LPL to offer advice to 401(k) participants

B-D providing investment models, financial education to participants served by Vanguard, Ascensus

Aug 22, 2013 @ 12:58 pm

By Darla Mercado

Retirement plan participants served by Ascensus Inc. and The Vanguard Group Inc. — with more than $2 billion in assets combined — are set to begin receiving personalized financial advice, courtesy of LPL Financial Retirement Partners.

LPL Financial LLC yesterday announced the partnership with the two massive retirement plan service providers at its focus13 conference in San Diego.

Bill Chetney, executive vice president at LPL Financial Retirement Partners, said LPL is in talks with New York Life Insurance Co. to provide advice to participants in plans serviced by the insurer.

Under the deal, LPL Financial Retirement Partners will reach out to participants in plans serviced by Ascensus and Vanguard through LPL's Worksite Financial Solutions program. About 1,000 plans, representing more than $2 billion in assets, will comprise the initial group of 401(k) plans that will be able to use the service. LPL expects to expand the service to other record keepers, Mr. Chetney said.

LPL’s Worksite Financial Solutions will only be available to LPL plans and participants on the Ascensus record keeping platform. As for Vanguard, only LPL plans that use the Retirement Plan Access 401(k) service for small to mid-sized plans and their participants will be able to use Worksite Financial Solutions.

Since March, Worksite Financial Solutions and LPL's research department have been developing investment models and providing advice to participants in partnership with Morningstar Inc. Participants have been able to interact with LPL advisers, either in person, via the web or over the telephone.

In addition to access to these services, under the new partnership, participants also will have access to educational programs on financial wellness.

The cost for the service includes a base platform fee plus compensation to the adviser that's charged on an asset level and depends on the workload the adviser takes on. Those expenses are charged on an institutional basis, so the more participants in the plan, the lower the cost.

Mr. Chetney noted that the greatest failing of the 401(k) industry is the do-it-yourself nature of structuring investments within retirement plans.

“We simply provide participants with a fund menu of 25, 50, 100 funds, and after an education meeting, we tell them to pick out their own investment mix,” he said. “You can't imagine that someone would sit down with a customer and tell them good luck picking their investments.”

In addition, Mr. Chetney contends that it's unthinkable that someone would invest their entire net worth based on a single data point — their age.

“It's almost shocking that the industry touts this target date solution when it's something so deficient,” he said.

Naturally, one of the biggest deterrents to providing advice to 401(k) plan participants as a whole is the fact that the account balances tend to be small, so the profits aren't massive. Mr. Chetney noted that the volume of the accounts is what makes this endeavor profitable for LPL.

“You're dealing with volumes of $50,000 accounts,” he said. “The economics are attractive, and you're able to deliver that advice at institutional pricing.”

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