Thomas Ruggie spent his first 18 years in the advisory business trying to dodge any retirement work. Now it's his fastest-growing segment.
He avoided it because the job required him to stay on top of detailed legal and administrative changes that he needed to know only when handling the occasional retirement plan situation.
“I had been in business 18 years and had about 30 plans under my belt — and still, every time something came up, I felt like I had to re-educate myself by doing research or calling someone else,” said Mr. Ruggie, 45, founder of Ruggie Wealth Management.
Nonetheless, Mr. Ruggie agreed to help his clients, who “forced” him to assist with their small-business retirement plans. Around 2008, much to his surprise, he recognized untapped market potential.
Significant opportunity existed if his firm could handle a large volume of retirement plan clients, improve the participant experience and cut plan fees, he concluded.
In 2009, he set up a company with a large third-party administrator called 401k Generation. It works with small businesses to improve their company-sponsored retirement plans by finding lower-cost investments and making plan administration easier.
“Clients don't like to call 800 numbers and talk to people who don't know anything about their plans,” Mr. Ruggie said. “We serve as a bridge between the client and the administrator.”
Mr. Ruggie's firm, which manages about 600 401(k)s, helps employers choose which investments to make available, whether to match a portion of employee contributions and other details of these rule-laden retirement plans.
Mr. Ruggie also is president of RW Direct, a business unit of 401k Generation that provides plan enrollment and education meetings to participants of 401(k) plans. It has helped thousands of participants choose investments and make other plan-related retirement decisions.
“Most advisers want the business owner as a client, not whomever is sitting at the front desk making $15 an hour,” Mr. Ruggie said. “But if employees are happy with their 401(k) plans, then owners will be happy, because they don't want their employees complaining about it.”
Mr. Ruggie started his core Tavares, Fla.-based advisory firm, which oversees about $282 million in client assets, about 22 years ago. Today it provides wealth management services to about 274 clients.
But the 401k Generation side of Mr. Ruggie's business is the fastest-growing segment right now, he said. This is in part because he has two full-time sales representatives who identify and pursue companies looking to hire a retirement plan adviser.
The firm typically handles plans with about $300,000 in assets, but it also takes on startup plans. Its largest retirement plan has about $7 million in client assets.
Because 401k Generation uses an open-architecture platform, plan sponsors can choose among 14,000 investment options to make available to employees, Mr. Ruggie said.
SERVICE AND FEES
The two main issues employers complain about most, he said, are client service, including quality participant education and administrative help, and heavy fees built into the plans. Thus, those are the two areas that 401(k) Generation and DW Direct aim to improve.
The core investment lineup the firm recommends has low costs, typically including funds from The Vanguard Group Inc. and Dimensional Fund Advisors.
“We're Wal-Marting the 401(k) industry by choosing the investments more carefully,” Mr. Ruggie said.
His company charges about 50 to 80 basis points less than most standard plans for the investment management component, Mr. Ruggie said.
Opportunities in the retirement advice space continue for advisers willing to jump into the business with both feet, Mr. Ruggie said. Merely sticking a toe into the waters of this marketplace doesn't pay off, he contends.
“The 401(k) business continues to become a commoditized business as the gap in fee structures has narrowed significantly over past several years,” Mr. Ruggie said. “Unless an adviser can build a scalable business, it will be tougher to generate enough net revenue to make it worthwhile.”