Rule changes could open up 403(b) field

Oct 15, 2008 @ 12:20 pm

By Lisa Shidler

Advisers have a huge opportunity to win business in the 403(b) arena, but they must act quickly, a retirement expert said at a panel on the subject at the Center for Due Diligence’sconference in Scottsdale, Ariz.

Because 403(b) plans are facing new regulations Jan. 1, advisers have a unique opportunity to acquire these accounts, said Steve Smith, a vice president with Purchase, N.Y.-based Diversified Investment Advisors Inc.

As part of the new regulations, non-profit groups will be required to have plan documents in place and will be forced to pare down the providers. Many non-profit groups are still lagging behind and haven’t made the appropriate changes.

A 403(b) is a retirement plan for certain employees of public schools, employees of certain tax-exempt organizations.

Advisers need to realize that the 403(b) market is different from the 401(k) arena, Mr. Smith said.

“This is a very labor-intensive market, but it can also be very profitable. In this marketplace, you’ll find a lot of plan sponsors will look to you to be the expert,” Mr. Smith said.

Advisers should think carefully about what sector they want to specialize in the non-profit arena. Mr. Smith pointed out that K-12 school districts can often require a great deal of hand-holding, but there are also many opportunities in charitable organizations and hospitals.

He said that advisers need to be aware that many of these non-profit retirement plans have expensive funds and don’t have the proper documentation.

“This market has worked in the dark ages for many years and ignored rules and regulations,” Mr. Smith said.

The Center for Due Diligence is based in Western Springs, Ill.

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