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Thursday, June 20, 2024

Why Advisors Should Capitalize on the Convergence of Wealth and Retirement


The workplace 401(k) retirement plan is becoming a popular way for retirement plan advisors to access wealth clients, providing new opportunities for rollovers, financial planning services, and high-net-worth (HNW) engagement.

Some of you may have already evolved your firm structure to benefit from this convergence of wealth and retirement through strategic hiring, acquisitions, and partnerships with other practices. But for many others, evolving your practice structure is a hefty ask. So, how can you use your retirement plan knowledge and service offerings to capture new wealth management assets?

To start, let’s provide context on how wealth and retirement align, including why it’s important, reasons to get involved, and how it opens doors to a broader scope of financial solutions.

Retirement and Wealth Management: A Symbiotic Relationship

Traditional workplace retirement plans offer a natural segue to wealth management growth opportunities for both advisors and clients. Retirement plan advisors engage with many of their future wealth clients via their support of retirement plan participants. As Commonwealth-affiliated advisor Tim DiSette, ChFC®, AIF®, of Infinitas Coordinated Wealth Counsel, shared, “[Plan business] is the number one driver in our business growth. It clearly and naturally feeds our private wealth business.”

[Plan business] is the number one driver in our business growth. It clearly and naturally feeds our private wealth business.

Tim DiSette, Infinitaswith Commonwealth since 2012

From C-suite to early-career employees, you as the plan advisor can form a connection in the workplace and make yourself available for extended support. Some of those individual participants, such as highly compensated employees and C-suite executives, are more inclined to have broader financial needs in the near term. But rank-and-file employees can also evolve into meaningful wealth clients as their careers and lives progress.

When you provide basic education to employees in the early stages of their careers, those plan participants will be more inclined to seek your support when they have an individual wealth need.

Top 3 Reasons to Get Involved

There are three key reasons retirement plan advisors may want to capitalize on the merging of wealth management and retirement plan consulting.

1. Cater to client expectations. The intersection of wealth and retirement services was born from client demand. On the wealth side, individuals are increasingly seeking personalized holistic planning that incorporates their workplace retirement plan savings. On the retirement plan side? Plan participants seek the same thing.

Plan participants no longer want advice on how to allocate their 401(k) assets. They do want advice on how to allocate their 401(k) plan assets as a component of their broader investment portfolio and financial planning needs. In other words, they want personalized holistic planning that extends outside of their workplace retirement plan.

The needs of both retail clients and plan participants have evolved and arrived at the same place. This isn’t surprising—at the end of the day, retirement plan participants are individuals who have lives and assets that extend beyond their workplace retirement plans.

2. Open doors to new clients. For a sense of what workplace engagement can offer to advisors, a 2023 study from the Retirement Leadership Forum found that for every 10 one-on-one meetings with plan participants, the average advisory firm will uncover one wealth management prospect. The average worth of the prospect will vary depending upon the size of the plan: the prospects found within medium-to-large plans are typically $1 million, while in smaller plans, it’s closer to $400,000.

Advisors unfamiliar with supporting retirement plans often can’t see past managing the plan itself. But for those who have more experience working with retirement plans, the plan’s participants (and the opportunities they can introduce) come more into focus.

The workplace is a channel to engage with large groups of individuals under favorable circumstances. Keep in mind that most participants trust that their employer has done due diligence and will view you, the retirement plan advisor, as a worthy financial professional.

3. Build your wealth management business. While relationships with plan participants will start within the context of their retirement plan, many participants will inquire about assistance with broader financial needs (think asset management, financial planning, and specialized assistance for HNW individuals). And these wealth opportunities aren’t always tied to the individual’s retirement plan assets.

While workplace retirement plans are the primary savings vehicle and the largest source of wealth for most Americans, many plan participants hold meaningful assets outside of those plans. In fact, a recent Consumer Finance study showed that individuals with $500,000–$1 million in assets had, on average, around $112,000 in their retirement plan and another $89,000 in assets outside of the plan. On average, individuals with assets between $1 million and $10 million have about $700,000 in their retirement plan and more than $900,000 in assets outside of the plan.

In general, the greater the wealth participants have inside of a retirement plan, the more likely they are to have increasingly higher assets outside the plan.

Scale Your Retirement Plan Business

Achieving scale at the plan level is critical for cultivating wealth opportunities from retirement plan business. Using third-party support can help achieve this, but not all solutions are created equal. In addition to using marketing services and technology, delegating services for retirement plan investing can help you meet your growth goals faster. The right option should free up your time, relieve you of administrative tasks so you can focus on clients, and significantly reduce your risk.

Commonwealth has a spectrum of solutions—from technology offerings to delegated support—designed to minimize the time an advisor spends on plan-level needs. Through PlanAssist, Commonwealth assumes discretionary control of plan investment decisions, taking the fiduciary burden off plan sponsors and creating scale within your practice. Using solutions like these gives you more time back in your day so you can nurture current client relationships and explore new ones.

Working with the right partner can give you access to subject matter experts (SMEs) who are available to answer questions quickly and correctly. Commonwealth-affiliated advisor Ed Wildermuth, CFP®, ChFC®, CPA, Innovative Financial Solutions, identified working with SMEs as a career-changing lesson. “One of the most important lessons I learned early in my career was to have subject matter experts easily accessible for the answer rather than pouring an enormous amount of time into research and analysis.”

One of the most important lessons I learned early in my career was to have subject matter experts easily accessible for the answer rather than pouring an enormous amount of time into research and analysis.

Ed Wildermuth, Innovative Financial Solutionswith Commonwealth since 2020

Use vetted resources. One of the more time-consuming parts of exploring a new focus area for your business is access to vetted resources and staying on top of changes from legitimate sources. A trusted third-party solution can keep you informed when it comes to investment monitoring and reporting, Investment Policy Statement (IPS) review, stable value data, proposals, RFPs, and plan cost analysis.

Reduce the fiduciary burden. Using a third-party 3(38) fiduciary service is a great way to delegate work and reduce your fiduciary burden, helping to create scale in your practice. When you find a trusted solution, you can cede discretionary control of plan investment decisions and have access to services like IPS creation, fund mapping, fund change coordination with recordkeepers, and share class review.

Drive Participant Engagement

Establishing a recognized presence with plan participants before helping with their personal financial needs increases an advisor’s ability to cultivate wealth opportunities from the retirement plan business. To help establish yourself as a point of value to participants, early and often, consider newsletters and social posts that focus on retirement education, tips, and resources. These can be fun and approachable ways to encourage plan participation from clients.

Educating clients about the options available to them also makes it easy to engage with plan participants on enrollment, saving and investing, and preparing for retirement. Some educational materials you might consider include seminars, short videos, and handouts. Ideally, you’ll want to find a turnkey solution with a combination of these things so you don’t have to spend time and energy creating a program.

Get in on the Action

The workplace 401(k) plan has presented itself as a prime entry point for connecting with potential wealth clients early in their life planning. The opportunity to foster relationships and meet individual client needs more holistically is an exciting and motivating direction for retirement plan advisors in the financial services industry.

Interested in learning how partnering with Commonwealth can help you evolve your retirement plan business? Contact us today.



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