Tilted Toward Doing More Wealth Management

If you haven’t had the chance, do yourself a favor and listen to (or read the transcript of) the recent podcast that industry thought-leader Michael Kitces did with Ric Edelman. It’s a great interview, but there’s one theme that stuck out in particular for me:

The merger of Financial Engines and Edelman Financial now allows the two firms to combine technology and people to build lasting relationships with participants at scale.

And in Ric’s own words:

“We now can provide you human advisors to help [employees] with the broad array of personal finances at no extra cost to either you or the employee. How many 401(k) providers can offer that? So the value proposition skyrockets for us and Financial Engines, the value to the client is massive.”

– Rick Edelman on the Financial Engines merger

Ric goes on to highlight that because they have the scale to work with individual employees, they’re building long-term relationships and “we get to a world where by the time the client actually shows up as an advisor rollover, they’re not unattached, they have a 9-year relationship with an existing EFS advisor.”

You don’t have to be Financial Engines or Edelman Financial to see that this service model of individual coaching and support for employees is attractive to employers, while also being a great, profitable service model for advisors. Now, whether you give the service away for free or charge for individual coaching is up to the advisor, but Ric’s doing you a favor and telegraphing how the DC business is slated to change.

Additionally, leading retirement plan firms, including CAPTRUST, are shifting towards doing more individual work with employees. In the words of CAPTRUST CEO, Fielding Miller, he recently declared in an InvestmentNews article, “We definitely tilted toward doing more wealth management transactions.

For those who want to read, the writing on the wall is pretty clear. Retirement plan consulting is only going to get less profitable, so advisors need to find new ways to add value and generate revenue.