Financial wellness was once a specialty service offered by a minority of retirement plan advisers — but now it is all but necessary to win new business, according to guests at the RPA Convergence Broker Dealer Roundtable and Thinktank in December.
“I’m amazed at the number of them that have redone their pitchbook, their presentation they use for prospects,” said Taylor Hammons, head of retirement plans at Kestra Financial. “They’ve minimized or removed the slides that talk about provider due diligence.”
The basics of funds, fees and fiduciary support are now a given, not something that help plan advisers differentiate themselves, Hammons said.
“What’s important is helping the plan participants make the right decisions and giving them the tools and support to make that happen,” he said. “And [advisers] are winning business hand over fist with that approach.”
That could be even more important as plans seek to hire new advisers in 2021. If this year has provided any lesson for the 401(k) business, it is that emergency savings and access to basic financial planning are lacking but sorely needed.
On this front, there is often a distinction between retirement plan specialists and advisers who have only a handful of DC clients, attendees noted. Advisers who have a big chunk of their business with 401(k)s, for example, are much more likely to provide comprehensive financial wellness services made by a third party. Those who only dabble in DC plans tend to direct plans to the financial wellness options provided by record keepers, guests at the event said.
NO EASY WAY FORWARD
But going beyond record keepers’ services creates wrinkles. Access to participant data, for example, is a must for financial wellness to be effective — and individual 401(k) savers, often because of inertia, seldom give it to advisers on their own. Record keepers and employers can be reluctant to provide participant data because of privacy laws and policies.
Third-party financial wellness services also come with a cost.
Conversely, opting to use a record keeper’s financial wellness service means that a plan adviser could have to keep track of a dozen different programs.
“From an integration standpoint, it’s a big deal as well,” said Don MacQuattie, head of sales for institutional fiduciary solutions at Raymond James. “It’s difficult to have someone else’s technology and bake it into your firm’s technology ecosystem. It’s next to impossible, and then you have compliance issues [as well].”
It is more efficient for broker-dealers to build their own systems that can work with all the different record keepers, he said.
“You can have a single adviser with great intent, but the delivery of financial wellness to his or her larger book of business is going to be disjointed by the dependency they have with different record keepers,” he said.
Some fintech financial wellness services are getting around the data access issue by using participant’s credentials, with their permission, to log into accounts with record keepers and pull data from them, said Shawn Daly, head of DC experience and product management at MassMutual.
“Where record keepers are going to need to shift is, instead of worry about generating data feeds, they’re going to have to have agreements with these fintechs,” Daly said.
Data sharing is something most record keepers struggle with, said Abigail Benham, VP of national accounts at John Hancock Retirement.
While it is unlikely that most record keepers will settle on a single financial wellness service, they could come together on a consistent format for data and basic system design that would make things for efficient for all of them, Benham said.
Retirement Plan Advisory Group rolled out its own program this year, though it previously partnered with other financial wellness providers, including Dave Ramsey, said Jesse Taylor, VP of new business development for the firm.
“There’s a lot of opportunity out there in the wellness space,” Taylor said. But, “you still need to focus on the paternalistic side of the plan.” Without automatic features and good plan design, financial wellness might not have much effect in helping workers save.
A massive benefit for advisers is that financial wellness could serve as the bridge between retirement saving and wealth management, the latter increasingly being an objective for plan advisers, guests at the event said.
“It’s the retirement plan advisers that are feeling the need to support the wealth management opportunities that are within their existing books of business,” Hammons said.
Of course, many participants who would benefit from financial wellness services would not qualify for wealth management business. To help participants who could use help beyond financial wellness but don’t have enough money to become wealth management clients, some broker-dealers are using the opportunity to train their less-experienced advisers.
“This is a great way to bring people up, get some prospects, cut their teeth,” Taylor said. “They’ve seen it as a great personal-development program for themselves.”
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As our second lead editor, Cindy Hamilton covers health, fitness and other wellness topics. She is also instrumental in making sure the content on the site is clear and accurate for our readers. Cindy received a BA and an MA from NYU.