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  • Writer's pictureSamantha Diggs

Is Advisor Subversion A Concerning Retirement Plan Trend?

Updated: Mar 11, 2022

As a guy who has earned his living from the qualified retirement plan business for many years, I can confidently say the retirement plan business has been a great place to be. In my opinion, the advisor has been at the forefront of this business. The hard work in this business has been prospecting, finding businesses that will listen to you, gaining their trust, and being willing to implement your suggestions. The human touch is irreplaceable. No recordkeeper—hundreds or even thousands of miles away—can make that connection and earn that business the way an advisor can. For that reason, advisors have been able to build a book of business and support a practice for the last 30 years.



What concerns me of late is that because advisors have been so successful, recordkeepers are now looking for ways to subvert advisors and take the business more direct. When I entered the business 30 years ago, group health insurance was going through the same metamorphosis. The delivery of group health insurance up until that time had been through insurance professionals. But, then the cost of health insurance kept rising and soon health insurance was only sold by specialists and the average insurance professional was pushed out of the business. Then, before long because of price compression and the fact of advisor costs, business was being written directly. That seems to be starting to happen in the 401(k) business to some degree. The last few years the push has been to only use advisors who specialize in retirement plans and require them to have certain designations or liability.


About a year ago the new idea was to implement group 401(k)s such as MEP’s or PEP’s where often the recordkeeper is running the plan. This is where one starts to wonder who really is in control of the retirement plan. Is it the advisor that sold the plan or the recordkeeper that controls the plan or the fiduciary that makes all the decisions, etc.? Some of these MEP/PEP plans are easy and attractive to sell. I heard one advisor say, “I sell this PEP because I don’t have to do anything.” Doesn’t that beg the question: why are you getting paid, and do you own this piece of business in the end? That makes me worry for a younger advisor that wants to enter this business and build up a practice. How does he do that if he doesn’t ever own his own piece of business?


Now what the new trend seems to support is a lot of consolidation of recordkeepers and they are paying huge dollars for these acquisitions. Some are being very vocal, saying the way they support the purchase of the 401(k) business is to engage directly in working with the individual participants in the 401(k) without the advisor. They not only insert Managed Accounts in the 401(k) without question, but they are also using Home Office employees to solicit personal wealth business gathered from the data in the 401(k). Not only does this make me concerned about the question of who owns the 401(k) business when it is the advisor that has done the hard work to create a new client, but now the advisor who was also looking to work with individual participants to do wealth management business is being subverted. How is that partnering together?


Don’t get me wrong. This is not an industry-wide problem. There are wonderful recordkeepers, and MEP’s and PEP’s can be structured to enhance an advisor. It is important that you, the advisor, be aware as you enter some of these agreements. If you would like some help navigating the landscape, please don’t hesitate to call.




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