For many financial advisors, working with retirement plans can offer a new client pipeline for the wealth management side of their business. As individuals exit their employer-sponsored plans, they may opt to continue working with the advisor for personal investment management and retirement planning advice.

But the retirement plan industry’s fragmented approach to storing and sharing participant data can derail this. The Cassell v. Vanderbilt settlement has also sparked debate over the ownership, value and usage of certain types of plan data.

What everyone seems to agree on—including plan fiduciaries, record-keepers, custodians and plan participants—is that plan participants need and want independent, professional advice and guidance when it comes to financial planning for, and in, retirement.

This is why advisors need to confirm agreed-upon data sharing protocols at the outset of their plan sponsor relationships. It is in everyone’s best interest to protect participant plan data in a way that enables a seamless transfer of information so that advisors can deliver retirement planning guidance and advice.

Without clear agreement on data sharing, advisors may lack the most up-to-date data on the participants they serve. This, in turn, can limit the effectiveness of a retirement plan program, with subpar outcomes that were unintended by the plan sponsor.

For example, most advisors are not automatically informed when participants are exiting or have exited their employer-sponsored plans—whether due to retirement, employment changes or other reasons. In some cases, contact details of exiting plan participants are not shared with the advisor—even though he or she has been in contact with these individuals directly through their employer sponsored plan.

When it comes to their retirement plan offerings, the overarching goal for most company leadership, whether plan fiduciaries or not, is typically that everyone in the organization has the opportunity to be in a position to retire. To help them fulfill their duty, it follows that advisors need access to key data to assist their individual employees—the plan participants.

The wealth management industry is clearly further along in sharing client data for non-ERISA accounts. Technology vendor integration has advanced to the point where financial advisors can run their entire business off of one open-architecture platform with the proper cybersecurity and privacy protocols in place.

Frankly, it is not a stretch to see this happen in the retirement plan world as well. It is only a matter of time.

Getting Guardrails In Place

The most logical time for advisors to level the participant data sharing playing field is at the outset of the relationship with the plan sponsor and plan administrator.

Advisors need to be clear about the type of data they need, and for what purpose. They can clarify that they are not seeking the data for collateral sales opportunities, rather, they need data to implement appropriate financial wellness and education initiatives for the organization, as well as to assist participants with financial and retirement planning.

Advisors should also note that it is possible to allow their participants to opt out of—or, opt into—personal data sharing agreements set up by the plan sponsor for the purposes of retirement planning. The advisor’s record-keeper can customize the level of data sharing for each plan participant based on individual instructions.

Setting Up The Back Office

Of course, even before the plan fiduciaries are on board, financial advisors must work with their retirement plan record-keepers and other service providers to make sure their operations are set up to deliver information seamlessly into their systems.

For example, advisors can ask for notifications to be set up for key events or milestones, such as contribution rates, plan termination dates, asset thresholds, variance to known risk tolerances, eligibility for catch up contributions, bonus payrolls, required distributions and the like. Just because it is not being done now does not mean it cannot be done.

In fact, all of the advisor’s technology vendors should have a level of integration for retirement planning that mirrors their interconnectedness on the wealth management side of the business.  Those that lack these capabilities should be willing to build them.

In the highly competitive and technology-driven world of retirement planning, it is impossible for advisors to succeed without leveraging data from their service providers and other partners.  Advisors that are unable to pull participant data into their own systems and manage communications flow face a real threat of being put out of business.

Mark Klein is the founder and CEO of PCS Retirement, a leading provider of retirement plan solutions. He can be reached at [email protected].