According to a group of industry experts, pooled employer plans and the changes they will bring to the industry will guide many of the trends retirement advisors will face in 2021. Vestwell hosted a webinar with CEO Aaron Schumm on Tuesday; David Stofer, founder and president of Mariner Retirement Advisors;; and Fred Barstein, founder and editor-in-chief of 401kTV. The discussion was moderated by Mary Beth Franklin from Investment News.
According to Barstein, PEPs were the “most dramatic change and opportunity” to get out of the SECURE Act for retirement plan advisors.
“While we probably won’t see much of a change in the actual roll-out of PEPs as there are still a few things to determine, this is a really good opportunity for your current customer base to be aware of this. ” he said.
He said around 50 companies have already applied to merge plan providers. Among these is Vestwell, noted Schumm. Pooled plans are “one option that is good for one segment and for others they have a different solution that is more tailored to them,” he explained.
Stofer believes PEPs “will be a great solution for the small consumer market” as small business owners are more interested in focusing on their business than on retirement planning.
Barstein believes the bipartisan nature of old-age insurance bodes well for SECURE Act 2.0, adding, “We are starting to see rumors that it will focus on the decumulation phase.”
ESG funds are a niche product, said Barstein, “but there is definitely a market. It depends on the type of companies they are offering in their plans.
With the Biden administration, “we’re definitely going to see movement, probably immediately,” he continued with ESG funds. He believes the DOL rule, which bans asset managers from including ESG funds in retirement plans, will be rolled back and new rules that make them more available or even allow them to be a standard investment could be circulated.
New product offers
Stofer noted that when his company hosted employee meetings, “25% of the questions we receive relate to the 401k. … Most of the financial advice we give as 401,000 advisors, retirement advisors, has nothing to do with retirement. “
The rest of that advice is on student debt or credit card repayments, he said; the types of topics that are covered in a financial wellness program.
A survey by Vestwell found that a quarter of consultants will add managed accounts to their offering in 2021. Schumm believes that this way consultants can offer their customers more individual solutions.
“I think the target dates for a segment of the market are great, but as we mature in our careers and lives, you have better data points to actually anchor in to determine what a potential investment option should look like than me Individual. “
He believes adoption will only increase as managed accounts become more integrated with technology and costs decrease.
Stofer agreed that target term funds are a good solution for people with easy retirement situations. Since “Your situation is more complex and becomes a smaller part of your overall financial situation, you have to look at everything else, and this is where the goal is. Date funds just can’t. “
Mergers and acquisitions
The “dizzying” pace of year-end mergers and acquisitions was due in part to concerns about how a new administration would affect capital gains tax, Barstein said. Retirement advisors need to watch out for mergers and acquisitions as a single transaction can grow their competitors “exponentially,” he said.
The other side of this is that consultants may be “sitting on an incredibly valuable resource that you can monetize”.
Stofer added that young practitioners in particular need an exit strategy for the day they are considering their own retirements. “It’s not that you have a couple of young consultants on your team who can just write you a check,” he said.