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Retirement Planning > Saving for Retirement

Focus on outcomes to land business, advisors urged

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WASHINGTON, D.C. – That old Economics 101 lesson about supply and demand paid a visit Monday to the 2014 Society of Professional Asset-Managers and Record Keepers meeting – and the news was good for retirement advisors.

“I’ve never seen a gap like this,” Ron Bush, the founder of Retirement Research Inc., told the audience. “It’s really remarkable.” 

The issue is a trend that RRI (and others) have been pointing out for a while: the growing need for highly knowledgeable advisors and expanding list of services that plan sponsors want those advisors to deliver in the small and mid-sized segments.

With more than 40,000 401(k) plans (out of a total of 528,300) projected to be in the market this year alone, there’s a good deal of opportunity available to advisors to try to stand out from the competition. 

Not that it’ll be easy. The shift from saving to drawing down will only accelerate in coming decades as boomers retire, making it that much harder to retain and manage assets under management. 

Retirement crisis aside, Bush pointed out that the U.S. is still far and away the leader in retirement assets, with about 62 percent of the $33.5 trillion in such assets worldwide.

See also: Top 1 percent of plans hold more than 71% of 401(k) assets

Defined contribution plans have the largest slice of the retirement pie, (19.4 percent), followed by individual retirement accounts (18.4 percent), and, finally, defined benefit plans (15.5 percent). 

About $4.2 billion is invested in private-sector 401(k) plans in the U.S., the bulk of all defined contribution-type plans. 

The “evolution” in the advisory market over the past few years, according to John Guido, a principal at RRI, has seen more advisors specializing in retirement. As of last year, 24 percent of advisors identified themselves as retirement specialists compared to 18 percent who did so in 2005. Eighty percent of them viewed themselves as fiduciaries, Guido noted.

That shift has also meant more advisors working with fee-based compensation models, rather than commission-based ones, and fewer insurance or wirehouse advisors working in the retirement plan field.

Plan sponsors in search of an advisor, he said, are putting an emphasis on several key points including open architecture investment platforms (defined as those offering 1,000 or more mutual funds), and investments with zero revenue sharing by the mutual funds. 

The greatest emphasis, however, is on how well an advisor can prepare an employer’s workforce for retirement, not on any given fund’s performance.  

That, Guido and Bush said, is now a critical differentiator.


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