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Retirement plan advisers need to start marketing to providers

Providers are being forced to make tough decisions on which advisers they can support

Sep 13, 2017 @ 1:13 pm

By Fred Barstein

Defined-contribution-plan plan advisers are relying more and more on providers, especially asset managers, to help them with marketing and practice management.

But resources are shrinking as margins get thinner, with more assets moving into target-date funds and passive investments, forcing these providers to make tough decisions on who they can support. As a result, advisers need to start "selling" providers on why they deserve support and treat them like true business partners rather than vendors.

As advisory fees decline and the demand for services increases, advisers need to focus on efficient ways to run their practices and acquire new clients. Most broker-dealers are just beginning to understand the unique needs of retirement plan advisers; most of those that do understand offer less support than in the past, because they're focusing more on limiting liability and transitioning to a fee-based fiduciary world courtesy of the Department of Labor's conflict-of-interest rule.

As a result, plan advisers are joining aggregator firms and larger regional practices or are relying more on providers for support. Advisers are in denial if they think providers are lining up to offer support, no matter how large the practice. And even those with a significant amount of 401(k) assets and plans are having less success getting support if they are not generating new business, or if very few of the plans or investment menus they work with are turning over to new providers.

Beyond looking for practices that have new-business potential, providers are looking for growing and viable practices. Those are the ones positioned for success, to make the investment to offer better client service and to acquire new practices, along with hiring and training new advisers and support staff.

(More: Where 401(k) advisers are on the industry consolidation curve)

In addition to needing to start marketing to provider partners about why they deserve support, advisers also need to include providers in their sales, marketing and business planning if they want these providers to be true partners.

Advisers also need to be honest about their practices and willing to admit when they are struggling and the areas where they need the most help. Finally, advisers have to stop believing they deserve support just because they might have given business to providers in the past or because they have a sizable book of business.

Providers, in turn, face their own issues. With the growth of aggregators, many of which are still attached to a broker-dealer, providers are being asked for support from three tiers: the broker-dealer, the aggregator and the individual adviser or practice. Tough decisions will have to be made.

And providers are equally delusional if they believe in the "show up and throw up" concept: thinking white papers are enough to help advisers run their practices and get new clients. Providers need to offer actionable and relevant value-adds that have top- and bottom-line impact for advisers. Asset managers in particular need to make sure that they are training their wholesalers to be better business consultants and partners, not vendors who can only tell a good investment story.

The 401(k) world is evolving. Advisers and providers alike need to adjust and form deeper partnerships as the market matures. Not all will survive this transition.

Fred Barstein is the founder and CEO of The Retirement Advisor University and The Plan Sponsor University. He is also a contributing editor for InvestmentNews' Retirement Plan Adviser newsletter.

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