Raymond James is using the “Goal Planning and Monitoring” tool it introduced last year to identify retirement plan opportunities. It will be looking at plan design to serve more professional services clients such as doctors, attorneys and engineers. It is also putting much effort into its “capturing rollovers” campaign, which includes education and marketing materials. “While we believe, based on demographics, the rollover business will remain strong,” says Bohanan, “new rules/definitions could certainly impact how an advisor approaches this market opportunity.”
Folsom, Calif.-based Gasber Financial Advisors Inc., a fee-only firm managing $100 million in assets, also has ambitious 401(k) goals. Founder Gerry Gasber, who has worked in financial services for over 30 years, hopes to grow his 401(k) practice to the size of his private client business. The firm created its “GFA 401(k) Retirement Plan Solution” about two years ago and targets plans with assets below $5 million.
Gasber describes this market as very underserved and notes that many plans of this size use advisors who work with just one plan. He currently serves six passively managed plans, including one for an insurance agency, a kitchen remodeler, an accounting firm and a dentist. Gasber is looking to hire a junior advisor to help prospect in the area and provide education for plan participants.
“It’s a slow build. It takes a lot of work up front,” admits Gasber, who says it can take three to six months to do a conversion to a new plan. He isn’t worried that the Labor Department fiduciary rule will hinder his practice. “I think I’m already where they’re headed,” he says. His plans’ fund fees typically cost about one-third less than what clients paid for previous plans, he says.
Chisholm of Cerulli Associates expects to see more plans with less than $10 million in assets begin to partner with service providers who will accept fiduciary responsibility—firms such as Morningstar Investment Management and Mesirow Financial Holdings.
Law and Order
Not a fiduciary? “Don’t panic,” says Marcia Wagner, a managing director of the Wagner Law Group, a Boston-based firm specializing in Erisa and employee benefits. “Look at your client base. Are clients demanding you to be a fiduciary? What can you do institutionally?”
Being a fiduciary, she says, is not for everyone. But advisors who aren’t must make sure they are not getting too close to this changing regulatory line and figure out what information they can and cannot provide, she says. And those who are fiduciaries must determine how to get level compensation—based on basis points or flat dollar amounts rather than commissions—so it doesn’t look like they are favoring certain investments. “Even if it doesn’t skew the advice, it could be problematic,” says Wagner, who notes that much recent litigation has been about what is a reasonable fee.
Wagner suggests that fiduciaries develop best fiduciary practice tool kits with everything from checklists for plan sponsors to information about how to effect rollovers. “You don’t want to be low-hanging fruit for a DOL audit or a class action lawsuit,” she says.