\n Just over 10% of advisors’ wealth clients come from defined contribution plans, as capacity, data and technology gaps block the bridge to wealth\n <\/p>\n
Financial advisors say they want to grow their wealth businesses through the retirement plans they already serve. Few are managing to do it.<\/p>\n
On average, just 10.2% of an advisor’s wealth clients came from a defined contribution plan relationship, according to new joint research by\u00a0Cerulli Associates and Morningstar. Meanwhile,\u00a091.2% of those surveyed called building their wealth practice at least a moderate priority, and about 63% said the same about prospecting for wealth clients inside their DC plans.<\/p>\n
Across wirehouses, RIA aggregators, independent practices and recordkeepers, Cerulli found that the so-called “Bridge to Wealth” \u2013 which involves winning retirement plan clients, then systematically finding,\u00a0vetting and converting plan participants into individual wealth management relationships \u2013 remains elusive for almost all those who set out to build it at scale.<\/p>\n
“Growing a wealth management practice organically can be very challenging, so advisors may be missing out on warmer leads that exist within DC plans whom they already have relationships with,” said Chris Bailey, director at Cerulli Associates.<\/p>\n
Read more:\u00a0Workplace retirement plans can be a pipeline for wealth clients, report reveals<\/a><\/p>\n Why the 401(k)-to-wealth pipeline stalls<\/p>\n Based on a survey of hundreds of advisors and dozens of interviews\u00a0with home-office executives and individual advisors, researchers found time was the biggest perceive obstacle. Nearly two-fifths of plan advisors who don’t prioritize wealth growth (37.8%) said they don’t have enough hours to prospect in their DC plans.\u00a0Another 24.5% said they don’t have the staff to offer wealth services to participants, and 20.9% said the extra revenue isn’t worth the effort.<\/p>\n Account minimums only add to the friction. Just over half of advisors (52.5%) said they require new wealth clients to bring at least $250,000 in new assets; for advisors with practices built mainly around DC plans, that share rises to nearly 60%.<\/p>\n Among three categories of advisors Cerulli considered, DC plan specialists \u2013 who reportedly derived roughly 66% of their revenue from retirement plans \u2013 reported serving just about half as many wealth clients as their peers because they lacked the tech and manpower to take on more.<\/p>\n Wealth-retirement hybrids, who get an estimated 23% of their revenue from plans, were able to source 15.5% of wealth clients from their plan business. The third category, wealth advisors, reportedly got 7% of their revenue from plans, and just 3.5% of their clients reportedly arrived from their plan business.<\/p>\n Advisors starved for home office support<\/p>\n In general, advisors told Cerulli their home offices offer limited help. Among those not prioritizing wealth growth, 53.4% ranked help converting DC-sourced prospects as a top-three resource their firm could provide, and 43.7% said the same about help identifying those prospects.<\/p>\n Then there’s the blind spot in data. For every type of participant data Cerulli asked about, at least 62% of advisors either lacked it or wanted more detail. Demand was highest for participant life events such as marriage or a job change<\/a>, at 82.1%. Only 14% of advisors use artificial intelligence for prospecting, and another 29% are experimenting with it.<\/p>\n “Advisors don’t need convincing that the Bridge to Wealth is worth building. They need the tools to build it without adding headcount or hours,” said Brock Johnson, president of Morningstar Retirement.<\/p>\n ‘Rules of engagement’ with recordkeepers<\/p>\n Cerulli’s research also described a dynamic in which\u00a0recordkeepers with their own wealth arms \u2013 including Fidelity, Schwab and Empower \u2013 are pursuing rollovers<\/a> directly, creating a friction point with advisors who now see them as competitors. On that note, Cerulli found 58% of advisors are willing to set participant “rules of engagement” with those providers to keep working with them.<\/p>\n “Other recordkeepers lacking the same retail wealth footprint while maintaining strong relationships with advisors are working to become the preferred partners of advisory firms,” the report said.<\/p>\n