“401(k)s platforms are about servicing the plans, not improving outcomes,” Babu Sivadasan said from the Envestnet Advisor Summit 2016 in Chicago, before emphatically adding, “Participants are treated as an afterthought. They’re the whole reason for a 401(k) plan!”
Sivadasan, group president of Envestnet | Retirement Solutions, is seeing a convergence of the wealth management and retirement businesses, which he said is being driven by robo-advisors.
“Goal-oriented investing—where the advisor and client meet, track and monitor a holistic wealth management plan—is what we’re after,” he explained. “Inputs and outcomes should be more closely aligned on the platform.”
Sivadasan demonstrated the new RetireSmart mobile app that Envestnet is releasing with MassMutual, which recently won an award from the Money Management Institute. It fit with his goal-oriented, holistic theme, and the app is ideally something he’d like to see participants walk away with from enrollment meetings, and have for their entire lives.
“A significant portion of participants are not invested properly,” he claimed. “This [app] allows them to do a simple checkup and know if they are on track. It gets them on a course, and they can course-correct. They simply sign in to see their dashboard, which shows 401(k) assets and those held away. It calculates an estimated amount of retirement income, and also identifies what more can be done.”
Sivadasan took specific issue with rollovers out of the plan, noting the more conservative allocation clients take as they near retirement, only to reinvest the assets aggressively when the rollover is made.
“There has to be a better model,” he said. “As you accumulate and get close to retirement, tactical decisions must be made to prepare for decumulation.”
One area that separates Envestnet | Retirement Solutions from its competitors, according to Sivadasan, is its scalability.
“If you look at the landscape, most firms focus on the 500 largest 401(k) plans,” added Tom Loch, senior vice president of enterprise accounts with the company. “Well, that’s 500 plans out of 650,000. Our competitors aren’t built to service smaller plans. We are able to deliver higher value to smaller plans. It’s a huge opportunity, especially with recent mandates for state-run plans.”
Smaller plans are underserved, Loch said, because advisors don’t have the necessary tools to be effective in aiding them.
“Our competitors are not advisor-friendly,” he continued. “They want it to be about their platform and their technology and don’t really consider the needs of the advisor.”
Sivadasan noted the 1,500 attendees at this year’s summit, the most yet, but added the company doesn’t want the event to get too big, as it will lose the communal atmosphere and accessibility for which it is known.
“We just want to make sure we have enough time to touch all our partners,” he concluded.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.