Advisor Practices of the Future 2012-2015
HARRISON, NY, August 27, 2012 -- Diversified, a leading retirement plan provider, released a new study highlighting how the professional retirement plan advisor profession will be fundamentally transformed during the next three years. The report, Advisor Practices of the Future 2012-2015, reveals how mandated fee disclosures and healthcare reform will fuel double-digit growth for advisors who work primarily or exclusively with retirement plans, as practices transition from regional to national and merger and acquisition activity increases.
According to the report, the market share of professional retirement plan advisors in the $10 million to $500 million market, a targeted segment, will grow to 40% from 25%, and the number of plan advisors will increase by nearly 50% during the next three years. To support this growth, firms will need to focus on recruiting and developing talent, as the pool of qualified candidates may not be large enough to meet demand.
"Thousands of advisors generate some revenue from retirement plans, but the number focused primarily or exclusively on mid to large plans is estimated at approximately 550 professionals," said Joe Masterson, senior vice president and chief sales and marketing officer of Diversified. "With an increasing number of health and welfare advisors and wealth management advisors poised to migrate toward this market to enhance their practices, the industry is about to embark on a new era of growth and development."
The Advisor Practices of the Future 2012-2015 study, which is the first of its kind, is based on insights from Diversified and more than fifty recognized retirement plan advisors, consultants, and practice leaders representing the spectrum of the profession. Among the trends expected to shape the retirement plan advisor practice of the future are:
- Greater focus on participant outcomes. As the transition from defined benefit pension plans to defined contribution plans continues, plan sponsors interest in measuring participant retirement readiness will surge. As a result, advisors will focus more on outcomes and less on means such as enrollment, asset allocation and debt management, and service provider's will respond with planning tools, participant-level indicators, and plan reports that help advisors monitor progress. By 2015, 51% of professional retirement plan advisors expect to offer participant advice directly, and an additional 26% expect to offer the service in partnership with another organization.
- Consolidation of regional firms into national practices. Increased merger and acquisition activity (90% of advisors expect M&A activity will increase in the next few years) coupled with technological innovation that makes it easier for practices to operate nationally will help many regional firms achieve greater economies of scale by building national practices. As this trend develops, plan type and geography (i.e., region) will be used less often by advisors to define their target markets.
- Greater reliance on retainer compensation. The percent of plan sponsors with $5 million to $500 million in plan assets who rely on an advisor paid on retainer is expected to increase to 49% in 2015 from 33% in 2012. Consistent with industry fee compression, the shift toward a retainer model is expected to spur additional advisor search activity, which will prove difficult for advisors attuned to an asset-based compensation system while creating new opportunities for advisors who successfully operate within the retainer model.
"Change is inevitable for professional retirement plan advisor practices," continued Masterson. "The Advisor Practices of the Future 2012-2015 report aims to help advisors anticipate the new challenges and opportunities that will surface as the industry is transformed."
To request a copy of Advisor Practices of the Future 2012-2015, email RetirementResearchCouncil@divinvest.com.
Diversified is a leading provider of customized retirement plan administration, participant communication and open architecture investment solutions for mid- to large-sized organizations. The company's expertise covers the entire spectrum of defined benefit and defined contribution plans, including: 401(k) and 403(b) (Traditional and Roth); 457; non-qualified deferred compensation; profit sharing; money purchase; cash balance and Taft-Hartley plans; and rollover and Roth IRA. Diversified helps more than two million participants save and invest wisely for and throughout retirement.
Headquartered in Harrison, NY, the company's regional offices are located in Arkansas, California, Florida, Illinois, Iowa, Louisiana, Maryland, Massachusetts, New York, North Carolina, Ohio, Oregon, Pennsylvania, Texas, Utah, Virginia, and Wisconsin. To learn more, visit www.divinvest.com. Connect with us on Facebook www.facebook.com/DiversifiedRetireOnTrack, Twitter www.twitter.com/GetDiversified, YouTube http://www.youtube.com/user/GetDiversified and LinkedIn http://www.linkedin.com/company/diversified.
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