RIA Aggregators Aim for Small-Plan Market Expansion

Back in May, the Senate Health, Education, Labor and Pensions (HELP) Committee hosted a hearing on the topic of improving the financial stability and retirement security of U.S. workers.

The hearing included detailed testimony from experts in employee benefits, personal finance and retirement policy. While the speakers covered a variety of topics related to improving retirement security, one theme clearly received the most attention and agreement: the necessity of closing the coverage gap that exists in the defined contribution (DC) retirement plan system.

Another particular point of agreement was that DC plans do great things for workers’ financial futures, helping people generate substantial amounts of assets over time by participating in the long-term growth of the equity markets. But the group also noted that substantial swaths of the workforce are shut out of the DC plan system entirely. In particular, they cited statistics showing that employees of small and midsized businesses broadly lack access to 401(k) plans.

Recognizing this coverage gap—and the opportunities that may come with solving it—various parties in the financial services industry are crafting solutions aimed at making DC retirement plans work better in the small-business context. One the one hand, thanks to a new legal framework established by the Setting Every Community Up for Retirement Enhancement (SECURE) Act, dozens of providers have taken the step of creating and marketing pooled employer plans (PEPs). Recordkeepers, investment managers, third-party administrators (TPAs) and retirement plan advisers and consultants alike are all expected to take different roles in PEPs—as sponsors, administrators, registered pooled plan providers (PPPs) and third-party fiduciaries.

Another approach to serving the small-business market is embodied by the likes of OneDigital and Ascensus, who have come together to create the “OneDigital Complete Retirement Solution.” The firms say their “co-created small market solution,” revealed last week, is meant to bring institutional-quality employee services to plan participants working at small businesses. Notably, OneDigital is already one of the largest partners on Ascensus’ recordkeeping system, with more than 900 plans and upwards of $3.75 billion in assets under administration. The companies expanded their relationship after both were involved in the acquisition of Truist’s retirement business in the first quarter of 2021.

According to Ascensus and OneDigital, the new small-market offering includes access to Personalized Portfolios, OneDigital’s managed account solution that gives employees access to personalized investment strategies and savings recommendations that are unique to their investor profile within the retirement plan. Another feature is called Financial Elements, which is described as a wellness solution offered through OneDigital. Other features and services include 3(38) fiduciary coverage provided by OneDigital and supported by an open-architecture platform, as well as Ascensus Elite Advisor program benefits. These include a dedicated client relationship manager and strategic account manager to help advisers focus on growth and enhance their practices

“When it came to developing a small market solution, we recognized that Ascensus’ platform allowed us to deliver OneDigital’s best-in-class managed account and financial wellness solutions to clients in a highly integrated fashion,” says Vince Morris, president of OneDigital Retirement + Wealth. “Ascensus’ open-architecture platform and expertise in small business retirement plans, along with top-tier service excellence and distribution enablement capabilities, made it easy for us to design and offer a retirement plan solution that is customized at the plan level and personalized at the participant level.”

Morris continues: “In terms of need, I’m aware of more than 20,000 commercial clients on the OneDigital side that would benefit from this new small market retirement plan solution. Together with Ascensus, we’re putting the focus on an underserved participant population that deserves access to valuable services and features typically found in larger retirement plans.”

A similar outlook was cited by the leadership at Hub Retirement and Private Wealth (Hub RPW) when it launched the “Hub Retirement Select” program several months ago. While offering a preview of the solution to PLANADVISER, Adam Sokolic, chief operating officer (COO) for Hub RPW, said the goal of Hub Retirement Select is to provide a comprehensive solution for small to midsized businesses looking for amenities traditionally afforded to large organizations.

“The approach eases the administrative and fiduciary risk burden and adds value to their holistic benefits offering,” Sokolic said. “Importantly, Hub Retirement Select can serve as a sophisticated retirement option if an employer is in a state requiring a mandated retirement plan.”

Sokolic emphasized that the solution will be priced competitively compared with existing offerings in the small- and mid-market. At the time of launch, Hub was partnering with a handful of select recordkeepers to power the solution, and Sokolic said additional partnerships are likely. When using Hub Retirement Select, clients gain access to Employee Retirement Income Security Act (ERISA) 3(38) investment management. Additionally, clients receive a quarterly monitoring report that includes tools and analytics design to make it easy to monitor and optimize their plan, along with an economic update to help them understand the bigger picture.

“We take responsibility for the quality of the investments and give clients regular updates,” Sokolic explained. “We expect Hub Retirement Select to be a highly competitive alternative option to state-mandated and voluntary retirement plans for employers.”