Retirement plan advisers undercharging: Panel

When it comes to retirement plans, reps need to start getting paid what they're worth. That's the consensus a group of broker-dealer executives reached on a panel at the American Society of Pension Professionals & Actuaries' 401(k) Summit in Las Vegas Tuesday afternoon. “Advisers should be charging more,” said Lisa Kottler, senior vice president of retirement services at National Financial Partners Corp. “We need to elevate this to the true profession it is.” Patrick Rieck, a national retirement distribution manager at Morgan Stanley Smith Barney LLC, echoed that sentiment. “I often have conversations with advisers, where they'll say, 'Here's the average [fee], and I'm below that,'” he said. When those advisers are providing above-average services, they are hurting themselves by competing on lower costs. “What's wrong with getting paid for value delivered?” Mr. Rieck asked. “I think we do a long-term disservice when we compete on price.” Firms are contending with low margins these days, but advisers are hoping they can tweak that by incorporating nonqualified savings plans with 401(k) clients. These plans are mostly targeted toward executives and provide additional savings opportunities that fall outside of provisions of the Employee Retirement Income Security Act of 1974 and include deferred-compensation and split-dollar life insurance plans. “The margins are much higher,” Ms. Kottler said. “And the executives need that help as much as anyone does.” Mr. Rieck noted that providing those kinds of benefits helps advisers differentiate themselves and that they'll come into play as taxes rise. “As we see incremental tax rates go up, we will see the logjam in the nonqualified business break up a bit,” he added. The upcoming fiduciary re-proposal and its impact on individual retirement account rollovers was a top-of-mind issue for the executives. Mr. Rieck noted that Morgan Stanley is taking a wait-and-see approach. “It's a sea change from an investment perspective,” he added. Some brokerages are moving ahead of the regulation, however. LPL Financial LLC, for instance, announced its Worksite Financial Solutions platform this week. Through the program, workers can tap participant-level advice through Morningstar Inc. When the time comes for distribution, employees can learn about their options and, if it's appropriate, transition out of the plan or stay in the 401(k). “We invested $4 million in a transition services support desk,” said Bill Chetney, executive vice president at LPL Financial Retirement Partners, noting that it's not a mere rollover desk. But he added that the need for such services will be there. “We're not going to wait [Labor Department],” Mr. Chetney noted. “We are building an infrastructure that can pivot as change comes.”