“Who owns participant data?” The Retirement Advisor University (TRAU) founder Fred Barstein rhetorically asked at the outset of a session dedicated to industry convergence that was held at the GRP Advisor Alliance (GRPAA) conference in Alaska. “The participant,” he answered.
But who should own the data? Whoever works the hardest for it, Barstein said.
“Recordkeepers say they invest in all the technology, spend all this money and yet make less than the advisor, which they believe is unfair,” he explained. “They want advisors to bring them the client and then go away, but whoever controls that initial experience owns the data.”
GRPAA founder Bill Chetney added that “We need to have the recordkeepers go back to being bookkeepers. It used to be that Fidelity would offer Fidelity funds, and Vanguard would offer Vanguard funds. We fought for open access and won, but now it’s back to the 1980s with their target-date funds and stable value. It’s all going to Fidelity again.”
Pension Resource Institute and Retirement Law Group’s Jason Roberts asked why the data is even valuable.
“I see two use cases for it, capture the rollover and saving the participant from themselves by being in cash. What am I missing?” he asked the assembled group of advisors.
Financial Finesse think tank head Greg Ward responded that there are quantitative and qualitative data, and the latter gets them to act. The participant cares about themselves and must be “met where they are.”
They’ll speak with a financial coach who will offer a solution to their predicament. They’ll come away feeling good and realizing it was the advisor who initially suggested the coach, so it’s a win-win-win situation if it’s done right.
“If we auto-enroll them and auto-escalate them, then we outta be talking to them,” Chetney quipped.
A broken system
The benefit of convergence is self-evident to the advisors in attendance, intellicents’ Brad Arends argued, but he offered a different perspective. It’s important to employees because the vast majority get their financial needs met at their place of work, beginning with their paycheck.
“It’s broken, and the pandemic exposed how desperate the problem is,” Arends added. “We have a chance to get to change this, to help the 99%. God knows we don’t need another wealth manager for the 1%.”
He was asked how it’s made profitable.
“A combination of the right people and technology in place,” Arends answer, before relating a story in which a longtime client admonished him for abandoning the client’s employees at retirement, a reason he started the wealth management portion of his practice.
“I went to Fidelity and told them I was opening a wealth management office where we have 401k plans. They said, ‘Oh yeah, we do that.’. I thought it was an original idea, but they’re not dumb,” he warned.
Barstein concluded that advisors have the advantage over record keepers, specifically with retirement income.
“Recordkeepers are developing products, which is what they do. You provide a service, but you have to talk to participants. Behavioral economist Shlomo Benartzi says it is like a plane that takes off, and halfway through the flight, the pilots parachute out, and the passengers must land the plane. That’s what we do after the accumulation phase. So, it’s not who deserves the client relationship, but who earns it.”
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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.
