Are you overlooking a potential substantial amount of new business right in your clients’ workplace?
For 45 years, defined contribution accounts have been a cornerstone of financial security for millions of people, with total assets reaching $10.1 trillion in 2023.
These accounts are often the largest asset an individual owns, even surpassing a person’s home. The workforce is a pool full of potential clients – and it's up to advisors to dive in.
Industry experts project that the workplace will become the top source of new assets for financial advisors over the next decade. With retirement accounts representing 36 percent of all financial assets and a staggering 56 percent for households with $100,000 to $2 million in assets, the potential for growth is immense.
Gone are the days when a person finds a job they will retire from early on and only has one pension or one 401(k). Individuals often change jobs multiple times throughout their careers, leaving a trail of retirement accounts behind. These rollovers are opportunities to consider if they’re in the best interest of an advisors’ clients.
But here's the catch: advisors are losing out on these opportunities at an alarming rate. Hearts & Wallets found that 42 percent of rollovers are staying with their employer-sponsored plan, and 18 percent are moving to the new employer's plan – the largest percentage remaining at recordkeepers since 2010.
Unfortunately, technological and regulatory hurdles have prevented advisors from being able to help clients effectively manage all of their defined contribution assets.
It's time for advisors to take the necessary steps to position themselves for success during this time of convergence between wealth and retirement planning.
On average, a hypothetical illustration using the Future Capital revenue calculator shows that advisors could potentially unlock $60,000 in additional revenue by offering 401(k) management services†. By getting deeper into your clients' financial lives and leveraging digital tools to provide a transparent view of retirement asset allocations, advisors can enhance client relationships and unlock new growth potential.
The COVID pandemic and financial stressors have been pushing many people to experience higher rates of stress than ever before. In fact, 71 percent of Morgan Stanley’s State of Workplace survey participants said financial stress is weighing on their work and personal lives.
People troubled about their finances don’t benefit the firms they work for, thus more employers are offering access to retirement savings opportunities and sometimes financial advice.
This is an opportunity for advisors to offer more than just traditional wealth management services. And clients are willing to participate, if they're given access to digital tools that provide a clear and comprehensive overview of their retirement asset allocations.
Advisors can leverage these tools to provide personalized insights, demonstrate the value of their services, and strengthen client relationships.
When deciding which firm to partner with, advisors should look for the most advanced technology available as firms know all too well that technology changes in the blink of an eye and a desirable partner would be able to adapt well with changing client and advisor preferences.
Digital onboarding, account aggregation tech, and appealing advisor and plan participant portals are table stakes.
Another desirable characteristic of a reliable partner is a firm that provides resources across the retirement value chain – including comprehensive portfolio insights, expert resources, and enhanced communication tools. This arms advisors with powerful tools available at your fingertips to engage and retain existing clients while also gaining prospecting opportunities.
Advisors managing a clients’ retirement assets, including their 401(k)s and other savings avenues, is a win-win for both client and advisor. For advisors, you are gaining new clients and particularly clients who are apt to accumulate wealth and need more services. Your clients receive more organized and holistic financial advice inclusive of investment, retirement, and even estate planning.
And an added bonus for clients is that they’ll feel less stressed while at work, which could mean increased job security and a greater chance of career development.
The time to act is now. By diving into the treasure trove of workplace opportunities, advisors who seize this opportunity and adapt to the changing needs of their clients will be well-positioned to thrive in the years ahead.
Jay Jumper is the CEO of Future Capital, a leading wealthtech solution for workplace retirement plan participants.
†ASSUMPTIONS: 150 wealth accounts per advisor; 75% of accounts with held-away 401(k) or other defined contribution plan; $333,940 average 401(k) balance based on Survey of Consumer Finances from The Federal Reserve; 60% client adoption rate of Future Capital services; 60bps Future Capital management fees; 33% referral fee to advisor
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