There is no doubt that pension plan advisors, particularly aggregators, are fascinated by the wealth management and financial planning professions, whether to better serve participants, distinguish themselves or generate additional income. But to date, very few wealth managers have shown the same interest in 401(k) plans.
Can Envestnet, which has more than 100,000 advisors on its TAMP, owns Yodlee and has been trying to enter the retirement market, getting wealth managers to look into the 401(k) market, especially since Do more and more states like California, Oregon and Illinois require most small businesses to offer workers access to retirement plans?
Starting with the hiring of Sean Murray in November 2021, a well-known industry professional who had led BlackRock’s DCIO after holding similar positions at PIMCO and Goldman Sachs, then the recent purchase of 401kPlans.com, launched by Scott Buffington, it looks like Envestnet is trying to revive the DC market after bringing in its retirement division, which was headed by Babu Sivadasan.
Although Envestnet has made significant inroads into the 401(k) industry and currently has data on 200,000 plans and generates half of its retirement income through trust services, primarily to generalists, their pension division does not was not considered a success by the industry as they were unable to deliver the data and analytical tools after making bold promises.
Yet they still have considerable assets on which to build, including 60 business relationships with RPA companies and brokers, but more importantly, the 400 business relationships enjoyed by the mothership as well as 1,000,000 heritage, their vast wealth technology and data aggregation capabilities.
Rather than myopically focusing on the RPA market where competitors like RPAG, fi360 and Fiduciary Decisions have thrived, the biggest opportunity, according to Murray, is to help wealth managers leverage relationships with business owners and managers.
“Our goal is to take a complicated business and make it easy and compliant for wealth advisors and home offices,” he said.
Key to his plans to create a retirement exchange, which sits alongside their insurance and credit exchanges, is 401kPlans.com which Murray characterizes as a “digital marketplace rather than an RFP tool. that any advisor can use to buy and compare a plan in five clicks.
401kPlans.com already has over 20,000 advisors using their system which has captured the pricing algorithms of many small market register holders, allowing users to price and compare plans automatically. With their 3(38) trust services, Envestnet may be able to simplify the creation and management of 401(k) and 403(b) plans for wealth advisors as well as experienced RPAs struggling with the economy. smaller planes.
“Technology will change things with the legislation that enabled PEPs, state mandates and DOL fiduciary rule,” Murray said.
DOL’s PTE 2020-02 could result in more assets being retained in plans, which will hurt IRA rollover activities of wealth advisors who may turn to DC plans to make up for lost revenue or facilitate the management of bearings.
But currently, most wealth managers are not focusing on CD plans because the margins are much lower while the liability and complexity are much higher? So why change?
The reality is that most wealth managers already manage DC plans, either accidentally because a client asked for help or because one of the founders saw the opportunity at some point to sell some way cross wealth management to the participants.
Using data analytics, Murray says Envestnet can help advisors identify small business opportunities among their high net worth clients, an important goal for connection houses like UBS, and presumably they can identify management opportunities. wealth within DC plans managed by advisors.
Change is coming to the DC market due to the overwhelming need of nearly 100 million workers for financial assistance at work and the massive creation of small plans on hold due to government mandates and incentives. Currently, RPAs and providers are unprepared to take advantage of these opportunities, which will require hundreds of thousands of wealth advisors, their connections, technology and financial planning expertise. Can Envestnet help bridge the gap? Let’s hope so.
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