Pooled employer plans and the changes they will bring to the industry will lead many of the trends retirement advisors face in 2021, according to a panel of industry experts. Vestwell hosted a webinar on Tuesday featuring CEO Aaron Schumm; David Stofer, founder and president of Mariner Retirement Advisors; and Fred Barstein, founder and editor in chief of 401kTV. The discussion was moderated by Mary Beth Franklin of Investment News.
Regulatory changes
PEPs were the “most dramatic change and opportunity” to come out of the SECURE Act for retirement plan advisors, Barstein noted.
“Even though we’re probably not going to see major movement in terms of actually having PEPs get off the ground and be available because there are still things to be determined, it’s a really good opportunity for your current client base to be aware of,” he said.
He said about 50 entities have already filed to be pooled plan providers. Among those is Vestwell, Schumm noted. Pooled plans are “an option that will be good for a segment, and then for others, they’ll have a different solution that will be more custom tailored for them,” he explained.
Stofer believes PEPs will “be a great solution for the small client market” because small business owners are more interested in focusing on their business than a retirement plan.
Barstein thinks the bipartisan nature of retirement security bodes well for SECURE Act 2.0, adding “we’re starting to see rumblings that it’s going to focus on the decumulation phase.”
Related: Neal Lays Out Ways & Means Priorities for Further Retirement Reform
ESG
ESG funds are a niche product, Barstein said, “but there is definitely a market. It depends on the type of companies” offering them in their plans.
With the Biden Administration in place, “we’re definitely going to see movement, probably right away,” on ESG funds, he continued. He expects the DOL’s rule prohibiting asset managers from considering ESG funds in retirement plans will be reversed, and new rules that make them more available, or even allow them as the default investment, could be floated.
New product offerings
Stofer noted that when his firm hosts employee meetings, “25% of questions we get are about the 401k. … Most of the financial advice we’re giving as 401k advisors, retirement advisors, has nothing to do with retirement.”
The rest of that advice is about student debt or paying down credit cards, he said; the types of issues that are covered in a financial wellness program.
Related: Do Financial Wellness Programs Improve 401k Participation?
A Vestwell survey found a quarter of advisors will in incorporate managed accounts into their offering in 2021. Schumm believes that’s a way for advisors to offer more customized solutions for their clients.
“I think that the target dates are great for a segment of the market, but as we continue to, mature in our careers and our lives, you have better data points to actually anchor on to determine what a potential investment option should look like for me as an individual.”
He believes that as managed accounts get integrated into technology better, and the costs come down, adoption will only increase.
Stofer agreed that target date funds are a good solution for people with simple retirement situations, but as “your situation is more complex, and it becomes a smaller piece of your total financial situation, you need to look at everything else, and that’s where target date funds just can’t do it.”
Mergers and acquisitions
The “dizzying” pace of M&As at the end of the year were partly due to fears about how the capital gains tax would be impacted by a new administration, Barstein said. Retirement advisors need to pay attention to M&As because a single transaction can let their competitors grow “exponentially,” he said.
Related: 401k Firm Merger Mania Will Continue: M&A Expert Darian
The other side of that is that advisors may “be sitting on an incredibly valuable resource that you can monetize.”
Stofer added that small practitioners in particular need to have an exit strategy for the day when they’re looking at their own retirements. “It’s not like you have a couple young advisors on the team that can just write you a check,” he said.
Related:
- New Year, New Rules: 3 SECURE Act Changes Coming Soon
- Retirement Plan Advocate Senator Rob Portman to Retire
- An Effective Strategy to Drive Financial Wellness Engagement
Danielle Andrus works as an editor for The Financial Planning Association® (FPA®). Over the past 15 years, she has worked in various capacities, including writing and editing. Andrus has worked for several notable publications and outlets and spent more than seven years as the executive managing editor at ALM Media, publisher of Investment Advisor magazine and ThinkAdvisor.com. Before that, she was online editor for Summit Professional Networks, where she oversaw newsletter development for four magazines, including Benefits Selling, Senior Market Advisor, Boomer Market Advisor, and Bank Advisor.
