Retirement plan clients seem to want it all — and these days, they're asking plan advisers what they can do for their participants in terms of guidance.
Retirement plan clients seem to want it all — and these days, they're asking plan advisers what they can do for their participants in terms of guidance.
“We're working more with advisers who can't respond to requests for proposals unless they have a response on what they'll do for participants,” said Scott Holsopple, president and chief executive of Smart401k. “Many advisers we're working with find they need a strong answer to get some finals and present to the plan committee.”
Mr. Holsopple, along with David K. Stofer, managing director of Sageview Advisory Group, yesterday led a panel discussion at American Society of Pension Professionals and Actuaries' annual 401(k) Summit in Las Vegas.
Mr. Stofer's firm specializes in corporate-level plan advice, with a small but burgeoning wealth management practice. Meanwhile, Mr. Holsopple's firm has no wealth management arm and provides no plan-level services, but instead teams up with plan advisers who want to delegate participant advice to a third party. Smart401k charges plans a direct fee for its services to participants.
Participant-level advice has been in demand from plan clients, but can be difficult for plan advisers to provide, as there are potential conflicts of interest to worry about, not to mention the sheer amount of work it adds. Enter the decision about whether to outsource the participant advice or provide guidance in-house.
At the heart of it all, advisers have to ask themselves whether they want to be a fiduciary to the participants. Educating participants on vesting schedules and the types of funds available isn't a fiduciary act, but making a recommendation based on a participant's situation is considered investment advice.
“From a practical matter, there's always someone who comes up [after an educational presentation] and says, ‘I heard what you said, but what do I do with my money?'” Mr. Stofer said.
“If you're a broker, you can't direct them into how to manage their money. We're RIAs, and we'd love to help in a situation like that,” he added. “But if the participant wants to coordinate everything, including assets outside of the plan, then we don't want to be giving ongoing advice to those participants.”
Plan sponsors are aware that advisers acting as fiduciaries are doing so within the context of the retirement plan and its participants, he said, adding, however, that some employees may think that the fiduciary protection covers assets outside of the plan, too.
Heightened regulatory attention to fiduciary duty as well as fee disclosure to plans and participants has made rollover capture all the more complicated for advisers who are hoping to pick up new business as participants leave plans.
“You can't be all things to all people,” said Mr. Holsopple. “If you want rollovers, don't provide advice to participants. It's too easy to do something wrong.”
“Have a third party do participant advice so that you can sit down and have a rollover conversation with them,” he added. “There's more of an upfront investment, but you can craft a plan that's more based on financial advice to get the rollover.”
