Equipping Advisers for Survival and Success in a Rapidly-Changing Market

Paul Chong, Senior Vice President,
Retirement Plan Services

The retirement plan market is changing rapidly. In fact, the greatest change in decades is happening right now. Margins are shrinking, fees falling, lawsuits rising, advisers leaving and specialists growing; fees are now transparent, alternative competitors are emerging, and the government is intervening. The retirement plan market indeed is demanding—but it also offers the most lucrative opportunities ever for advisers who are prepared. PLANADVISER spoke with Paul Chong, senior vice president of retirement solutions at CUNA Mutual, about how advisers can be prepared and, therefore, successful, and how CUNA Mutual Retirement Solutions can help.

PLANADVISER: From an adviser perspective, what are the three largest areas of influence and change?

Paul Chong: The fundamental premise here is that the landscape is changing, really because of the fiduciary rule. And, whether or not that passes, it would be hard to argue that fee transparency and putting the client first aren’t good things for the consumer. So the true question is, how do I deal with my business in this environment? 

The first thing advisers should do is really assess their overall business and business model. I know it’s unpopular to talk about case profitability today; however, it’s important for them because they’re facing downward pressure in terms of fees. If I were to talk to the major wirehouse advisers, those who are going fee-for-service, and away from a commission based model, many struggle on how to price themselves. While they can get an FBi benchmark report and ensure they’re in an acceptable range, they should assess the profitability of their model and pricing range and the services they bring to the client. Once they understand their business model, they need to apply it without trepidation in the marketplace. There is a market for folks who do a great job for their clients—the plan sponsor and especially the participants—so the adviser should look at what he/she can bring to get the best outcome for participants. It’s about transparency and providing good services for what they are charging.
Second, advisers must clearly articulate their value proposition and, third, be able to demonstrate how they succeed at getting the participant into the best position for eventual retirement.

PA: How do you have that conversation with plan sponsors who are afraid they’ll be asked to pay too much, to charge participants too much? 

Chong: I think it comes down to two things. One is getting comfortable with and being able to clearly explain the fiduciary roles and responsibilities—the ones the plan sponsor has and what the adviser has. The second is, if the goal is to improve the odds that the participants can save more and be better prepared for their retirement, the adviser can say with confidence, “The rules are that you don’t have to offer the cheapest option out there. They say you have to be prudent and make sure what you are offering is comparable. It’s about providing value for value and transparency.”

PA: Let’s talk about fees and the investment structure. There are so many options today—are we at a good place in terms of flexibility, or will more evolution occur?

Chong: I think we’re at a good place, and that’s because of transparency—of being able to say, “This is what the investment part costs, the administration costs, the advice, the education.” All that is good, but you still need the flexibility to take all those different pieces and package them together with the plan sponsor in terms of how you want to be paid. The transparency drove that, and now the flexibility is being driven by the fiduciary rule.
I’ll note, we’ve put a lot of effort into being able to support just about any fee program that’s possible out there. Every plan and adviser differs, and the way advisers are charging fees and the way plan sponsors want to pay fees are changing. The true open architecture programs we offer are very important: Just about any mutual fund, exchange-traded funds [ETFs], collective investment trusts [CITs], unitized model portfolios, etc., depending on what the adviser and plan sponsor want with no proprietary fund requirements.

PA: Where do you think we are in being able to show participants how well they’re succeeding? And what stands in the way of advisers getting them to a valid retirement readiness metric?

Chong: Standing in the way is always inertia. There’s something about investments where hard working Americans feel lost. The array of tools and advice they can get really doesn’t build their confidence. In many ways, they just want to be told what to do, and told in such a way that it’s easy to implement.
For the adviser, part of showing their value proposition is to show what percentage of a work force participates and being able to break down, within each demographic, who’s participating and what their average deferral is, and from there being able to demonstrate within those demographics if people are properly diversified. Is the adviser helping the plan participants make the right combination of decisions that will lead to a secure retirement on time?
Our goal is really to help those financial advisers help their practice meet its goals for the long term, as well as help the plan sponsor and employees meet their retirement goals. Our education and focus is on hardworking Americans, people that the credit union movement serves—folks who don’t have a lot of money, household incomes of $50,000 or so. Those are the folks that need the most help. All of our marketing materials, our modules, our tools are written for that particular demographic, and so it’s a great partnership with the financial adviser, where they can concentrate on the HCEs, and we can concentrate on everybody else so that the entire program is well served.

PA: You had mentioned a couple of times about how, with all the changes, advisers need to be very careful in how they grow and manage their practice. Could you comment on the role of the Retirement Adviser Institute offered through CUNA Mutual Retirement Solutions?

Chong: We realize that advisers don’t need more product—there’s plenty out there. On the other hand, if we can provide them with ways to enhance their practice and make it more efficient and profitable, everyone wins.
Through the Retirement Advisor Institute, we help advisers enhance their practices in a variety of areas like Branding, Marketing, Sales or Client Management. For example, there are tools to determine how they can improve their profitability or sharpen their marketing messages. Essentially, we want to help them spend more time working not just IN their practice, but ON their practice.
One thing we look at: Not all advisers are the same. Some are still in that rapid growth phase. For them, the training and information is more about prospecting, growing their business, making sure they prospect for the right types of clients. The track we offer for the more experienced advisers shows how to make their business more efficient while still hitting certain profit levels and providing the quality of service that their clients and the employees of those clients need.

PA: Anything else to add?

Chong: Again, it’s the value of being flexible. We want the advisers and their clients to say, “Here’s a plan provider that offers basically everything we’re going to need in this changing world.” That, in and of itself, helps make an adviser’s practice more efficient and helps them leverage time.