Though RPAs loathe comparisons to law firms, advisers are professional service providers like lawyers and accountants who charge based on the work and time spent. More experienced professionals can charge a higher hourly rate – and last time I checked, few of them are hurting.
The fight for the default option, like the competition to be a plan’s record keeper or adviser, could change the largely cooperative DCIO landscape.
Though registered investment advisory firms could benefit from hunting for new clients at the DC plans they manage, will they begin to acquire retirement plan adviser firms?
The recent Government Accountability Office report and even more recent Department of Labor guidance on cybersecurity hammer home the reality that protecting plan and especially participant data has become a fiduciary responsibility.
Training advisers to be financial coaches or mentors is more appealing to the younger generation. Rather than cold-calling or selling insurance or high-priced annuities, these younger advisers would be contacting 'clients' of their firm with the blessing, and fiduciary oversight, of their employer.
It is no wonder, but certainly disappointing, that one of the industry’s most innovative providers, Prudential Retirement, is reportedly exploring a sale. That highlights how much record keeping has become a commodity focused on scale and costs.
People benefit from being flexible, and the defined-contribution industry can too, as it attempts to provide benefits in a way that takes into account the individual needs of employees.
The problem is largely a result of the multivendor systems common in teachers’ supplemental retirement plans. Brokers descend on unsophisticated teachers at work and sometimes at home, mostly offering high-priced annuities.
Not having a retirement income solution within a DC plan is like having the pilots on a commercial flight parachute off midflight, forcing passengers to land the plane.
RPAs need to create or use high-quality content. Ideally, RPAs get their content published or speak at industry events. Though social media is important, we have all learned that it is not necessarily reputable.
