A nod to an industry friend and great thinker

Evolution of the Retirement Plan Advisor

One wonderful thing about getting older is the chance to see things develop over
time. Those of us in the DC plan industry for a while have seen a tremendous evolution of
our industry and the overall competence of the advisors who are managing 401k
plans. Way back in 1998, I represented Larkspur Data at Million Dollar Round Table,
selling a then-revolutionary CD-ROM database of qualified plans to top insurance
producers. Most knew little about retirement plans and thought the CD-ROM drive in their
CPU tower was to hold their coffee cup. But they did know how to market. And many
realized that a searchable and detailed database of existing 401k and group health plans in
their area would help concentrate their marketing efforts.

Assets in 401k plans were growing rapidly at the time. Defined benefit (DB) plans were
becoming a "dying breed". Significant commissions and fees were built into 401k plans for
registered reps, insurance brokers, record keepers, plan administrators and asset
managers. Employer-sponsored retirement plans presented an opportunity to generate
sticky revenue and connect with business owners and key executives who were prospects
for other financial services. Lead generation services emerged and a huge growth of 401k
sales activity occurred in the early 2000's.

Looking back, we can see there was a lot of room for improvement in available 401k
products and the quality of retirement plan advisory services delivered in those early
days. There were significant proprietary fund requirements. Most investment due diligence
was done by bundled providers (think fox in the henhouse). And there was really no way to
effectively compare 401k providers other than by looking at brochures or playing golf with
the wholesalers. Advisors relied on Morningstar ratings and the Wall Street Journal for
fund analytics. Ideas such as auto-plans, target date funds, vendor benchmarking
analyses, guidance tools, and measuring retirement readiness were not yet conceived.

As Darwin would have predicted, those advisors who adapted to the challenges of a more
mature industry are now thriving. The DC plan environment now emphasizes fiduciary
responsibility for investment selection, open architecture and fee transparency; and
demands that advisors bring independent, meaningful, and integrated processes to
advising on plans. The blind squirrel, one-hit-wonder, golfing-buddy-of-the-CFO no longer
manages many plans and the number is dwindling. Advisors having most success are
applying new technologies, creative plan design, and asset allocation portfolios. They
accept fiduciary accountability and focus on measurable improvement in participant
retirement readiness (and costs thereof to their plan sponsor client and participants).

Most in the DC plan industry agree that overall participant retirement income potential from
401k plans has been insufficient. But some things require time before change is
realized. Since the Pension Protection Act in 2006, numerous "best practices" have been
implemented. 401k and 403b products and providers are in many ways better. More
people are being auto-enrolled, auto-escalated, and nudged or defaulted into suitable asset
allocations. Participation rates and deferral rates have improved a little despite tough
economic times, but are getting better. The effectiveness of this pattern of changes will
play out in retirement outcomes for Baby Boomers like me over next 20 years, but more so
for those who follow. The evolution in the professionalism of the independent retirement
plan advisor community is both a result of this new environment and instrumental in
creating it.

Fred Greenstein is Director of Business Development for NFP Advisor Services and
Retirement Plan Advisory Group (RPAG). A 401k industry veteran, Fred has been an HR
Director, labor negotiator, educator and entrepreneur. Fred has helped hundreds of
retirement plan advisors and providers with systems, data, and support needed to serve
clients and grow their business profitably.





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