Small retirement plans with less than $50 million in assets remain underserved and their sponsors are hungry for help.
Fifty-two percent of small plan sponsors that aren’t working with an advisor are looking for one or might be considering it, according to a survey from TIAA that focused exclusively on not-for-profit plans.
“It’s definitely a lucrative area for advisors to get involved in,” said David Swallow, TIAA’s consultant relations practice leader. It’s also an area that’s been “relatively untapped" by consultants and plan advisors, he added.
Among other findings, most plan sponsors working with an advisor rely on their advisor for education on fiduciary responsibilities (92 percent) and for help with investment selection, plan design and monitoring plan investments (69 percent). All plan sponsors who work with an advisor said they’d recommend the use of a plan advisor to their peers.
The survey also revealed that 85 percent of small nonprofit plan sponsors who enlist the support of a plan advisor feel more confident that they’re meeting their fiduciary responsibilities, compared with 80 percent of plans without an advisor. Sponsors with an advisors were also more likely to say their plan’s fees are fair and competitive (79 percent versus 57 percent) and that their employees are saving adequately (40 percent versus 8 percent).
Advisors are helping plan sponsors understand the range of available investment options, meet their plan’s individual goals and objectives, streamline investment options and build more diverse portfolios, said Swallow.
Advisors interested in small, nonprofit plans, which are primarily 403(b) plans, should learn the rules, get to know the providers and familiarize themselves with the unique products, he said, adding that these plans tend to have built-in annuity options.
Many smaller, for-profit companies also need help. According to the 2017 Small Business Retirement Survey by the Pew Charitable Trusts, 40 percent of full-time employees lack access to a retirement plan. The most common reasons employers cited for not having a plan were the expense of setting up a plan, limited resources to administer a plan and lack of employee interest. Yet the vast majority of employees will participate if they have access to a plan, the survey noted.
Filling A Niche
Grass Valley, Calif.-based Owens Estate and Wealth Strategies Group, a comprehensive wealth management firm and Raymond James affiliate, manages more than 100 retirement plans for nonprofits and for-profit companies. The largest plan has just under $5 million in assets and the smallest plans, both new and in the funding stage, have about $20,000 in assets, said Mary Owens, a CPA and principal.