For all the hoopla about the SECURE Act expanding access to Multiple Employer Plans and Pooled Employer Plans for small- to medium-sized businesses, new research has found that few 401k-focused advisors actually work with these types of plans.
The majority of advisors in the DC space (82%) report that they do not work with MEPs in any capacity. This according to the Secure Retirement Institute (SRI), which asked 256 advisors (who had sold at least one DC plan in the past year) about their understanding of MEPs, engagement with the MEP market and their perceptions of what the SECURE Act’s changes would be and mean to their businesses.
Just 9% of advisors in the survey say that they advise a MEP(s); the slightly more common engagement with MEP(s) for advisors is to have a current client who belongs to a MEP, likely a result of happenstance rather than an active MEP practice.
Deb Dupont, who is responsible for the SRI’s institutional retirement research program, recently wrote about the survey findings in the Issue 1, 2021 Secure Retirement Institute Review.
She noted that until recently, the “common nexus” requirement served as a barrier for unaffiliated employers joining together in offering a MEP arrangement to their employees, while another obstacle was the “bad apple” rule under which an entire MEP could be disqualified if a single participating employer failed to meet plan requirements.
The SECURE Act, she continued, paved the way for increased access to DC savings via a MEP-like approach by removing the “common nexus” requirement and establishing PEPs—essentially a MEP for unassociated employers. The SECURE Act also nullified the “bad apple” rule.
“While the many intricacies of SECURE are still being researched and scrutinized, it is clear that the roles and perceptions of DC advisors—who are the gatekeepers to most DC plan business for recordkeepers, asset managers, and other service providers—will be key to penetrating and building share in the new MEP/PEP marketplace,” Dupont said.
That led to SRI’s interest in surveying advisors about the MEP/PEP market. While their survey found the aforementioned small minority of DC advisors currently working with MEPs/PEPs, it also found that advisors who place a great deal of emphasis on growing their business are five times more likely to say that they work with MEPs than advisors with little or no focus on growing their plan business.
But the survey also found that many advisors are interested in learning more about MEPs and PEPs. In a post-SECURE Act marketplace, MEPs and PEPs represent one of the most evident business development opportunities. In fact, 72% of advisors surveyed said they would like to learn more, and only 9% said they have no interest in the market.
Dupont wrote that advisors who anticipate startups and existing clients turning to a MEP approach for their DC plans may be able to position themselves as “go-to” resources.
The research found that advisors are not strongly and unilaterally concerned about the potential impact of MEPs on their practices, but nearly three in four (73%) see at least some cause for concern and more than half (53%) are concerned about more than one potential impact on their practice(s).
Most commonly, advisors are more concerned about employers choosing a MEP/PEP arrangement for start-up plans than they are about losing existing business to MEPs. Few are concerned about losing plan-level sales to MEPs.
Considering that the intention of the SECURE Act is to expand coverage among smaller employers, Dupont concluded that the greatest opportunity may exist for these advisors and service providers in the start-up plan space.
Finally, Dupont noted that advisors are not concerned about MEP/PEP competition from recordkeepers. Recordkeepers and other service providers may find that partnering with advisors and supporting their MEP capabilities and value propositions is key to success in this new market.
SEE ALSO:
- How to ‘PEP Up’ Your Retirement Plan Business
- Callan DC Survey Finds Large Plans Unlikely to Join MEPs/PEPs
- 401k Pod(k)ast Episode 21: Retireholi(k)s Host JD Carlson on PEP Dangers
- TAG Advisors Launches ‘Private Label’ PEP
- Are PEPs ‘Instrumental’ in Closing the 401k Coverage Gap?