Visions

Unknown to industry observers and the trade media, the wirehouses are not losing retirement plans business. Sales remain robust and depending on the firm, 30-50 % of their total new retirement plan sales are emanating from BOR changes. Not surprisingly, the numbers are much higher for their specialized teams. The wirehouses have recognized that retirement plans are a specialized buisness and they are creating the infrastructure to support their speciaists in the mid-sized and institutional markets.

Beyond the costs, complexity and inefficiency associated with the new and non-optional 408(b)(2) requirements, it will become increasingly difficult for generalists to justify their value proposition during the course of credible ERISA plan vetting. The need for compliance solutions will also cause some advisors to change broker-dealers and reconsider their registration status. In addition to their affirmative fiduciary insurance coverage, ERISA investment bonds and employee dishonesty insurance, retirement plan specialists with equitable service agreements should use the agreement as a marketing tool.

Participant advice solutions, including managed portfolios and managed accounts, are poised to grow substantially. While successful outcomes will require a combination of customized solutions, the CFDD’s 2011 Advisor Conference, Participant Advice, Retirement Income & New Growth Strategies, will center on helping advisors adapt to an evolving industry, differentiate, gain a competitive edge and grow new higher margin business.

While profitability and risk remain unknown, a growing number of vendors and advisors are positioning to offer in-plan participant advice to add value, differentiate and earn higher fees. Intoxicated by the whiff of revenue and enhanced margins, we have never seen so many alleged solutions under development. Given the opportunity, the participant advisory space will be targeted by opportunists as well as those who add real value.

Managed accounts provide an opportunity for advisors to add real value. As a result, advisors and their home office personnel are very interested in the managed account strategies offer by other successful retirement plan advisors. To meet this need, the CFDD's Participant Advice/Managed Accounts research will include a sub-category of managed account services provided by advisors. The competitive analysis will also provide advisors with fuel for the strategic development of these value added services.

Because the high quality research will be unbiased, the competitive analysis will clearly distinguish the CFDD. The participant advice competitive analysis will also help advisors distinguish themselves, add value and close more business. The definitive research will be exclusive to CFDD clients, i.e., only those participating in the research and/or attending the CFDD’s Advisor Conference will have access to the competitive analysis. Broader distribution may, however, be available through research sponsorships.

The major impact of the new fee disclosure regulation will be on providers and plan sponsors because they have to deliver the information and ensure disclosure. Advisors receiving 12b-1 fees could also feel the impact. By elevating total costs to the surface, the regulation could pressure fees, complicated arrangements and force the justification of value thru new hard questions generated by participants. Declining margins also make scale more important than ever.

Given their lack of time, budgets and new media marketing savvy, ongoing business development is the biggest challenge facing advisors. To be truly successful, advisors must distinguish themselves, expand their audience, increase activity and brand with their “local” community. When broadcast on The CFDD Station, the turnkey Local Business Leaders Internet radio show is the most powerful, cost effective, convenient and compliance friendly way for advisors to grow their business.

Good, bad or indifferent, ERISA is what it is. It may not be fashionable to acknowledge it, but ERISA is based on process rather than results. To avoid liability, the rules must be followed and documentation must be maintained. Regardless of their approach to delegation, sponsors cannot be entirely relieved from their fiduciary responsibility and or liability.

The primary challenge facing advisors today is the lack of time and budget available for ongoing business development. To differentiate their practice, advisors are beginning to market expanded fiduciary roles. While new trends provide opportunities, the skills applicable to investment counseling and investment management are very different. There are at least 3 different types of 3(38) managers serving 401(k) plans, but some do not believe 3(38) was intended to apply to investment advisors. Those who become managers without the necessary experience and corresponding change in support services could be increasing their litigation risk. At the same time, E&O insurance may actually exclude coverage for a 3(38) role.