Wealth management firms once ceded the ground in workplace retirement plans to Fidelity, Schwab and Vanguard. Not anymore.

Wealth managers know that fledgling investors often get their start with payroll deductions into a 401(k) but will, in time, have six-figure (and larger) portfolios and more complex financial situations and needs—rollovers, financial planning, investment management, account consolidation, and more.

The race for workplace assets is on.

Morgan Stanley at Work, Vestwell, Empower and others are developing hybrid models of tech-enabled advice that start with a purely digital (and robust) experience but evolve toward relationships with their financial advisors supported by sophisticated technology.

Firms are building comprehensive advice platforms that engage all the aspects of tax alpha—asset allocation, asset location, tax harvesting, tax-efficient transitions, and eventually, Roth conversions and retirement income sourcing.

By helping investors manage their qualified and non-qualified assets in a coordinated, tax-efficient way, everyone wins: Investors have more money for retirement. Firms raise net new assets by quantifying the benefits of their approach and retain assets longer by diminishing the rate of outflows to pay taxes.

It’s a dramatic and welcome turnaround in wealth management and the workplace.

“Five or 10 years ago, when we benchmarked workplace experiences, they were pretty bad,” Laura Varas, Hearts & Wallets CEO, told me recently. “Workplace advice looked like this: ‘Put all your money in my 401(k) plan and get my proprietary products.’

“Consumers aren’t dumb,” Varas continued. “They know that can’t possibly be the best advice. We’re seeing a lot of improvement in the workplace in the last five years.”

Why Are Wealth Managers Flocking To Offices And Shop Floors?
Plan sponsors, administrators and record keepers, wealth managers, and tech companies are providing greater breadth and quality of advice, products, and services.

How did we get here?

1. Opportunity: Morgan Stanley CEO James Gorman anticipates the workplace will become the firm’s No. 1 place to gather new assets over the next ten years. In a world where workers have, on average, 12 jobs in their careers, 1 there are many rollovers to be won.

2. Desire for control in a chaotic world: Workers learned how little they control in the last few years. They’re stressed about the economy, politics, health, climate, and global conflicts, all affecting their well-being.

3. Labor markets are very competitive in attracting skilled workers. Workers are lured by more than salaries. They now expect financial guidance on – budgeting, saving to buy a car or home, paying for education, healthcare, and managing debt.

4. Financially stressed employees are less productive. Workers worried about credit card debt or paying for childcare are distracted. Morgan Stanley’s State of the Workplace Survey found that 71% of employees said financial stress negatively affects their work and personal lives.

5. Worker’s trust employers and expect their help: Jacque Reardon heads client experience for retirement at Franklin Templeton. On my podcast, she said their annual Voice of the American Worker Survey found it was the employer’s job to provide holistic financial guidance – and win workers’ trust.

6. Younger workers have watched parents’ travails: Gen Z’ers and Millennials are preparing for the future, possibly more than their parents at the same age.2,3 They see their parents postponing retirement due to worry about running out of money.

How Companies Are Innovating
Chip Roame, Tiburon Strategic Advisors founder, said workplace benefits is one of three big trends driving industry asset growth, and smart companies should learn from Fidelity, Schwab, and Morgan Stanley in the workplace.

Vestwell serves small businesses. They are on fire. J.P. Morgan Asset Management selected Vestwell’s platform for its small business 401(k) services earlier this year. Vestwell agreed to acquire Gradifi Solutions, a student loan benefits provider.

Vestwell is advancing its data-informed tech capabilities to a wide selection of benefits and services.

• Added a beneficiary recently? Let’s talk about the 529 plan options in your state.

• Are retirement savings low? Perhaps a payroll-deducted IRA?

• Does your health plan have a high deductible? Consider a health savings account (HSA) funded with biweekly payroll deductions.

“We guide the next best dollar and provide the experience that allows the user to know what they're doing and how they can best save for their future,” founder and CEO Aaron Schumm said.

He noted surveys show a high desire among workers to have access to a financial advisor (52%, according to Morgan Stanley’s survey).

“For advisors seeking to engage, start in the workplace,” Schumm said. “And then show them wealth solutions over time.”

Empower CEO Edmund Murphy shared a similar strategy informing solution development and acquisitions at his company.

“We work through consultants and advisors. Many have wealth management capabilities. And they’re very good at it,” Murphy said. “So how do we come together in a way that’s mutually beneficial, that meets the customer’s needs?”

Morgan Stanley at Work is the market leader in equity compensation plans and continues to invest in its workplace offerings as part of its savvy corporate strategy. They figure investors get their feet wet through retail investing and retirement plans and will look for comprehensive services later.

“It starts with the corporate client,” Morgan Stanley at Work head Brian McDonald told me. Helping them in multiple ways, including “to help educate their employees on these wonderful benefits they’re spending billions of dollars on … that helps them attract and retain top talent.

“And if you do that really well, you earn the right to work with their employees as individual wealth management clients. That’s kind of the crux of our strategy.”

What The Future May Look Like
Chip Roame paints the picture: Hybrid advisors at companies like Vanguard, Fidelity, and Betterment are outperforming other advisors in net flows, he said. COVID-19 changed the workplace forever. Everyone is more comfortable meeting via Zoom or phone.

That’s good news for Vestwell, Morgan Stanley, Empower, and the advisors who can strike the right combination of digital delivery and human advice.

Qub Ahmed heads retirement for Franklin Templeton. He’s an advocate for how technology can “democratize” advice.

“We think about the workplace as the new financial epicenter,” he told me on my podcast. “It’s heads down on work to assemble an integrated ecosystem that thinks about everything, not just the 401(k).”

Ahmed said that such an ecosystem provides “informed advice” to workers on their financial needs.

“It's the top 5% of wealth in the U.S. wealth managers are attracted to because that's where the money is. But there's a major advice gap with this mass underserved marketplace. And we need to get advice to them and make sure that advice is informed with data.”

Or, as my friend Ken Dychtwald says to financial advisors: “You’re in the business of saving lives.” The workplace may be where they put investors on a life raft and guide them to shore.

Jack Sharry is EVP and chief growth officer of LifeYield and host of the WealthTech on Deck podcast. He is on the Next Chapter board, a leadership community dedicated to improving retirement outcomes.

1. Zippia. "Average Number of Jobs in a Lifetime [2023]: How Many Jobs Does The Average Person Have" Zippia.com. Jan. 11, 2023,  https://www.zippia.com/advice/average-number-jobs-in-lifetime/

2. CFA Institute, FINRA Investor Education Foundation, & Zeldis Research. (2023). Gen Z and Investing: Social Media, Crypto, FOMO, and Family. cfainstitute.org. https://rpc.cfainstitute.org/en/research/reports/2023/gen-z-investing

3. Baker, B., CFA. (2023). Investing trends and statistics for millennials in 2022. Bankrate. https://www.bankrate.com/investing/millennials-investing-trends-and-stats/

4. Fidelity. (2023, May 11). Fidelity Study: Despite concerns about the future, Two-Thirds of small businesses do not currently offer retirement savings benefits. The NewsMarket. https://newsroom.fidelity.com/pressreleases/fidelity-study--despite-concerns-about-the-future--two-thirds-of-small-businesses-do-not-currently-o/s/72432825-233e-4a33-a470-3bed305b2f04