Wealth management becomes more attractive to providers


With Fee Compression and Other Defined Contribution Market Pressures, Financial Planning and Wealth Management Opportunities Become More Attractive Offerings for Registrars, Plan Advisors and Other DC Providers .

In fact, several DC plan providers are aligning their DC and wealth management businesses to foster deeper and more comprehensive relationships with retirement investors that extend beyond their DC plan, according to “The Cerulli Report—US Retirement End-Investor 2022: Fostering Comprehensive Relationships”. ”

According to company research, about one-third (34%) of active 401(k) participants identify their 401(k) provider as their primary source for retirement planning and advice, followed by a retirement professional. finance (16%). According to the study, many participants will benefit from a comprehensive, high-contact wealth management relationship where they gain access to more advanced financial planning services, a broader set of investment opportunities and more flexible distributions.

“Retirement investors’ financial priorities often shift from immediate savings and debt management concerns to longer-term financial planning considerations as they progress in their careers and accumulate greater wealth,” notes Shawn O’Brien, Managing Partner at Cerulli.
For plan members who work with advisors, the most important services provided by advisors are investment selection (68%), disbursement planning (61%) and retirement accumulation (58%), highlighting the application for a comprehensive service that guides participants through every stage of their lives. , notes the study.

As for who they trust to provide advice, Cerulli found that advisors are the most trusted source of investment advice for the 33% of plan members who work with them, with 53% saying their advisor is “very trustworthy”. Participants who do not work with an advisor have the most confidence in the investment advice provided by their bank/credit union and 401(k) provider. “Companies that build and expand member relationships over their working years provide a simple and seamless transition from CD-focused asset accumulation to a more holistic financial planning and advisory experience at approaching retirement,” says O’Brien.

rolling market

As such, the opportunity is ripe for pension plan providers, the report suggests. Cerulli estimates that more than $440 billion in DC assets were moved into IRAs with the help of an advisor in 2021, illustrating the potential to supply wealth management business to the DC market. Additionally, the vast majority (86%) of advisor-mediated rolling assets are through an existing advisor relationship, as opposed to new advisor relationships, according to the research. “For wealth managers looking to capture DC plan rollovers, this data underscores the importance of building and nurturing member relationships earlier in their careers, years before potential rollover events,” O’Brien points out.

Cerulli expects the consolidation of DC registrars and intermediaries, along with ongoing legal and regulatory pressures, to continue to put downward pressure on fees in the DC market, making planning services financial and wealth management increasingly attractive to providers from a financial perspective. Services are considerably more lucrative than pure-play recordkeeping relationships, according to research, in part because the wealth management industry has been largely insulated from the intense fee compression experienced in asset management industries. assets and record keeping.

Given the attractive economics of wealth management versus recordkeeping and plan advisory practices, Cerulli expects more wealth managers and DC plan providers to create synergies between these two business units. through strategic partnerships and mergers and acquisitions.

By harmonizing their DC and wealth management businesses, companies can achieve significant financial benefits for both franchises, O’Brien observes. “Taking into account the ancillary revenue expected from converting DC participants into wealth management clients can allow firms to offer more competitive pricing on the DC side, helping them win additional mandates,” he notes. , noting that greater “coopetition” between registrars and plan advisors could arise as both parties strive to serve the plan, but at the same time compete for participant turnover.

On these points, a recent report by Wise Rhino, Retirement & Wealth Advisory Q2 2022 Spotlight, observes that interest in mergers and acquisitions in retirement and wealth advisory remains high and competition is strong for investment targets. acquisition. The report notes that many of the acquisitions of pension and wealth advisory firms over the past five years have been made by CAPTRUST, HUB, OneDigital, NFP, Marsh McLennan Agency, Sageview and, most recently, World Insurance with its exit. Pension Mark.

“Each of these companies has strategically focused first on establishing multidisciplinary office centers in each of the major regions, and then on recruiting its consulting talent in each of the major US markets,” the report explains.


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