Many RIAs Merely 'Accommodating' Retirement Plans Business



It may be an overstatement to call the retirement business an afterthought, but for some registered investment advisors (RIAs), the 401(k) and 403(b) business appears to be exactly that, according to a new survey by Fidelity Institutional Wealth Services.

The survey of 1,700 Fidelity Institutional Wealth Services clients found that 91 percent of advisors offering retirement plans are only “accommodating” the retirement business as part of their broader wealth management practices, Fidelity said.

Meg Kelleher, executive vice president and head of Fidelity’s Retirement Advisors and Recordkeepers segment, said that advisors who rely on an accommodator model eventually will lose those accounts to advisors who dedicate proper resources to managing retirement assets.

“Retirement planning is not an accommodators’ business for the long term – advisors who expect to only accommodate plans will not be able to compete with those who are dedicating real time and resources to it,” Kelleher said in a statement.

Managing the retirement business requires following complicated rules designed to protect retirement plan participants – small investors – as well as employers. The survey reveals that RIAs consider the retirement business to be a burden.

At the same time, the retirement business is projected to deliver robust growth as baby boomers move into their golden years, defined contribution plans attract more assets and the federal government sanctions the growth of the employer-sponsored defined contribution model.

Total assets in defined contribution plans surpassed $5.6 trillion at the end of the third quarter, up from $5 trillion at the end of 2012, according to the Investment Company Institute. That means the industry grew by $600 billion in nine months.

Plan sponsors rely heavily on advisors for retirement advice, the Fidelity survey found, with 84 percent of plan sponsors relying on advisors in 2013, up 9 percentage points from 2012.

In addition, Fidelity reported that 60 percent of high-performing retirement advisors expect to at least double their retirement business in the next five years.

With demand for retirement advice strong, RIAs will have to focus on either individual clients or growing their retirement business instead, as there doesn’t seem to be enough room to be able to do both well: 67 percent of advisors said servicing retirement plans is not a current area of focus, or is a distraction, the survey found.

The issue, Fidelity said, is how far do advisors want to go with regard to retirement plans, but that’s a question only individual advisors can answer.

BRAMCO & Prudential: An Alliance For Life

is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].

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BRAMCO & Prudential: An Alliance For Life