During the past decade, 401(k) plans have elbowed defined benefit plans to become the primary retirement vehicle for most Americans.
A decade ago, 48% of employers provided DB pension plans. Today, just 29% of employers do.
As a result, 401(k) plans have gone from a supplementary retirement savings vehicle to being most employees' core financial asset.
Assets in the plans have doubled to $3 trillion, from $1.5 trillion at the end of last year, according to data from the Washington-based Investment Company Institute.
Along the way, financial advisers have learned that 401(k) participants need assistance. Today, they are spending more time helping clients make selections in 401(k) plans, and many advisers are actually specializing in 401(k) plans, offering help both to participants and their employers.
"We went from trying to provide education to employees to get them involved in the 401(k) and investing to providing them with more guidance and advice for a fee," said Andrew McIlhenny, an executive vice president with Firstrust Financial Resources LLC in Philadelphia. The firm manages $600 million in assets and typically works with employers whose plans have $1 million to $10 million in assets.
The role of the advisers working with employers on their 401(k) plans has changed, said Steve Dimitriou, managing partner of Mayflower Advisors LLC in Boston, which manages about $500 million in assets.
"You go back a decade, and the adviser was a lot like a health insurance broker," he said. "They came in and sold a plan, and most clients never saw that person again."
Another major change in the past decade is that technology has improved the face of 401(k) plans, with more plans allowing open architecture.
Mr. Dimitriou also thinks that the Pension Protection Act of 2006 has helped propel the change from sales representative to adviser. "The PPA makes it easier for advisers to justify their role," Mr. Dimitriou said.
Advice is really what participants have wanted for some time, said Fred Conley, president of the institutional retirement group at Genworth Financial Inc. in Richmond, Va.
In the late 1990s, the industry was trying to teach plan participants to become their own chief financial officers, which worked until the tech bubble burst in 2001 and 2002, and participants began demanding advice, he said.
"It was too much to expect the participants to do," Mr. Conley said.
As the importance of advice has grown, advisers have been forced to become more specialized, said Louis S. Harvey, chief executive of Dalbar Inc., a financial services research firm in Boston.
The role of the adviser has expanded drastically, he said. They now must understand in-depth details, including fiduciary issues relating to the plan.
"Ten years ago, it was strictly a selling job," Mr. Harvey said.
Where most advisers once serviced plans with assets under $1 million, those who have gained expertise have moved upscale and now service larger plans, said Bob Wuelfing, principal and managing director of RG Wuelfing & Associates Inc. in Simsbury, Conn.
"The advisers that really understand the business are doing more and more business," he said.
Advisers who are working with wealthy clients directly also find that they are spending time helping clients make the right choices in their 401(k) plans, said Dan Crimmins, an owner and managing member of DPC Wealth Management LLC in Ramsey, N.J. His firm doesn't manage assets.
"The biggest change is that people have to take responsibility for their retirement," Mr. Crimmins said.
E-mail Lisa Shidler at [email protected].
