It would be an understatement to characterize the introduction of the Pooled Employer Plan (PEP) as a game changer. Congress authorized the use of the defined contribution plan that allows unrelated multiple employers to participate in a 401(k) as one of the provisions of Secure Act 2019. Between 2021 and 2022, the number of registered PEPs swelled 76% according to figures from the U.S. Department of Labor. While the breakneck pace has slowed in recent years, PEPs have disrupted the retirement industry.

For participants, the disruption was to their advantage by offering access to retirement savings options that would not have been potentially available in a stand-alone plan, especially in the micro plan market.

For some financial advisors, the PEP threatens their value proposition. However, the PEP can leverage the ability to grow an advisor’s qualified plan business. Here’s how retirement plan advisors can redefine their place in a PEP world:

Historically, advisors who sold retirement plans took one of two roles:

· As a non-fiduciary disseminating investment or financial education information to the plan sponsor.

· Or a qualified plan specialist in a 3(21) fiduciary capacity providing investment advice or a 3(38) fiduciary with the ability to make investment decisions on behalf of the client.

There were more 3(21) fiduciaries initially, but now, the number of 3(38) investment fiduciaries has grown with technological support and other factors.

Also, the link between wealth management and advising retirement plans has become more lead-generative by allowing advisors the ability to establish a relationship that can lead to additional business. I’ve seen advisors working with a retirement plan end up managing an executive’s portfolio. Conversely, I’ve seen wealth managers overseeing an executive’s investment become their organization’s retirement plan advisor.

One Hundred Becomes One
Most advisors seek growth, but they become hampered by scale. Leveraging the structure of PEPs can allow advisors to simultaneously manage multiple plans. The best example of this efficiency is during fund changes.

PEPs remove the labor-intensive process of making individual fund changes across multiple recordkeepers and eliminate the need to meet with each plan sponsor to communicate the change. A pooled option provides the advantage of affecting all funds with just one change.

These efficiencies can help wealth managers drive client retention and growth. Also, they can provide a higher level of service by collaborating with the Pooled Plan Provider (PPP) responsible for managing and administrating the plan, allowing the wealth manager to focus on what they like doing best—overseeing portfolios and relationships.

Choosing A Partner
The key for advisors seeking to redefine their place in a PEP world is to find a partner that offers the technology, plan design flexibility and fiduciary oversight to drive efficiency and growth. Partnering with a Pooled Plan Provider (PPP) that doesn’t provide the advisor with the right solutions may not provide any advantages.

How does that work? First, ensure the PPP has the right expertise as a 402(a) fiduciary. This can allow the advisor to focus on the wealth management aspect of the retirement plan without getting bogged down by compliance and regulations.

It’s also important to find a PPP who has experience and understanding of regulatory requirements in the event of an Internal Revenue Service audit or Department of Labor investigation.

Pooled Employer Plans continue to gain popularity among organizations that want to provide defined contribution plans to their employees and members, but that doesn’t mean financial advisors are relegated to the sidelines. There is the opportunity for advisors to redefine their place in a PEP world and it starts with a better understanding of the advantages and finding a partner to drive growth.

Jeff Atwell is senior vice president of fiduciary at FiduciaryxChange, an AmericanTCS solution.