In Practice September 29, 2015

PANC 2015: Broker/Dealer and OSJ Evolution

The choices for retirement plan advisers to find support in the form of home office are increasing.
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“With the Department of Labor’s fiduciary rule, it will become very difficult to do advisory services as a broker/dealer,” suggested Kimberly Shaw Elliott, president of IFP Plan Advisors, a division of Independent Financial Partners (IFP). “Advisers will look to us to help them with compliance and provide a level of sophistication.”

Shaw Elliot’s firm is an office of supervisory jurisdiction (OSJ) for advisers, and she was speaking at a panel at the PLANADVISER National Conference. Vincent Morris, president, Bukaty Companies Financial Services, explained that there are certain FINRA and broker/dealer (BD) policies that are in place and advisers have a multitude of tasks to perform on a daily basis. Also a registered investment adviser (RIA) has to have a chief compliance officer to enforce Securities and Exchange Commission (SEC) policies.

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“One way to comply is to set up or partner with an OSJ office,” he told conference attendees. The OSJ takes on certain functions, such as client communications and advertising and overseeing trades. “And, it pulls both [regulatory] bodies together under one roof. We can do things in house to serve our adviser partners.”

William Chetney, CEO, GRP Advisor Alliance, said all of the advisory business is moving into an RIA model. When his firm worked as a BD, it found there were certain things it could not manufacture, so it decided to partner with an RIA. “At first, 73% of our revenue was from the BD business and 27% from RIA, but now it has flipped to 25% BD and 75% RIA,” he noted.

NEXT: What OSJs offer

Shaw Elliot’s firm backs the gamut from generalist advisers to retirement plan specialist advisers, and develops products advisers may need for their businesses. “If a generalist has a client connected with a retirement plan that wants help with that, they don’t have to be a specialist, we can help them.” she told conference attendees.

She adds that under her firm’s RIA structure, advisers have their own brand, but with a much larger organization behind them providing compliance oversight and structure. The value in working with an OSJ is advisers have a range of product and service choices, and can preserve their independence. Some resources her firm has available for advisers include in-house Employee Retirement Income Security Act (ERISA) counsel, dedicated compliance specialists, and 3(38) services.

In addition, the partnership with an OSJ extends advisers’ purchasing power for marketing efforts. Shaw Elliot’s firm has an in-house marketing team that will brand advisers, print out materials for them, and help them build their presence.

“A good way to describe OSJs is like a co-op,” Chetney continues. His firm focuses on helping retirement plan specialist advisers. “Our partners’ clients can do what large plans are doing if they band together; some things they just can’t do on their own.” As an example, Chetney says it takes scale to provide services at a participant level. If there are thousands of participants in a plan, advisers and plan sponsors may have to contract advice out. GRP has contracted with Financial Finesse so clients and their participants have access to Financial Finesse’s certified financial planners (CFPs).

“It’s a scale thing,” Chetney concluded. “Specialists 15 years ago needed to do certain things but didn’t have the scale. Partnering with an OSJ can help them keep up with trends and have resources they can use. It brings things to the mid-market resources they didn’t use to have.”

In Practice September 29, 2015

PANC 2015: Recordkeeper Partners Critical to Success

Two senior retirement industry executives—one from an advisory firm and one from a recordkeeper—discuss how the two types of service providers can work together for better plan sponsor outcomes.
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According to Joe Ready, executive vice president of Wells Fargo Institutional Retirement and Trust, dedicated retirement plan advisers have probably their most effective service delivery partner in their recordkeeper. And if they don’t, it’s time for them to find another recordkeeper.

“Mutual agreement up front and mutual service from the recordkeeper and the adviser are foundational to good plan sponsor outcomes,” Ready said during the first day of the 2015 PLANADVISER National Conference in Orlando. “When the recordkeeper supports the adviser and the adviser knows the recordkeeper inside and out, it absolutely leads to better ideas and better best practices.”

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Working together throughout the process of running a retirement plan will certainly bring better outcomes and increased satisfaction from the plan sponsor, agreed Randy Long, managing principal at SageView Advisory Group. He observed that, earlier in his career, winning a new advisory client almost always meant converting them to a new recordkeeper.

“Today the process essentially works in reverse,” he explained. “Starting in the last 10 or 15 years, the industry has really evolved and we’re commonly winning new clients through our recordkeeper. It’s a client on the recordkeeping platform looking for a new adviser, which only makes things easier from the participant perspective.”

The benefits that arise from close coordination between adviser and recordkeeper are myriad, the pair explained. From greater plan management efficiency to more advanced reporting and faster data updates, a skilled recordkeeper/adviser team can really turn up the heat on plan viewability and performance.

For those advisers who feel it’s important to maintain a coolheaded distance from the recordkeeper in order to promote an image of independence and transparency among clients, Long says that’s great, but this doesn’t mean the adviser has to coordinate less with the recordkeeper or be a less effective partner.

“You can maintain your independence while presenting services in a highly coordinated and effective way,” Long said. “That’s something we have strived pretty successfully to do, I think. Just remember, the end goal is always to put the client first and keep the client happy, both for adviser and recordkeeper.”

NEXT: (Careful) collaboration is king 

While more effective partnering between recordkeeper and adviser can improve efficiency for all plan stakeholders, Long and Ready agreed that problems can arise, especially when duties are not carefully and clearly divided among service providers.

“For success with adviser and recordkeeper, keeping the duties and responsibilities clear will always be a key effort,” Ready said. “Successful collaboration means maximizing use of data by all parties and proactively creating the best relationships we can among the sponsor, the adviser and the recordkeeper.”

Ready said one area in particular where advisers and recordkeepers should work more aggressively together “is around the cost-versus-value question,” referring to the ongoing market trends squeezing advisory and recordkeeping pricing closer to unsustainable levels from a practice management perspective.   

“I don’t think recordkeepers or advisers have done a good job on navigating and taking charge of this cost-versus-value question,” Ready explained. “Neither side has done a particularly good job enumerating the value of our service deliverables. Instead we have focused on rolling out shiny new tools and services to try and justify our pricing. It’s unsustainable when you think long term and our challenge, industry wide, is to do a better job demonstrating our costs and how this relates to the value that is delivered.”

Long agreed: “If you think about what a given participant actually gets for his $100 or so in recordkeeping costs each year, it’s a huge value. Think about everything else you spend $100 on in a year and it’s probably worth a lot less than access to investments, asset custody and all the other services a recordkeeper actually provides.”

Both speakers concluded that recordkeepers, with their troves of data and ability to pull reports on demand, are particularly well-positioned to help advisers map out the value they are delivering to a plan. As Long explained, they can help the adviser identify and broadcast gains in key plan performance metrics experienced by the typical client, for example.

“We just haven’t connected the costs to the outcomes,” Long said. “We all know a $5 per year recordkeeping service is not going to deliver strong value, but how can we make clients better understand this? It’s a problem for advisers and recordkeepers to tackle together.”

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