The 401k Round Up is a weekly column aimed at keeping mutual fund industry insiders updated on what's happening in the 401(k) industry. For more, read our sister publication, The 401kWire.

Understanding the role played by retirement plan advisor specialists is becoming more and more important, especially for fundsters selling into the 401(k) plan marketplace as DC-IO providers. Retirement plan advisors who focus on this business have very different needs from retail advisors or even advisors who dabble in a 401(k) or two.

The data on this trend is clear: specialists are gobbling up retirement plan marketshare.

Fred Barstein, CEO of 401kExchange (a lead generation company that supports retirement plan advisors), revealed that, according to the brand new 2010 DCP Advisor Study, the average 401(k) advisor today has double the experience of the average 401(k) advisor in 2006.

"DC [defined contribution] commissions are up almost 100 percent since 2006," Barstein writes, adding that advisor DC assets have more than tripled in that same time period.

A debate this week in an advisor trade publication highlights the growing gap between generalists and specialists. On Tuesday an advisor, Ric Lager, published a guest column in RIABiz, urging fellow retail RIAs to jump into the retirement business to work directly with retirement plan participants, providing advice. Lager's column provoked such fiery responses from 401(k) industry insiders like Phil Chiricotti that Peter Savarese, senior regulatory counsel for National Compliance Services, penned a follow-up column today for RIABiz, offering a legal perspective on some of the issues raised by (and in response to) Lager's column.

The controversy arose out of Lager's insistence that advisors who aren't retirement plan specialists can gather "big-time 401(k) assets" by going straight to participates and not worrying about ERISA (the 1970s era law that governs more defined contribution retirement plans like 401(k)s). Lager makes no claim to 401(k) expertise and shows no desire to work with the retirement plan itself, though, an important distinction. For mutual fund firms used to distributing through retail advisors, Lager and his business don't look too unfamiliar.

But advisors like Lager also offer little or no opportunity for fund firms trying to win 401(k) assets. Lager and other participant-only advisors advise participants directly on how to allocate their investments within a 401(k) lineup chosen at the plan level. When it comes to getting funds into those lineups, a necessary prerequisite (unless there's a self-directed brokerage option) for being used in the plan, fund firms need to work with the 401(k) advisor, broker-dealer and/or recordkeeper.

At the same time, the maturing 401(k) marketplace has fewer employers seeking to set up new plans or switch providers, meaning that more and more plan movement is influenced by the advisor.

Some broker-dealers have already jumped on these trends. LPL, Commonwealth Financial, and even the wirehouse UBS, among others, have all created special units for select retirement plan specialist advisors to serve as fiduciaries. (To read more UBS' program and it's new chief, see The 401kWire, 5/25/2010.) Specialized independent firms focused on retirement plans -- like CapTrust Financial Advisors, National Retirement Partners and Retirement Plan Advisory Group -- have popped up and lured away many of the top-producing retirement plan advisory teams. Even big wirehouses like Merrill Lynch and Morgan Stanley Smith Barney have created specialty programs for retirement specialists (though they're not yet embracing the term "fiduciary").

Fundsters have to embrace this divide, too, and reach out to the retirement plan specialists if they want to survive and thrive in the defined contribution investment-only business. Some asset managers are leading the charge, shifting their DC I-O focus to place less emphasis on direct sales to giant, Fortune 1000 plan sponsors and to place more emphasis on working with advisors. Dave Musto leads the advisor-focused DC I-O effort at the giant JPMorgan Asset Management, and he just won over a top advisor-focused retirement executive from a 401(k) recordkeeper (see The 401kWire, 5/24/2010).

JPMorgan's not alone. BNY Mellon, Columbia, Franklin Templeton, Goldman Sachs, the Hartford, John Hancock and others have all devoted resources to catering to this new breed of specialist. Selling through an experienced retirement plan advisor isn't just a matter of sending over a retail wholesaler, and the fund firms that understand that will be able to get their foot in the door.

Stay ahead of the news ... Sign up for our email alerts now
CLICK HERE