Wealth advisors haven’t historically embraced workplace retirement plans as part of their practice. We think they should. There is a pressing need to address the coverage gap in retirement plans. And, the landscape of wealth management is changing, along with changing perspectives on retirement.
State mandated plans open the door to promote savings, enhance benefits for employees, and even prompt business owners to seek more tailored solutions, compared to what the state offers. The role of financial professionals has evolved in recent years, and clients today are looking for a more holistic approach, which incorporates all aspects of financial well-being.
Retirement plans for small to mid-size business can now offer:
- Outsourced fiduciary responsibility and administrative burdens can be minimized.
- A way to avoid introducing another advisor into a relationship with a client.
- A potentially more attractive privatized option to state-run retirement options.
- The workplace is a very efficient gateway to engage and interact with the next generation of savers and investors.
Our Voice of the American Worker Survey revealed that personalization and customization go a long way when it comes to American workers’ retirement savings behaviors—three-quarters (77%) of respondents stated they’d be more likely to participate or contribute more to their retirement savings if there were more personalized 401(k) investment options.1 This is where we think wealth advisors can play a key role.
It’s a win-win for wealth advisors—and their clients.
Following are highlights of a discussion our retirement specialists had on this topic, which included Kevin Murphy, Head of Workplace Retirement Distribution, John Kelley, National Retirement Plan Consultant, and Matthew Beaulieu, Senior Retirement Plan Strategist.
Kevin Murphy: Roughly half of all US workers do not have access to a workplace retirement plan.2 So there is a coverage gap. This is both a problem and an opportunity for advisors.
John Kutz: We are seeing state and federal legislators pushing hard to address the coverage gap, and we are finally witnessing new regulations that encourage interest in more turnkey workplace retirement solutions to aid business owners—particularly small businesses that don’t offer a plan.
John Kelley: I think a lot of generalists get into the retirement plan space to utilize it as a prospecting source for individual wealth clients. First and foremost, it’s the business owner, protecting them as a client but then along the way they become the financial expert to all these participants.
Matt Beaulieu: Exactly, and the new regulations are a catalyst. They are going to force wealth advisors to start coming to the table, to ask what they can do from a benefits perspective. Maybe they can provide another product that’s better for a particular client than a state-mandated plan.
Kevin Murphy: We know wealth advisors want to build a wall around their existing wealth business. The non-retirement specialist advisors have very strong relationships with influential business owners and executives. The last thing they want is to let another financial advisor into that relationship. If there’s a business owner who has a mandate to implement a retirement plan, there’s this sort of thinking that “I don’t want anyone else getting to know my wealthy business owner.”
John Kutz: Right. Recordkeepers are entering the realm of the wealth management business, and wealth advisors feel the need to protect their turf a little bit. As a result, these advisors have to be more engaged to at least some degree on the retirement plan side and with the participants in the plan to prevent losing these clients to recordkeepers or other entities.
Kevin Murphy: I have one word for you—technology. It’s now much easier to implement and service retirement plans than it was five or 10 years ago, so now I think wealth advisors are looking at it as a growth opportunity, an opportunity to develop and nurture relationships with the mass affluent and the sub-mass affluent. This is where I think the provider landscape has excelled in crafting best-in-class solutions, state-of-the art technology, and effectively outsourcing nearly all fiduciary responsibility while minimizing administrative burdens.
John Kutz: Absolutely, technology now is allowing advisors to get that lower-balance account, too, right? Historically, advisors have focused on the “c-suite,” maybe the top 10% to 20% of the workforce, and they ignored the rest of the workforce. But wealth advisors want to keep and grow their assets, and if we can help them through more personalized solutions in the workplace, they get pretty excited about an effective way to streamline their business.
Kevin Murphy: Exactly. I strongly believe most retirement advisors started doing this business for the genuine good of helping more people. Wealth managers are seeing now that they have generational wealth transfer issues to think about and they need to figure out ways to really engage and interact with the next generation of savers and investors, and dealing in the workplace is a very efficient gateway to do so.
Matt Beaulieu: All these things that historically were solely on the plan sponsor, with the advisor quarterbacking, all that can be packaged together in a way that creates economies of scale and brings down the overall cost. That’s very attractive for all parties involved.
John Kutz: The enhancements of pooled plan solutions have done a fantastic job of helping financial professionals streamline their business. Ideally, we’ve helped them strengthen their relationships with business owner clients, while also freeing up time for them to prospect new business and/or use that new additional time to support existing clients. It’s about scaling the business in a more efficient way.
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1. The Voice of the American Worker survey was conducted by The Harris Poll on behalf of Franklin Templeton from October 28 to November 15, 2021, among 1,005 employed US adults. All respondents had some form of retirement savings. This online survey is not based on a probability sample and therefore no estimate of theoretical sampling error can be calculated. Findings from 2020 reference a study of a similar nature that was conducted by The Harris Poll on behalf of Franklin Templeton from October 16 to 28, 2020, among 1,007 employed US adults. Franklin Templeton is not affiliated with The Harris Poll, Harris Insights & Analytics, a Stagwell LLC Company.
2. Source: Bureau of Labor Statistics, as of 2022.