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Jamie Hopkins and Aaron Schumm

Practice Management > Building Your Business

Advisors Ignore 401(k) Plans at Their Peril: Carson, Vestwell Execs

By John Manganaro

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What You Need to Know

  • Carson Group and Vestwell launched a retirement plan advisory solution, Carson Complete 401(k), last week.
  • Regulatory and market pressures are increasing the demand for small-business retirement plan services.
  • There is a tremendous, unmet need for expert advisory support in this area, Hopkins and Vestwell CEO Aaron Schumm say.

Last week, Vestwell and Carson Group announced the launch of a retirement plan advisory solution called the Carson Complete 401(k), designed to help Carson Group advisors grow their small and mid-market 401(k) and 403(b) plan practices.

The new advisory program includes many of Vestwell’s technology capabilities, such as payroll integration and 3(16) fiduciary plan administration. For Carson-affiliated advisors, a core part of the solution is the home office 3(38) capability that dramatically simplifies the investment management process for fiduciary retirement plan clients.

At the time of the announcement, Jamie Hopkins, managing partner of wealth solutions for Carson Group, said the new 401(k) plan solution would complement the firm’s existing retirement specialists’ program, adding that the Vestwell partnership will provide advisors with the essential tools they need to rapidly grow their retirement plan practices.

With the support of Vestwell’s participant platform, Hopkins said, advisors would be able to deliver a “state-of-the-art experience” to their small-business owner clients and their employees.

This week, in an interview with ThinkAdvisor, Hopkins was joined by Vestwell founder and CEO Aaron Schumm to offer more detail about the small-business retirement plan solution, and to put the launch of the Carson Complete 401(k) into its broader context.

According to Hopkins and Schumm, the worlds of wealth management and workplace retirement plans are converging, such that wealth advisors who aren’t taking steps to support their business owner clients could struggle to hit growth targets and keep existing clients happy.

Regulatory and Market Tailwinds

According to Schumm and Hopkins, the passage of the original Setting Every Community Up for Retirement Enhancement (Secure) Act in 2019 and the recent adoption of the Secure 2.0 legislative package help explain the need for the new collaboration.

“The regulatory trade winds have built up some significant momentum behind the small-business retirement plan space, and the engagement we are seeing across the advisor community has grown substantially,” Schumm says. “Simply put, more advisors are asking their home offices and outside providers to support their desire to work with small-business owners in this way.”

This desire among advisor professionals, Schumm and Hopkins say, comes from the emerging understanding that there is a tremendous, unmet need for expert advisory support in this area. In fact, research shows that, as of early 2023, only about one in four small and midsize businesses offer employer-sponsored 401(k)s. Traditionally, the perception of excess cost and complexity prevented many small-business owners from setting up retirement plans for their employees, but the picture looks much different in 2023.

As Schumm and Hopkins point out, small-business owners who lack retirement plans for their employees are finding it increasingly difficult to compete for talent, and at the same time, much of the complexity of creating a plan has been reduced or eliminated. Another driving factor is the rapid expansion of state-based and city-based mandates that require most small and mid-market employers to offer retirement benefits to their workers.

While more employers are being required to offer plans, Schumm and Hopkins say, they also have more approaches and options from which to choose. For example, the Secure Act 2.0 package included the creation of a simplified “Starter 401(k)” designed to allow even the smallest business with the most limited resources offer a retirement benefit to employees. The legislation also offered new and expanded tax credits to incentivize small businesses to offer retirement plans.

“For all of these reasons, small-business clients are pushing their trusted advisors for access to 401(k)-style retirement plans for their own workers,” Schumm says. “Jamie and his team saw the need to put a solution in place that helps their advisors do just this, because they know how important this segment of the marketplace is going to be, now and in the future.”

Helping Advisors Help Their Clients

According to Hopkins, many advisors who have focused on wealth management now feel a need to be able to offer support with their clients’ employer-sponsored retirement plans, but they just don’t have the necessary expertise.

“That’s why a solution like this is useful, because advisors speak about needing help here, too,” Hopkins explains. “This is especially true for those advisors who have not built their business around serving retirement plan clients.”

These advisors have many important skills, but they probably should not be building 401(k) plans from scratch, Hopkins says. They don’t have the necessary relationships with the recordkeepers or a sophisticated understanding of the laws and regulations that affect institutional retirement plans.

Even as they seek to expand their own expertise, Hopkins says, the vast majority of Carson Group advisors fully understand that the small-employer retirement plan marketplace will continue to grow more important over time — both because of the tailwinds of Secure 1.0 and 2.0 and general market forces.

“It’s a pretty straightforward thing,” Hopkins says. “So many of the individuals and families we serve as advisors have business ownership interests. If we can scale up this service and deliver really great solutions on the retirement plan side, this will set up these families to be able to run and maintain really great businesses. That will, in turn, have a positive impact on their own wealth and on the wealth of their employees.”

As Schumm and Hopkins repeatedly emphasized, businesses of all sizes see offering a solid retirement plan as a critical talent attraction and retention tool, and they say the marketplace has now reached a point where it can deliver compelling advisor-mediated solutions that support the launch and operation of such plans.

“I think we are poised for some really dramatic growth in this segment,” Hopkins says. “Look, small-business owners might have looked at their options back in late 2019 or early 2020 and made a decision that they weren’t ready to go down this route of launching a plan. Today, things are completely different. There are some awesome opportunities to work with great financial planners who can also help deliver a really great 401(k) program. It’s good for the workers and the business owners alike.”

The Sky Is the Limit

“Reflecting on the road ahead, honestly, I still feel like we are just getting started when it comes to the expansion and importance of workplace retirement plans,” Schumm says. “We have only scratched the surface on the reach and the impact we can achieve with these types of collaborations and this type of technology.”

Hopkins agrees with that assessment, noting that the complexity facing business owners of all sizes continues to increase. This is great news for advisory professionals, Hopkins says, but it also raises challenges.

“There are more household financial concerns and concerns among business owners than ever before, and at the same time, there is more wealth out there than ever before. That’s all really good news for us as advisors,” Hopkins says. “However, we also have basically the smallest number of advisors working out there in the industry today relative to prior decades, so there are going to be resource constraints and just fierce competition for talent.”

Schumm and Hopkins say that this emerging environment will put a premium on powerful planning technologies and drive greater degrees of collaboration and partnerships of the type that has been built between Vestwell and Carson Group.

“Obviously, we have our own perspective as Carson Group, but I just think it is going to be really hard for the smallest or more old-school practices out there to manage a full technology stack and to stay on top of all the emerging trends like data access and data security,” Hopkins says. “It doesn’t mean that you will just have to sell your small independent practice full stop, but you will have to find really good partnerships moving forward.”

Pictured: Jamie Hopkins, left, and Aaron Schumm.

John Manganaro

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