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TD Ameritrade Institutional Advisor Survey: RIAs See Opportunity In Retirement Plan Market But Want Guidance Navigating A More Complex Business

Most registered investment advisors (“RIAs”) agree the U.S. retirement plan market represents a tremendous growth opportunity yet relatively few RIAs pursue this business in a significant way. What advisors want, according to a recent TD Ameritrade Institutional 1 Advisor Survey, 2 is a deeper understanding of the rules and more guidance in assembling the components needed to service 401(k) and other employer-sponsored retirement plans.

Nearly eight of ten advisors in the survey said they believe RIAs as a group are well-positioned to increase their share of the $5 trillion 3 in defined contribution retirement plan assets, a market long dominated by brokerages, insurers and mutual fund companies. Still, few RIAs are competing in this marketplace today.

According to the survey, 62 percent of RIAs service 10 or fewer plans, including nearly 19 percent who work with no plans. Additional industry research supports that finding, indicating that only 6 percent of retirement plan advice specialists are RIAs. 4

Now, however, U.S. Labor Department rules that mandate greater fee transparency and changes in the definition of “fiduciary” could potentially tilt the playing field in a way that may benefit RIAs – a group that already adheres to a fiduciary standard. 4

Advisors have taken notice: nearly half of the survey’s respondents see an opportunity to expand in the retirement business and they’re currently directing time and resources towards this goal. Another 19 percent said they don’t currently have plans, but they likely will in the near future.

“RIAs recognize the retirement plan business is a tremendous growth opportunity for the industry and a chance to gather additional assets they are not capturing today,” said Skip Schweiss, managing director, TD Ameritrade Institutional, and president, TD Ameritrade Trust Company. 5 “There’s no denying the retirement business has more moving parts, but with a little help and guidance advisors believe they can assemble an important new growth enterprise.”

The U.S. retirement market is enormous at $21.8 trillion, and is growing – analysts expect the market to reach $23.8 trillion by 2017. 4 And that growth has in the recent past been steadier: retirement plan assets over the past five years increased at a faster pace than non-retirement assets 4 because American contributed to their workplace plans with every paycheck across market cycles.

Moreover, RIAs could have a substantial cross-selling opportunity when it comes to the retirement business. Half of the advisors surveyed said 10 percent or more of their clients were business owners, a group that potentially could steer their company’s retirement plan to the RIA. Business owners can also serve as a source of new referrals. 4

Still, there are some concerns that have prevented many advisors from capitalizing on this opportunity. According to the survey:
  • 60 percent cited a lack of time or resources
  • 42 percent cited compliance and regulatory requirements
  • 38 percent said they lacked business relationships with third party administrators (“TPAs”) or recordkeepers
  • 30 percent were not sure of the opportunity
  • 25 percent said they lacked the tools needed to service retirement plans

The survey, meanwhile, underscored that RIAs don’t lack for business-owning clients nor are they worried that they lack expertise.

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