Outside voices and views for advisers

What are the business priorities of elite 401(k) advisers in 2018?

Managing the firm's operations and employees appears to be the standout

May 9, 2018 @ 1:55 pm

By Fred Barstein

The 401(k) advisory business is maturing. Many elite plan advisers with $250 million or more in defined-contribution assets under management have enjoyed great success since the 2008-09 market collapse, as more plan sponsors have focused on the quality of their advisers. That's been spurred partly by two Labor Department rules — the fiduciary rule and an earlier one on fee disclosure.

But success also brings challenges. Not only has the demand from savvier plan sponsors increased while fees have declined, but having more clients means advisers must become better business managers.

So what areas of business management are elite plan advisers focused on in 2018?

While opinions vary somewhat between practices of varying size, managing their operations and human capital appears to be the largest focus for 401(k) advisers this year, while succession planning is the smallest.

"As business owners, we all have the same role: leaders of human capital," said Nick Della Vedova, the president of NFP Retirement, a firm with roughly 100 DC-plan advisers overseeing around $130 billion in assets. He challenged advisers to focus on their most precious resource as a business owner, asking: "Where do you spend your time?"

The Retirement Advisor University hosted more than 120 elite 401(k) advisers at two events at the end of 2017. At the conclusion of each of the six interactive sessions, conducted over a two-day period, advisers were asked to complete a checklist of what they intend to focus on after the class, providing insights into their priorities.

(More: Why defined-contribution plan innovation is so slow)

The six business management areas covered during the event were: client acquisition; client servicing; managing operations and human capital; managing technology; managing partners; and succession planning.

Overall, almost 20% of the advisers listed something under "managing operations and human capital" as a new focus of theirs, making that the most cited session. This area includes such topics as reviewing the pricing and profitability of clients, evaluating which operations should be outsourced, and determining whether staffing is appropriate for current and projected growth.

"Succession planning" was least noted, by less than 10% of this advisers. This entails tasks such as reviewing the client base to determine their value and grooming or hiring potential successors within the firm.

(More: Retirement plan advisers ignore content marketing at their peril)

Small and midsize practices were most focused on operations and human capital, as well as client acquisition, which entails referrals from clients and centers of influence, cross-selling within the firm and social media, for example. Larger practices were more focused on managing technology. Although succession planning was not a big priority, larger firms were almost twice as focused on this area.

"Leveraging partners and outsourcing as much as possible is critical," said Greg Porteous, head of the DC intermediary group at State Street Global Advisors, which was a sponsor of The Retirement Advisor University's two events for 401(k) advisers. "Advisers need to evaluate and limit partners to those that provide real value-add that helps them grow and manage their businesses."

In the realm of client servicing, health savings accounts and total benefits, along with financial wellness, were the most important to advisers; fewer advisers across the board were likely to investigate robo-adviser technology, advice programs or improving client asset allocation.

Why was succession planning least noted among elite advisers? As Mr. Porteous said, "Some advisers are part of a firm that already handles succession planning. Others are true entrepreneurs who are not thinking about it."

Or perhaps, like the proverbial shoemaker whose family has no shoes, retirement plan advisers rarely of think of retirement themselves.

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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