WHILE FEWER PLAN sponsors are changing their record keeper, more and more are changing their advisor. Over 90% of all appointments made by 401kExchange are broker of record change opportunities, a phenomenon that started almost three years ago. Record keepers under pressure to grow need to find ways to shift strategies especially as plan assets decline. Advisors who might want to put a vast majority of their business with two to three providers now find themselves with plans all over the map. Providers can find opportunities for growth by convincing their best advisor partners to consolidate their disparate plans with them.

Most advisors we speak to are not necessarily keen to consolidate their book of business as it takes time to convert the plan, taking them away from other more productive activities like growing their business. Further, advisors may not be serving their clients well by consolidating their book. Providing financial incentives to advisors may be viewed as a prohibited transaction under ERISA. So how can providers and advisors work together to help each other while best serving their clients?

To incent someone to change, the benefit should greatly outweigh the risk. Record keepers must offer low-impact, over-the-weekend type conversions, which minimize the downside. But with services and features being commoditized and more open investment platforms, what are the benefits? Advisors get better service when they have a significant number of plans with a record keeper sometimes in the form of a dedicated internal relationship manager who keeps the advisor abreast of all plans and deals with problems as they arise. Any help that providers can give to advisors in growing their business would be a great incentive as well.

The most important parties, however, are the sponsors and their participants. With the auto-plan features of the Pension Protection Act, providers and advisors have the means to dramatically improve the chances for a participant’s successful retirement while minimizing exposure to the employer. Perhaps providers should offer a dedicated “success manager” to the plans of their best advisor clients. These managers could work with the advisor to increase participation, better allocate investments and, most importantly, increase deferral rates. Education meetings should focus on three simple messages: 1. Join the plan; 2. Select an asset allocation investment; and 3. Defer, defer, and defer some more. A dedicated success manager with the resources of a major record keeper at their disposal and an experienced retirement advisor will make for a more successful plan. Providers offering these success managers to only their best advisors with a minimum number of plans should see growth in a slow growth market from advisors properly incented to consolidate their book. Revenue and profits rise as assets increase which should more than pay for the cost of the success manager who can eventually turn their attention to helping the advisor capture rollovers and outside assets. Talk about a differentiator.

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