wirehouses have been criticized for putting up hurdles to let retirement plan advisers be fiduciaries on their plans. While both UBS and MSSB enable advisers to be fiduciaries on the plan, advisers cannot be participant-level fiduciaries providing individual advice.

Both Silverstrom and O’Connor gave no indication that that will change anytime soon. “It’s very unclear what the rules are,” said Silverstrom, referring to the investment regulations that are now going back to the drawing board (see “DoL Set to Drop Investment Advice Regulations”). “It is difficult right now to launch a program without any clarity.”

Silverstrom and O’Connor mentioned that they offer educational tools but not advice to participants. O’Connor agreed that the lack of clarity keeps UBS on moving toward advice. He predicts 80% of participants will eventually be in target-date funds, and the value-added for advisers will be choosing investments at a plan level, as opposed to helping participants choose investments. “I’m not saying I’m not going to do something about participant advice; it’s just very blurry right now.”