The horsepower behind 401(k) plans: A specialist adviser

Employers are turning to a new kind of adviser to help their employees save for retirement, a new survey shows

Feb 25, 2014 @ 2:31 pm

By Darla Mercado

+ Zoom

It appears that 401(k) specialist advisers are getting the job done, as data shows that plan sponsors who work with them experience a spike in worker deferral rates and appreciate advisers' help with the fiduciary process.

After fee disclosure regulations from the Labor Department and heightened scrutiny of fiduciary duty, advisers are finding that dabbling in the retirement plan business while holding out hope for IRA rollovers may no longer be a worthwhile endeavor. Rather, a new kind of 401(k) adviser is emerging who focuses on serving retirement plans and helping employees achieve the best possible retirement savings outcome through education and other services.

It's a labor-intensive process, particularly in situations when plan sponsors might hesitate to make drastic changes.

“We took on an account that had a 40% participation rate [in its 401(k)] plan,” said George Fraser, managing director and financial consultant at Retirement Benefits Group, an affiliate of LPL Financial.

Following an evaluation, the company in question now provides a match. It also has started an auto-enrollment program at 1%, a tactic Mr. Fraser uses when plan sponsors are reluctant to automatically enroll workers in the plan — typically because those workers earn low wage.

“We re-evaluated it: Now the company provides a match, auto-enrolls at 1% and auto-escalates [the deferral] at 1% with no caps,” he said.

“We go out and we do what we do, spending time on this additional training: How can we empower you?” Mr. Fraser added.

That extra attention is starting to yield results, according to a recent survey from the Retirement Advisor Council, a plan adviser advocacy group that's sponsored by 401(k) service providers and asset managers.

Last September, the group surveyed 407 sponsors of retirement plans with $5 million to $500 million in assets. Out of the 334 plan sponsors who work with an adviser, 83% have seen an increase in participants' deferral rates over the last two years, and about a third of those employers have seen deferral rates rise by at least 6% of pay.

Seventy-five percent of the sponsors working with a plan adviser estimate that at least half of their workers are on track for retirement, and 53% of those with an adviser say that the adviser does an “outstanding job” of helping them implement fiduciary processes.

It takes a special kind of adviser to get those results. “These advisers will gather information on participation and contribution rates, asset allocation in the plan, fees and record-keeping services,” said Melissa Cowan, national sales manager at Morgan Stanley. She was on a conference call discussing the results of the Retirement Advisor Council's study.

“[These plan advisers] are knowledgeable about fee structures; they take on a role as a liaison and assist in fee negotiation and resolution,” Ms. Cowan added.

Apparently, there is also a sweet spot for advisers who want to be more involved with retirement plans: Small to medium-sized employers. Owners are preoccupied with running their businesses, so the expert counsel of an adviser, especially one who can dedicate time to improving results for participants, is greatly appreciated.

“Small and medium-sized firms often don't have the resources for a full HR staff,” said Michael H. Gouldin, CEO of Gouldin & McCarthy, an advisory firm that works with retirement plans. He also participated on the conference call. “Clients turn to us more often than not for help and questions on their plans.”

“It makes it easier to run the plan overall,” he added.

0
Comments

What do you think?

View comments

Recommended for you

Sponsored financial news

RIA Data Center

Use InvestmentNews' RIA Data Center to filter and find key information on over 1,400 fee-only registered investment advisory firms.

Rank RIAs by

Upcoming Event

Oct 11

Conference

Fall Excell—Peak Advisor Alliance

The InvestmentNews Research team will present exclusive data and highlights from its bellwether benchmarking study that will identify best practices for setting and structuring compensation and benefits packages throughout your organization.... Learn more

Featured video

INTV

How litigation has changed the 401(k) market

Deputy Editor Bob Hordt discusses the lasting impact that a flood of lawsuits brought against major companies and their 401(k) plans has had for people serving the retirement market.

Video Spotlight

Are Your Clients Prepared For Market Downturns?

Sponsored by Prudential

Recommended Video

Path to growth

Latest news & opinion

Jerry Schlichter's fee lawsuits have left an indelible mark on the 401(k) industry

After a decade of litigation, fees are lower and retirement plans are more transparent. But have the lawsuits gone too far?

10 best financial adviser jokes

How many financial advisers does it take to screw in a lightbulb?

With margins crashing, broker-dealers look to merge: report

Increased regulation is straining profit margins among broker-dealers, sending many of them into the arms of their bigger brethren.

Hackers may have profited from SEC breach

The hack of the agency's Edgar filing system occurred in 2016, but the regulator didn't conclude until last month that the cybercriminals may have used their bounty to make illicit trades.

Top 10 financial firms ranked by investor satisfaction

Find out which firm took the top slot for overall investor satisfaction for the second year in a row.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print