New regs forcing '401(k) dabblers' out of market: Expert

Tougher regulation in the 401(k) marketplace is driving “dabblers” out of the plan advisory business, according to an industry executive.
NOV 14, 2010
Tougher regulation in the 401(k) marketplace is driving “dabblers” out of the plan advisory business, according to an industry executive. “The 401(k) dabblers — the light advisers — they're doing less 401(k) business than they used to,” Ron Bush, a principal at Brightwork Partners LLC, said during a panel discussion last week at a meeting sponsored by The SPARK Institute, an advocacy group for the retirement plan industry. “We think this is due to the growing complexity of 401(k)s and the growing regulatory requirements that make it more difficult for advisers to do a little bit of 401(k) business along with a lot of their retail business or group insurance,” he said, speaking at the 2010 SPARK Forum in Palm Beach, Fla. According to a survey of 300 advisers who work with retirement plans which Mr. Bush presented at the conference, wirehouses and insurers account for 25% and 22%, respectively, of distribution in the 401(k) market. Just a few years ago, however, insurance producers accounted for about 35% of the distribution, while wirehouses accounted for 25%. Further, plan sales from those two channels account for fewer assets versus their counterparts in the RIA channel, the survey found. The insurance and wirehouse channels account for only 18% and 17% of asset sales, respectively. By contrast, registered investment advisers and specialty retirement broker-dealers are gaining clout in the 401(k) market. RIAs make up 13% of the channel distribution, while specialty broker-dealers and banks combined make up 8% of the distribution, the survey found. Independent broker-dealers and financial planning firms are also gaining traction, accounting for 14% of the channel distribution, according to the study. Specialty broker-dealers and RIAS are also winning the asset race, accounting for 10% and 22% of asset sales, respectively. The findings are reflective of a “phenomenon in insurance and wirehouse channels,” Mr. Bush said. Advisers who specialize in retirement plans are moving out of those channels, leaving behind brokers who serve primarily small accounts. Accordingly, advisers who are “heavy” on the retirement market — those who obtain at least 60% of their income from 401(k) business — have oversight over an average of $185 million in 401(k) assets. By comparison, advisers who get less than 20% of their income from retirements plan work with an average of $14 million in plan assets, according to the survey. E-mail Darla Mercado at [email protected].

Latest News

The key to attracting and retaining the next generation of advisors? Client-focused training
The key to attracting and retaining the next generation of advisors? Client-focused training

From building trust to steering through emotions and responding to client challenges, new advisors need human skills to shape the future of the advice industry.

Chuck Roberts, ex-star at Stifel, barred from the securities industry
Chuck Roberts, ex-star at Stifel, barred from the securities industry

"The outcome is correct, but it's disappointing that FINRA had ample opportunity to investigate the merits of clients' allegations in these claims, including the testimony in the three investor arbitrations with hearings," Jeff Erez, a plaintiff's attorney representing a large portion of the Stifel clients, said.

SEC to weigh ‘innovation exception’ tied to crypto, Atkins says
SEC to weigh ‘innovation exception’ tied to crypto, Atkins says

Chair also praised the passage of stablecoin legislation this week.

Brooklyn-based Maridea snaps up former LPL affiliate to expand in the Midwest
Brooklyn-based Maridea snaps up former LPL affiliate to expand in the Midwest

Maridea Wealth Management's deal in Chicago, Illinois is its first after securing a strategic investment in April.

Trump executive order set to ease path for private assets in 401(k)s, but hurdles remain
Trump executive order set to ease path for private assets in 401(k)s, but hurdles remain

A new PitchBook analysis unpacks sticking points relating to liquidity, costs, and litigation risk for would-be investors and plan sponsors.

SPONSORED How advisors can build for high-net-worth complexity

Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.