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Fidelity Offers Tools for Unlocking the 401(k) Market

By Chris Latham March 26, 2014

Fidelity’s institutional arm recently rolled out a consulting tool for independent advisors who’ve dabbled in overseeing 401(k) plans but have yet to commit a significant chunk of their business to serving employers. The program, called Retirement Plan Growth Strategies, combines online training with prospect referrals.

Offering advisors a value-add beyond the core services of custodian, record-keeper and fund provider is an approach institutional asset managers have long taken in the 401(k) space. For example, ING U.S. has supplied marketing material and industry insights to independent retirement-plan advisors for years.

While these basic tools are useful for beginners in the field, providers that want to appeal to veteran retirement-plan advisors must go deeper, says Jim Sampson. He manages 105 employer plans through Cornerstone Retirement Advisors in Warwick, R.I., which is affiliated with LPL Financial. Sampson has been advising 401(k) plans for 11 years. His average plan sponsor has about 40 employees, for whom he conducts enrollment meetings and educational seminars.

“The vendor strategy for the last six to eight years is to figure how to stand out and help advisors grow their business,” says Sampson. But he considers complimentary marketing seminars, fiduciary benchmark reports and investment-monitoring tools to be no more than basic. More advanced — and valuable — is providing free access to external consultants who can help advisors assess their strengths and weaknesses, Sampson says, or help them hire the best talent. Some prominent defined-contribution-investment-only (DCIO) providers make that effort, including BlackRock and Franklin Templeton.

James Sampson

As far as Sampson is concerned, dedicated independent 401(k) plan advisors should be able to persuade sponsors of their value proposition. This means adhering to the fiduciary standard, keeping sponsor costs down, pointing out when a plan has too few or too many funds, knowing how to custom-build target-date funds, and getting an employer’s finance and human resources departments on the same page about the plan’s priorities.

Three-Phase Process

That would be a tall order for an online tool like Fidelity’s, which uses a three-phase process. In the first phase, the tool runs through 20 to 30 questions that “diagnose” whether the user’s practice is suited for retirement-plan advising. The next phase helps “develop” an advisor’s prospect-targeting methodology and elevator pitch. The final phase uses a third-party vendor to “deliver” connections by linking to local centers of influence with access to prospects.

Fidelity hopes advisors already using its services will see this as straightforward guidance they can act on quickly, according to Meg Kelleher, head of its retirement-advisor and record-keeping business. For such advisors, the tool carries no fee; Kelleher was vague as to whether it’s available to those who don’t already use Fidelity, and if so, at what cost.

Meanwhile, ING continues to allow advisors access to its online Retirement Research Institute, even as the company moves deeper into managing retirement plans. The advisor-oriented website hosts dozens of informational publications on plan-participant behavior, regulatory information and financial-market updates. In 2014, ING aims to focus on helping small and midsize plan sponsors get their employees better at saving, according to James Nichols, who is responsible for advice across the firm’s retirement business.

This means deploying its own advisors to push auto-enrollment and auto-escalation in 401(k) plans, as well as encouraging plan participants to attend educational seminars. So the company will effectively be competing with independent advisors — even as it seeks their business as a record-keeper and asset manager. However, ING says its services are complementary to independent advisors.

ING has 2,400 advisors who serve as fiduciaries for their individual clients, but they do not act as ERISA fiduciaries on retirement plans or with plan participants, Nichols says. Nevertheless, the company, which is in the process of rebranding itself as Voya Financial, also is repositioning what Nichols calls “a treasure chest of capabilities” regarding retirement planning — with individuals, employers and advisors all as customers.

Sampson of Cornerstone doesn’t see ING as a threat, precisely because of its fiduciary limitations, although he does respect its record-keeping prowess. And he says frankly that, given his expertise, the company’s self-styled thought leadership in the retirement space doesn’t hold much appeal. “I didn’t get to 105 plans by tripping over myself,” Sampson says.