In Practice September 30, 2015

PANC 2015: Leading Edge Technology

The rapid progress of tech advances has brought a dizzying array of applications and software that helps plan advisers to be more efficient and profitable.
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Technology must be ready to support advisers in what they do best: helping our participants retire, said Christen Marsenison, vice president in client services and delivery, Envisage Systems, speaking at the 2015 PLANADVISER National Conference in Orlando, Florida, on Tuesday.

Providers have an eye on what tomorrow looks like, she said, as they scout solutions for what will make platforms move forward.

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One challenge for advisers is juggling day-to-day responsibilities and the associated technology tasks, added Steven Shackelford, senior vice president, strategic sales at Aspire Financial Services. Managing data is another big issue, Shackelford said. “Advisers are starting to move toward consolidating vendor relationships in order to get the data they need,” he said. A top concern is how to adapt the technology but still leave time for their daily agendas.

Advisers are mulling how to use the many available resources to provide better service and remain profitable, and they continuously struggle with a number of questions, said Anders Smith, senior vice president at Nuveen Investments. These include: How do I use this technology to provide better services for my plan sponsors? How can I be more profitable in terms of how I run my business? How do I get more out of each dollar coming in? “We believe technology can enhance a service model,” Smith said.

Many resources exist to help advisers expand their business, Shackelford said, such as private labeling capabilities, which can make a business much more viable in the marketplace. “It makes you larger than what the client sees,” he said. “You can expand your practice and boost visibility in the industry.” Partnering with the right institutions allow advisers to leverage the strength of the existing marketplace instead of building custom solutions from scratch.

Technology can also influence how advisers manage retirement plan practices and deliverables. Virtual recordkeeper partners can provide the resources to help advisers provide participant education. Instead of holding individual client meets, Smith explained, advisers can do webinars using an iPad preloaded with information and materials, saving the cost of an assistant.

NEXT: Time management, and the costs of managing a plan

An ongoing issue with profitability means that advisers look at the business more as a business. “They’re putting in plan information and seeing what it costs them to manage a plan,” Smith said, adding that advisers try to determine a billable hourly rate and how much time the adviser spends on a specific plan.

“Advisers have a hard time tracking [hours] spent with each client,” he said. “It takes time to track time.”

Gamification is gaining traction, Marsenison said, referring to a practice to reward participants for certain behaviors and increase enrollment. A recent study showed that 49% of men and women older than 28 spend four hours a day playing games on devices or computers, Marsenison pointed out, making the trend all the more vital for younger plan participants.

Millennials’ communication preferences are also a hot interest, Shackelford said, and one that could influence an adviser’s own practice with the use of alerts, to cite just one example. Another characteristic of Millennials that will influence technology, Marsenison said, is their level of trust. Study after study showed an enormous differential: Baby Boomers ask the hotel concierge for a recommendation, but Millennials go straight to Yelp.

“How does that change the business model, for a business built on trust?” she asked. “They still need advice, but how do you get in front of them? The technology will have to be very different.” Perhaps what is needed, she said, is a Match.com for advisers.

“We’ll have to solve the issue of Millennials,” Shackelford added. “They’ll be a big part of our growth.”

Technology is coming to define the recordkeeping industry in terms of supporting plan sponsors and plan advisers. Advisers can address a critical issue for plan sponsors—tools for participant enrollment—with recordkeeper tools and services for education, Shackelford said.

“The industry has not yet solved how plan sponsors can continue to increase enrollment in the plan,” he said. But the industry is producing a range of resources for participant education, freeing up the adviser to spend more time building a practice.

In Practice September 30, 2015

PANC 2015: Micro Plans

Moving down market can be lucrative, executives say.
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“Plan sponsors with less than $20 million in assets under advisement are generalists with a lot of responsibilities, and they are strapped for time,” said Benjamin Lewis, senior managing director, direct plan market, at TIAA-CREF, speaking on the “Micro Plan” panel at the 2015 PLANADVISER National Conference in Orlando, Florida. “They need an efficient solution and are not very well covered, so it is a great opportunity to grow your business. Their process is simplified. They rely on referrals as opposed to RFP [requests for proposals]. If you have experience in their industry, they value that.”

In the not-for-profit K-12 education space with 100 or more employees, only 25% use advisers, Lewis said. In the corporate space as well, “sponsors are underserviced,” said Jennifer McPherson Franton. “The opportunity is there for you to differentiate yourself. Why are advisers moving down market? Advisers in the mid to large market are getting squeezed. They have to reduce their pricing, which is why advisers are looking down market for more stable clients.”

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Of the billions and billions of dollars of assets in 401(k) plans in the United States, a surprisingly large portion is in the micro market, noted Jason Roper, divisional vice president at MassMutual Retirement Services. “You can really be a hero for these clients,” he said.

As to what micro plan sponsors are seeking help on, they want help on the basics. “They want to reduce their effort and risk and provide service to their participants,” Lewis said. “Ninety percent of micro plan advisers consult on investments and provide education. Fifty-five to 60% conduct fee assessments and compliance monitoring.” They are also particularly interested in 3(38) fiduciary services, he said.

NEXT: Seeking out the micro plan business

“The smaller the plan, the more likely they will turn to their personal financial adviser, so retirement adviser specialists can partner with wealth management advisers,” Roper said. “That gives you a great opportunity to get into the micro space.”

Lewis said that TIAA-CREF specializes in the not-for-profit space, and that to find leads, he turns to the C-suite, since many of those executives serve on not-for-profit boards. “Third-party administrators are also a great source for leads across all the markets,” he said.

As advisers go down market, they need to move from customized models to standardized models, McPherson Lewis said. “Platform providers can supplement you with such things as education,” she said.

It is also critical for advisers to educate micro plan sponsors on the importance of an investment policy statement and a retirement committee, Roper said. Furthermore, small plans often want ancillary offerings, such as 529 college savings plans, Roper said.

As far as what trends from the large plans are moving down market, smaller plans are beginning to embrace more aggressive approaches to plan health and financial wellness, Roper said. “Clearly, what happens in the large market eventually moves down market,” he said. In addition, smaller plans are beginning to issue RFPs, McPhearson and Franton said.

TIAA-CREF has developed a tool specifically for micro plans that shows participants their income replacement ratios, Lewis said. “We use that in advice sessions with participants. We can show them how they compare to other individuals,” he said.

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