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A significant impediment is that experienced retirement plan advisers do not want to work with smaller or start-up plans, because they can't afford the minimum fees these RPAs need to charge.
RPA firms are selling at record profits, with deals flow expected to double in 2021, but it pales in comparison to the RIA market. So far, we have not seen any RIA aggregators, other than Captrust, show interest in the DC space.
Looming over the RPA Record Keeper Roundtable and Think Tank was the convergence of wealth, retirement and health at work.
RPAs with strong wealth management businesses and leadership will command a premium price, among other factors.
The DC industry must be realistic and admit that financial wellness is largely a failure, an acknowledgment that's a key step on the road to success. Because we cannot afford to fail.
Providers cannot hope to create a sales force that competes with the 25,000 RPA specialists and hundreds of thousands of RIAs that dabble. But once the plan is sold, who has the right and ability to monetize the participants?
Plan sponsors are clamoring for solutions to help employees with their financial issues. Student loans and emergency savings programs are two easy, simple and impactful ways that the DC industry can help.
There are more than 40 national record keepers, with plenty of capacity for all. And some providers are uniquely positioned.
Few have figured out how to serve the participants who cannot afford traditional advice. Managed accounts are just a start.
The model provides simplicity, with a single investment lineup, and also offers record-keeping pricing advantages.
More RPAs are choosing to sell, in part to get referrals, especially if they are part of a benefits firm. But being part of a larger firm as an employee is not appealing to all.
Empower has distanced itself from its other competitors; the only one that matters is Fidelity, which is bigger and more profitable because of its ability to cross-sell wealth management services to participants as well as offer proprietary products.
Who deserves to service and monetize the participants? The answer to that is whoever works the hardest, within the limits of the law, in a professional, conflict-free manner.
The case for pooled employer plans is compelling, especially to address the fact that there are 5 million to 6 million companies in the U.S. and just 650,000 defined-contribution plans.
There are three major trends that could make the small and micro DC markets more attractive to retirement plan advisers.
There will be vast differences, but the fundamentals of the business will be the same, as will the importance of strong relationships and brands.
Lack of diversity is a problem for the financial service industry, and especially the DC market, where most advisers are white males. That is also true of industry executives, most of whom went to college in the Northeast or were trained by a provider there.
Anyone who has tried to roll assets out of a DC plan knows how difficult and time-consuming it can be.
The lack of training for retirement committees and plan professionals is appalling, especially in the retail DC market. Many people got their job when someone walked into their office and said, 'Good luck, you’re now in charge of running our retirement plan,' and then walked out.
The Retirement Research Center recently surveyed elite RPAs, half of whom had more than $300 million in DC assets under advisement.