A timely reminder from Lisa Kottler about a topic that should always be front and center—there are 5.4 million employers who still do not offer a retirement plan, which equates to 65 million employees without coverage. After decades since their inception, the Chief Growth Officer with Sallus Retirement emphasized that there are only 600,000 401k plans on the books.
The tech-centric executive, with a master’s in technology communication from the University of Texas, argued that the massive coverage gap will not be closed with legacy systems and strategies. Rather, digital products are needed, and digital distribution channels, as well.
“I think distribution has challenged our industry for many years,” she explained. “When looking at the fact that we’ve penetrated 10% of the employer market, 98% of the U.S. employer market has less than 100 employees, and 90% have less than 20 employees. That is not who we have built plans for. We built plans for mid to large companies with margins, and we could make money. That’s a big part of the disconnect.”
Delicately mentioning wholesalers and the fact she was once one, she said a significant challenge when selling to smaller companies is the lack of motivation due to too few assets.
“A big layer of the industry’s cost infrastructure is around wholesaling. I was a wholesaler, and I have many friends who are wholesalers. It’s not a knock on them, but as good as they can be, they’re not scalable. Sallus focuses on leveraging emerging technologies to counter these challenges.”
Its packaged PEP solution is currently in place with NFP and Tampa-based Independent Financial Partners (IFP), with more announcements on the way.
“Sallus is an independent P3—a pooled plan provider,” Kottler said. “We can be the P3 on any PEP arrangement as long as the service providers pass our due diligence process. Our packaged solution is with Ubiquity, a fully digital 401k provider. Matrix is the custodian, and we’re the P3. We’ll build different PEPs at the institutional 3(38) level; we don’t want individual advisors to be the 3(38).”
The Sallus PEP offering is fully digital because Ubiquity, the recordkeeper, is fully digital, but it also spent significant time building the front-end proposal generation and onboarding experience, where too often a relationship is won or lost.
“The advisor can create a proposal in just a few minutes. They then send a link to the prospect, and the prospect can also get it all done—the census, payroll, all of it—in as little as a few minutes.”
Interestingly, firms like IFP, which are mostly wealth management advisors, are a primary Sallus target for a very specific reason.
“Wealth management advisors have small business owner clients. Retirement plan specialists just don’t because it’s not where they’ve played. They’ve done the mid- to large-sized plans and don’t necessarily have those relationships.”
Although some do, she conceded, like IFP’s Jeff Acheson, someone who understands the small plan market.
“He wanted it not only for his own practice but also recognized that most of the wealth management advisors at IFP have those relationships,” she concluded. “The data says that, on average, they have seven small business clients. Humans have to be in the loop, and there is a lot of support, but ours is a digital-first strategy.”
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.