PANC 2015: “Industry Insights”

Pensionmark Financial Group and CAPTRUST Financial Advisers formed a strategic partnership in March. At the 2015 PLANADVISER National Conference in Orlando, Florida, Pensionmark CEO Troy Hammond and CAPTRUST CEO Fielding Miller talked about what prompted the deal and how it is benefiting advisers.

Pensionmark has an adviser support program to help advisers respond to inflection points, Hammond said. Much like other advisers, Pensionmark hit an inflection point last year and wanted to expand. “We spent a lot of time last year evaluating how to take Pensionmark to the next level, to evolve. CAPTRUST and Pensionsmark have been very friendly competitors. We share clients as well as best practices,” he said. He then just picked up the phone to speak with CAPTRUST and started talking about the potential of working together.

For its part, CAPTRUST “had a strategic interest in an affiliate because we expect the bull market for retirement plan advisers to continue for some time,” Miller said. “A lot of advisers will need a strong retirement back office, so we decided to partner with Pensionmark, allowing them to take a 49% stake. We have both an affiliate and a partnership model.”

NEXT: The various roles Pensionmark and CAPTRUST play

CAPTRUST is the broker/dealer, and Pensionmark supplies the back-office support and registered investment adviser (RIA) intellectual capital, Hammond said. “I’ve been in this business for 25 years and have had four partners. This is the first time I’ve had a partner with whom Pensionmark is philosophically and morally aligned. CAPTRUST has some great resources, which has allowed us to roll out the Smart Lifecycle custom target-date fund since forming the partnership.”

Miller added: “Troy and his team run the business. We are a strategic partner that brings capital and business acumen.”

As to whether the advisers the two entities serve are different or the same, Hammond and Fielding said that in both cases, they are retirement specialists looking to grow their business. Asked whether the advisers can be affiliates or acquired, Miller said it depends on the adviser preference. However, given the strong CAPTRUST and Pensionmark brands, “advisers to independent firms can benefit from affiliating under one brand,” he said.

As to the trends advisers will face in the coming years, Miller said that requests for proposals (RFPs) for advisers have become standard. “That will rationalize the industry,” as it will make it clear to plan sponsors which advisers only dabble in retirement plans, he said. Fee transparency will also bring increased competition from other advisers. “Our fees are out there for public consumption, so there is a lot of pressure for us to bring more value to the table.”

Thirdly, as investment menus increasingly use passive investment and target-date funds (TDFs), it will be a challenge for advisers to prove their value, he said. Fourth, he foresees more demand for advice and wellness programs. If advisers aren’t already offering this, they will be at a disadvantage, he said. Lastly, regulatory pressures are rapidly increasing. “The price of poker is going up. It will be much more expensive” to do business, Miller said.

In addition, advisers must think about succession planning, Hammond said. “Otherwise, your practice will dissipate,” he said. By partnering with CAPTRUST, Pensionmark solved this problem for itself, he said.