The head of a retirement plan advice and managed account provider discusses the ‘race to the participant’ and why some advisers aren’t even at the starting line.
Recordkeepers have an “unfair advantage” over both retirement plan advisers and individual wealth managers when it comes to managing retirement plan participant wealth, according to Jay Jumper, the CEO of financial wellness and managed account provider Future Capital.
“So much of this is about data, right?” Jumper says. “And who has the data? The providers.”
Jumper, whose Chattanooga, Tennessee-based firm provides a platform for financial advice and wealth management for plan participants, says the large recordkeepers and financial firms have shown their “playbook” on how they seek to leverage data, name brand and scale to capture participant wealth, both in- and out-of-plan. The trend, he says, is putting both institutional and retail advisers at a disadvantage that is ramping up by the day.
The urgency of the moment is part of the reason the firm, formerly known as ProNvest Inc., recently rebranded to Future Capital. In the interview below, Jumper discusses his views on the race to the participant and how he believes advisers can get to the finish line.
PLANADVISER: How can a retirement plan adviser, often working in the background with plan sponsors, compete against recordkeepers in getting participant attention and trust?
JUMPER: Recordkeepers are going after their 401(k) customers, and they are trying to grow the out-of-plan asset captures, because they know that for every $1 in a plan, there are $3 to $5 of outside assets. If you’re the traditional adviser or you’re the retirement plan adviser, you’ve got to figure out how to compete with that. … To do that, you’ve got to have a great relationship with the participant. They have to know you, or your solution, better than they know the provider’s solution. If you don’t do that, obviously the provider is going fill that void.
That’s really one reason why we’ve rebranded as Future Capital. We are much more than just a managed account solution. …. The plan advisers just don’t have the bandwidth to engage with all the participants in a plan. They are focused on the C-suite, in most cases. So we help them go engage with all the other participants in the plan, service them, create a relationship, identify outside assets, refer those outside assets back to the adviser and allow them to compete on a level playing ground.
PLANADVISER: Some retirement plan advisers are only interested in working on plan design and administration. But for those advisers that are either interested in wealth management or are working with a wealth management division, why do you think they haven’t yet found a way to reach participants?
JUMPER: In our opinion, most advisers have taken a wait-and-see attitude. They’re waiting until a participant is 55 or 56 years old to see how [many] assets they have. Some others are going out there and creating relationships with all these other generations … [such as] 25-to-40-year old participants, in order to create a long-term relationship with these customers, and they’re leveraging technology to get the scale to do that.
What most advisers aren’t thinking about is this great wealth transformation that is coming. It’s these younger generations that, in many cases, will be making the decisions of where Mom and Dad’s money is going to go after they pass away. And the only financial relationship these younger generations have with any type of financial person is a retirement provider. Advisers serving these participants are uniquely positioned not only to win the participant assets, but to win the assets that are going to be transferred to those participants in this great transfer of wealth.
PLANADVISER: What is your differentiator in providing a financial advice and management account solution to advisers?
JUMPER: I’m not sure if you’d call it a differentiator, but we are positioned to educate advisers on what this market is and, in some cases, help them understand that they are under attack. Many advisers don’t even understand what’s happening. And we’re talking about basically most of Wall Street that’s not Goldman Sachs and Morgan Stanley. Because those larger firms all understand and appreciate that, and they’re looking for a solution that they can use both for their institutional product and retail product lines.
We’re uniquely positioned to be able to give advisers an institutional and a retail product. So if you’re a large broker/dealer, 25% of your advisers sell plans, while 75% are dealing with high-net-worth customers. We’re the only ones that can help you do both. We can help you with your plan sales when you’re selling a [retirement] plan or we can help you with your wealth management customer that has assets held away in various 401(k) providers.
PLANADVISER: Managed accounts, while widely used, haven’t necessarily seen the uptake people have expected, as participants remain in investment vehicles such as target-date funds. Why are you bullish on managed accounts?
JUMPER: The first thing we do with a participant, before we offer them a managed account or anything—and we do this at no cost—is we walk them through our retirement analysis and ask, ‘Are you on track for retirement?’. … Then we’ll give them an asset allocation. And if they can overlay that with their fund lineup, then they can do that on their own. But what we see is that the vast majority of participants [realize] they are not on track for retirement and go, “I’m either not on track or I’m going to be on track with a correct plan. I need a professional manager to help me.”
There’s a reason why there are all these [wealth management] firms out there, and there’s something like 260,000 advisers. People want help. They want to talk to somebody; they need help in creating a personalized solution for their goals and objectives, and you can’t really get that anywhere else, other than with personal engagement.
PLANADVISER: You’ve put effort and resources into a rebranding. Why are you confident you’ll see growth with your approach?
JUMPER: There’s been more activity in the last 12 months than there has been in the 40 years of the 401(k) marketplace. Every firm in the marketplace today is in a race for the participant. They have to get access to create a relationship with the participant in and post-retirement. Everybody is trying to figure that out.
Goldman announced their plan. Morgan Stanley announced their plan. Every other board of directors is looking to their senior managers and is saying, ‘What is our plan?’ The activity we’re seeing has never been this big before. The message has been the same over the last couple of years. It’s just the validation point of what the competitors are doing and what they’ve introduced. You can no longer bury your head in the sand and not have a plan.