Banks can provide an opportunity for RPAs

OneDigital’s recent acquisition of Truist Financial’s retirement advisory practice raises the question of whether banks offer an opportunity for retirement plan advisers to grow their business, just as they have for record-keeper outsourcers like Empower Retirement and Ascensus.

For Vince Morris, president of OneDigital’s retirement and wealth practice, there was the obvious opportunity to acquire more $10 billion in assets, 1,200 plans and 24 team members. But there is also the chance to cross-sell.

“We take a holistic vision,” Morris said. “Most of the Truist clients only used them for retirement. We want to cross-sell employee benefits and HR consulting.”

Morris said he expects to be aggressive about acquiring business from other banks in the future. Overland Park, Kansas-based Qualified Plan Advisors recently acquired the retirement advisory business of First National Bank of Oklahoma.

Truist, the sixth-largest U.S. bank, resulted from the merger of SunTrust and BB&T, both of which had defined-contribution record-keeping divisions. Those record-keeping divisions were also just sold, to Empower and Ascensus, respectively, each of which had previously provided record-keeping services for the banks.

The now-vacated Obama-era fiduciary rule from the Department of Labor meant that “the banks had already bifurcated their advisory and record-keeping roles,” Morris said. “It only made sense to sell the advisory practice after they sold their record keeper.”

“Retirement is not a significant percentage of the bank’s revenue and not a core business,” he said.

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Banks are not a big part of the record-keeping industry — only Bank of America remains among the giants, after the sale of most of JPMorgan’s record-keeping division to Empower and Principal’s acquisition of Wells Fargo’s DC business. But there are smaller regional banks leveraging their trust departments and banking relationships to provide retirement services to clients.

Banks are challenged to refer relationships internally, never mind working with an outside firm. Smaller, regional retirement plan advisers will have to be creative in financing deals and developing relationships. OneDigital, for example, has no formal relationship with Truist going forward to refer bank clients interested in retirement services, Morris said.

“We see opportunities to partner with record keepers to provide our managed accounts and 3(38) solutions to their clients,” Morris said. “How much new business does Financial Engines refer to their record-keeper partners?” And now that Financial Engines is part of Edelman, which has a fledgling RPA division, it could be considered a competitor to RPAs.

Regardless, the pace of consolidation and change with record keepers — and RPAs especially — is dizzying, with no indication that it will let up anytime soon. The driving forces are numerous: Private equity firms are flooding the market; the industry is fragmented and maturing; RPA owners are aging; government support for retirement plans is growing; the COVID-19 pandemic is prompting changes; and there is a convergence of wealth, retirement and benefits at the workplace.

And for many RPAs, the opportunities are ongoing — but that is especially true for larger, well-capitalized groups like OneDigital.

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Fred Barstein is founder and CEO of The Retirement Advisor University and The Plan Sponsor University. He is also a contributing editor for InvestmentNews’​ RPA Convergence newsletter.