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DC Advisor-Sponsor Matchmaker

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For Fred Barstein, founder and CEO of Palm Beach County, Florida-based 401kExchange, one of the most important issues in the retirement finance space today is the pressing need for top-notch advisors in corporate retirement plans.

There are close to 1.5 million defined contribution plans across corporate America, he says, including well over 500,000 401(k) plans, and yet the number of advisors in the corporate space–good advisors, that is, experienced folk who know what they are doing–is negligible.

In part, this is due to the fact that being an advisor to a corporate plan is an arduous process that does not offer quick rewards. “Corporates don’t make decisions in a week or a month, so it takes a good while to get that fee-based revenue going,” Barstein says. Good corporate advisors also require sound technical knowledge of ERISA procedures, and making a sale to a corporation requires special skills, he says.

But the relative lack of corporate advisors is also a result of inertia on the part of plan sponsors; despite pronouncing themselves dissatisfied with their retirement plans, plan sponsors do not take the easy step of finding a new advisor. “Most plan sponsors only change vendors if they have to, yet changing an advisor is very painless and can be done anytime,” Barstein says. Indeed, the key to changing a retirement plan that doesn’t seem to be working is to get a new advisor on board, he says, and this can be done at no extra cost to a plan sponsor. “We’re seeing in the market a huge need for plan sponsors to not change their vendors, but to change their advisors instead, and we’re saying that once a plan sponsor has a good advisor in place, there is no need to worry about anything else,” he says.

Find Me a Find

401kExchange, which Barstein founded 11 years ago, is at the forefront of answering that need. Through its Web site, the firm acts as a matchmaker between plan sponsors looking for a new advisor and advisors looking to enter the corporate retirement space. This year, 401kExchange set up 600 such “appointments” a month, compared to a mere 100/month last year, thereby underscoring a significant increase in the number of plan sponsors that either want to get an advisor on board for the first time or are looking to replace the one they have, Barstein says. 401kExchange also equips advisors with, among other things, a vendor/record keeping tool and an investment management tool, so that they can prove their worth to a plan sponsor and retain a corporate client.

The benefits that a company with a good advisor in place can get are invaluable, Barstein says. A plan sponsor’s primary responsibility is to make sure that the costs and fees associated with a corporate retirement plan are reasonable, but it is really the financial advisor who knows how to navigate the hidden fees and other complexities of the 401(k) system, he says, so every plan sponsor ought to ensure they have a top-quality advisor on board.

That said, such individuals are not so easy to come by, and although 401kExchange acts as a meeting place for corporate plan sponsors and advisors, the company is clear in that it only wants to deal with truly competent advisors.

“Our message is ‘Don’t do this if you’re not serious,’ if you’re not going to commit the necessary time and resources toward becoming a corporate retirement advisor,” Barstein says. “A lot of advisors who are good with individual retirement accounts or high-net-worth individuals believe they can make the jump to a corporate account, but it requires a lot of experience, technical skills, and resources, as a corporate advisor is creating a whole process.”

Still, for those advisors who do make the grade, there is great potential in entering the corporate retirement space, notably unique access to thousands of investors who want to know how best to save for their retirement. “The final frontier in the 401(k) industry is the participants,” Barstein says. “The other issues–recordkeeping, technology, investment platforms–have all been resolved. The last step is preparing participants to retire successfully, and the key to this is the advisor.”

Plan sponsors have realized the importance of a good advisor, Barstein says, not only because a qualified advisor will ensure they get a sound retirement plan in place, but more so because a good retirement plan is one of the main attractions for good employees, and having a faithful, happy employee base can only benefit any business in the long-term.


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