Advisors who offer retirement plans see them as part of their broader wealth management services rather than a dedicated business, leaving many scrambling to keep up with fiduciary rules, build scale and grow relationships with their clients, according to research from Fidelity.
However, some advisors have gone beyond accommodating retirement plans to deliberately growing their business. Earlier research from Fidelity shows that there are opportunities for advisors who focus on retirement plans. The 2013 Fidelity Plan Sponsor Attitudes Survey found 84 percent of sponsors relied on an advisor in 2013.
“We’ve found that many of them have thought about growing in this space, but never took the time and never really knew how to do that, to have an intentional growth strategy,” Meg Kelleher, executive vice president and head of the retirement advisors and recordkeepers segment for Fidelity Institutional Wealth Services, told ThinkAdvisor on Wednesday.
She noted that many of these “accommodating” advisors have just a handful of plans because a client has asked for their help based on their other expertise. For example, “Someone in their high-net-worth book of business says, ‘Boy, I love what you’re doing for me with my personal wealth. Can you help me with the 401(k) plan that I’m responsible for in my company?’ And the advisor would say yes because they wanted to work closely with the high-net-worth individual and they do a good job with the plan, but they never sat back and said, ‘Hmm, if I have one to three plans, why not have 15 to 20? But how do I do that and how do I scale that business? How do I know that would be a good return on my investment?’”
To help answer those questions, Fidelity is launching a three-step program that helps advisors diagnose whether retirement plan clients are right for their practice; develop a deliberate approach to grow that part of their business; and connect with the clients and prospects that will help them grow.
Kelleher said that as they were developing the program, Fidelity analyzed its client base to see how they were running their practice, “looking at everything from how they tell their firm’s story to succession planning, how to segment their clients, how to do strategic planning.”
“We also did the research at the end of last year to make sure that as we built this program, it had a really informed view and that we were building something that would be valuable to the advisor,” she said. “It’s almost impossible to pick up a publication now that doesn’t have something about retirement. We knew there wasn’t a shortage of information for these advisors, but what we would hear from them is they didn’t know how to digest it to create an actionable plan.”
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Kelleher acknowledged that working in the retirement plan business was not for everyone. “If you only have a few plans and it’s not core to you, you could easily say it’s not the right model,” she said. “What I think we’re going to see is those firms that make that decision, if they want to grow, they have to invest the time and resources or it could be a distraction.”
Some of the research Fidelity conducted in developing the program identified common attributes among high-performing retirement plan advisors. “Those advisors are very bullish on the market,” Kelleher said. “They experienced really significant growth over the last five years and are very bullish on the growth that they believe they’ll achieve over the next five. They also have been very deliberate, and that’s really the key message of this program: If they want to accelerate their growth, they have to be deliberate.”
As for advisors who do decide to expand their retirement plan business, Kelleher doesn’t anticipate they will abandon their other wealth management services, either. In fact, advisors who have added retirement business have said it’s increased referrals.
“We see some advisors who have been building out their retirement practice who will talk about how the high-net-worth business actually feeds referrals for the retirement business. Also, on the retirement side, there are referrals that go from the folks in the plan who are looking for additional support that get referred over to the wealth management side,” Kelleher said. “Those firms that have both, they can get referrals that fuel the growth on both sides.”
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