The notion that you can do well by doing good is alive and well in the 401(k) and qualified plan marketplace. Advisers, however, are walking a tightrope. With a big push by the government for more disclosure and stricter fiduciary standards, broker-dealers are struggling to allow their advisers to act as fiduciaries without opening themselves to unwanted liability. Meanwhile, plan sponsors are looking for advisers who can help their participants be more successful in retirement yet limit their costs, liability and work.

For their part, recordkeepers and defined contribution asset managers are more than willing to support focused DC advisers. However, the unspoken agreement is that in return, those advisers must use their products. The most successful advisers will be those who move the needle for participants while walking this tightrope. For advisers looking to succeed in the qualified plan market, focus and planning are the keys.

The age of advisers who dabble in the corporate retirement market is over. While half of the 300,000 active financial advisers have one DC plan, only 5,000 - or less than 2% - have 10 plans, $30 million and three years of experience. These focused DC advisers have seen their business more than double in the last three years.

More advisers than ever have become intrigued by a market that promises consistent income even in bad markets. Though getting to the elite level and beyond is harder than ever, never have there been more resources for advisers to get trained, get certified and get access to quality benchmarking, due diligence and practice management tools and services.

With strict disclosure requirements about to come into force in July 2011 requiring advisers to state in writing the exact services they plan to provide and their cost, and whether they will be acting as a fiduciary, there will be fewer places for the "blind squirrels" to hide.

For all advisers, planning and managing their business has never been so important for so many reasons. Fees continue to become deflated, so advisers must be able to manage more plans for fewer costs. Efficiencies in servicing and acquiring plans require foresight and a talent for hiring and managing the right people.

Even the most successful DC advisers struggle with managing their people and businesses because they do not have the right financial or "people" training. Advisers with those skills are in a better position to build and then grow their business at prolific rates. But what do planning and focus have to do with the greater good?

Advisers who are focused on the qualified plan market ultimately must be focused on helping participants be more successful in retirement, and must be able to track their success. With thousands of participants to manage, how can an adviser hope to deliver on the promise?

Behavioral finance is not new, of course, but its principles have enjoyed great attention and success in the DC market. The 2006 Pension Protection Act endorsed many of these principles by incorporating auto enrollments, deferral increases and qualified default options. Even target date and lifestyle funds leverage behavioral finance principles.

Advisers with well-planned and focused DC practices who are willing and able to accept fiduciary responsibility and incorporate behavioral finance techniques will find themselves doing well by doing the right thing for their plan sponsor and participant clients.


Reach Barstein at



Client service matters to 401(k) plan sponsors

Plan sponsors might not always distinguish one retirement plan from another, especially because the industry has effectively turned the products into commodities.

But they do remember the consultants.

For that reason, according to Anova Consulting Group, retirement plan sponsors say client service has now become one of the top reasons for choosing a new retirement plan provider over a rival firm. The Brookline, Mass.-based research firm surveyed more than 300 plan sponsors with assets of more than $25 million under administration.

When Anova began looking in to plan sponsor preferences in the late 1990s, it found that a plan provider's brand recognition, selection of funds and fees were uppermost in the minds of plan sponsors when sifting through options.

But it took just 10 years for plans to adopt changes like open architectures, and compressed fees, almost evening out those differences among plan providers, says Rich Schroder, Anova's president. Everything is almost the same - that is, except the final presentation.

Plan sponsors were just 12% more likely to refer to client service as a factor in their initial search criteria, but 33% were more likely to cite it as a top reason for the final decision, according to the survey.

"They know they'll be working with these people on a daily basis. They want to make sure you are doing your job well," Schroder said of plan sponsors' thinking. He adds, "They are kicking the tires on the service team."

- Donna Mitchell, Financial Planning magazine

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