Sure, RIAs are well-versed in retirement income planning for senior executives and other high-net-worth individuals, but what about at the plan level? It’s a client need, and chunk of opportunity, that’s passing too many RIAs by. TD Ameritrade Trust Co. President Skip Schweiss has specific insight on what it will take to get more RIAs over their fiduciary fears and into the corporate retirement plan arena. He recently shared his ideas with Boomer Market Advisor editor John Sullivan.
BMA: What steps are the RIA channel taking to get more involved in the retirement income market?
SS: Traditionally RIAs have, as a body, not been heavily involved in the retirement plan space. I’m excluding IRAs here because most independent advisors are very involved in the IRA space. I really mean the corporate retirement plan market. I’ve been speaking with advisors about the corporate retirement plan market for quite a few years now and it’s amazing how quickly they’re eyes glaze over. They almost get this look of fear when I raise that topic.
BMA: When you mention corporate retirement plans, you mean 401(k)s, SIMPLE IRAs and SEP IRAs?
SS: All of the above. But I think most advisors are more comfortable with the SIMPLE/SEP kind of things. Most fee-based advisors are comfortable working with business executives, but far less so with the corporate retirement plan as a whole. There are a number of reasons for this. First, it’s outside their area of expertise and their comfort zone. It’s one of those things you don’t know what you don’t know until you really dive into it. Second, they hear about this fiduciary concept. It always baffled me a bit because fee-based advisors are already fiduciaries to their clients by virtue of being registered investment advisors under the Advisor Act of 1940. What seems to scare them more is being a fiduciary to a retirement plan and operating under ERISA.
BMA: Is it because of a perception that it’s easier to be a fiduciary in the accumulation stage than in the distribution stage?
SS: I think so. The decumulation stage is harder and many advisors have a lot less experience in that area. But as this demographics tide rolls on, advisors are going have bring themselves up to speed. You do have complex issues and conflict of interest possibilities. One is when the advisor charges basis points on assets. Maybe the right thing for the client is to take the money out of the advisor’s management and put it into an annuity. Or maybe the right answer is to pay off a mortgage. Well, that takes the money out of the advisor’s management and thus out of their fee stream. So you’re right in observing that the decumulation stage gets more complicated in terms of fiduciary responsibilities.
BMA: But if you believe the client focus is heading towards the decumulation stage, and advisors are afraid or ignore it for some other reason, what does it mean for their business?