The Pension Protection Act (PPA) passed in September 2006 validates the growing conviction that advice is the critical success factor in helping workers achieve a financially secure retirement. As a result, advisors whose business is retirement should find themselves competing for — and winning –more and bigger slices of the defined contribution (DC) or 401(k) plan pie.

The quality of advice available to plan participants may prove to be the key factor in employers’ future decisions on DC plan providers, now that the PPA makes it easier for employers to add an advice component to their plans with less fear of liability. Even before the new law passed, however, DC plan sponsors were already taking a close look at their programs and providers in search of a solution to the increasingly worrisome savings gap.

Nearly a quarter of American workers eligible to participate in a DC plan do not, according to research from the Profit Sharing Council of America. Those who do participate typically save too little and fail to invest strategically. In fact, the Employee Benefit Research Institute’s annual survey for 2006 reveals that two-thirds of current workers say they have less than $50,000 in accumulated retirement savings.

These dismal statistics worry employers. A 2005 survey by CFO magazine of finance executives at companies offering DC plans showed that 56 percent are concerned that employees may not be able to retire comfortably and 49 percent are worried that employees do not invest wisely.

Will an advice component allay these concerns and help close the gap? No one knows for sure, but it should be worth a shot. Research conducted by Putnam has regularly shown a link between investment advice and retirement security. Our 2005 survey of retirees who had returned to the workforce, those who had used an advisor were 15 percent more likely to be satisfied with retirement and had 50 percent more investable assets than working retirees without an advisor.

The consideration of an advice component is likely to reshape roles and relationships in the DC services landscape, accelerating a trend that is already underway. Brightwork Partners, the research-based consultancy focusing on retirement issues, estimates that 61,000 401(k) plans, representing $206 billion in assets, have changed providers. When it became clear that DC plans were not serving employees as well as they might, employers’ first instinct was typically to review their plans with an eye toward changing some aspect, and often that aspect was the provider.

Given their fiduciary responsibilities, employers are not inclined to decide unilaterally when it comes to their DC plan. Most depend on intermediaries to help them find the right provider and implement a plan that works for them and their workers. In fact, the Retirement Services Roundtable forecast that in 2006, based on data from the first part of the year, 97 percent of DC plan sales would depend on an intermediary.

The advisor-intermediary’s role in the DC market now parallels the traditionally essential role of the consultant in the Defined Benefit (DB) market. DC plan providers, meanwhile, are eager to work with those intermediaries that bring access to the plan sponsors. Successful intermediaries are now in demand from both sides of the market.

As the role of intermediary broadens to include advice to plan participants as well as to the employer, the advisor segment is gaining a more prominent profile in the DC plan market. Fee-based advisors who have made retirement their business and immersed themselves in the legal and public policy issues are especially well positioned. Based on our experience working with advisors, Putnam estimates that about 350 advisor groups already occupy this niche.

Our Retirement Services Group at Putnam has seen these advisors moving quickly into the larger end of the market. We define small plans as those with $20 million or less in assets, the large end as plans with $500 million or more, and the middle market as everything in between. Where an $8 million plan was a big account for advisors two years ago, today they are now commonly selling to plans in the $60-$100 million asset range. We are also starting to see advisors compete at the large end on an equal footing with traditional defined benefit (DB) consultants who are increasingly moving into the DC space for greater growth potential.

The quality of the advice advisors deliver to plan sponsors and participants will remain their primary differentiator, and smart advisors will do all they can to preserve and enhance this core competency. To keep the business and succeed over the long term, they will need to choose their investment and infrastructure partners carefully. Most employers today demand open architecture, and they are not likely to tolerate any financial incentives for selling one company’s funds over another’s. They also want bullet-proof administration and reporting along with state-of-the-art on-line tools, targeted employee communications and advice models that work together to increase participation and investment success.

Because advice delivery is time-consuming, advisors need to align themselves with providers that are equipped to do the heavy lifting for larger plans in terms of enrollment materials and workshops, investment platform design maintenance (including hiring and firing of managers), tax filings and administration. This operational infrastructure must be scalable to support growth. A more comprehensive solution may prove to work more profitably and effectively to enhance the advisor’s lead role in attracting, maintaining and growing the client relationship through value-added service.

David Tyrie is the director of retirement services at Boston-based Putnam Investments, one of the country’s oldest and largest money management firms.