An Elite Group of Advisors Driving 401k Business
CAMBRIDGE, MA, November 30, 2011 -- While just over half (52%) of the estimated 315,000 retail investment advisors in the United States currently support at least one 401k plan, only 7% of advisors are Heavy plan producers with $25 million or more in 401k AUM. This elite group supports almost as many plans as all other 401k producers combined. These and other findings are included in the new 2011 Retirement Plan Advisor Trends™ report which was released last week by Cogent Research. The report is based on a nationally representative survey of 523 DC plan producers with a minimum of 5% of total AUM invested in 401k plans.
On average, Heavy producers support 30 plans, compared to an average of 11 among Moderate producers ($5-<$25 million 401k AUM) and five among Light producers (<$5 million 401k AUM). However, what distinguishes Heavy 401k producers from other advisors is not simply the number of plans they support, but the size of these plans as well. The average plan size for Heavy producers is $4.2 million, compared to $1 million for Light producers and $3 million for Moderate producers. The typical Heavy producers' book of business includes between five and six plans with assets of at least $5 million, and one or two of these are likely to have assets exceeding $20 million. "There is no doubt that Heavy 401k producers are more successfully targeting larger plans," says Cogent Principal John Meunier. "As a result, these advisors compete with retirement plan consultants for the upper tier of their business. However, more than two thirds of plans they support have less than $5 million in plan assets, so the lion's share of Heavy producers' competition is still coming from other retail advisors."
Cogent found the highest concentration of Heavy 401k producers within the RIA channel where 39% of advisors who sell 401k plans report $25 million or more in 401k plan assets. The result is an average 401k AUM of $76 million for all RIA plan producers, four times the average 401k AUM at $19 million for plan producers overall. The second highest concentration of Heavy producers can be found within the National Wirehouse channel where one in five (18%) plan advisors control $25 million or more in 401k plan assets. The proportion of Heavy 401k producers in the Regional and Independent channels is 8% and 10% respectively.
In terms of expected growth, Light and Moderate producers on average expect to add about three plans over the next year, while Heavy producers on average plan on adding twice as many, or about six plans over the next year.
"What is interesting when we dig into these numbers," says Meunier, "is the fact that non-RIA channel producers are predicting much higher growth rates next year. To me, this suggests that the advisor-as-retirement-specialist model is spreading and swiftly being adopted across all advisor channels."
About Cogent Research
Cogent Research helps clients gain clarity, obtain perspective, and formulate direction on critical business issues. Founded in 1996, Cogent provides custom research, syndicated research products, and evidence-based consulting to leading organizations in the financial services, life sciences, and consumer goods industries. Through quality research, advanced analytics, and deep industry knowledge, Cogent Research delivers data-driven solutions and strategies that enable clients to better understand customers, define products, and shape market opportunities in order to increase revenues and grow the value of their products and brands.
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