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Why is Creative Planning’s acquisition of Lockton a game changer?

Sometimes it takes a big deal like the Creative Planning purchase of Lockton’s $110 billion defined contribution exercise to wake up to the market and make big changes like CapTrust’s purchase of five-year asset management practices has led to other Retirement planning advisory made aggregators realize they needed to develop or acquire RIAs.

But CREATIVE PLANNING and CAPTRUST didn’t change—they became aware of the market dynamics and leaned into it. So what are the market dynamics that are driving RPA to offer wealth management and financial planning services and Creative Planning to achieve Lockton’s defined contribution (401(k) and 403(b) plans) practice? Why Pay $500 Million?

market dynamics

Most retirement planning advisors focus on plan-level services such as fees, funds and fiduciaries. Although many RPA practices have evolved from the wealth management business, very few have retained these capabilities because of perceived conflicts of interest while focusing on building a scalable DC business.

Similarly, the vast majority of RIAs have limited interest in DC plans because they are loaded with liability and are far less profitable with advisor fees declining, while their core businesses continue to grow with lower fee pressures.

Market dynamics, legislation and client shifting needs accelerated by the pandemic have presented myriad opportunities and challenges resulting in the convergence of wealth, retirement and benefits at the workplace.

Providers and consultants giving feedback

Due to low record keeper and advisory fees, their focus has shifted to serving participants and monetizing, although only a few have been successful. Exceptions include providers such as Fidelity, Schwab and Vanguard, and consultants such as CAPTRUST, and a handful of regional RIA/RPA firms that have developed integrated practices.

Participant products and services begin to leverage data, technology and access for participants at work. Today, the primary goal is to find high net worth and largely affluent workers who can afford customized money management services. No one has figured out how to monetize and effectively serve neglected or under-served participants who make up more than 95% of the workforce.

customers want more

With the war for talent, especially for younger workers who highly value retirement planning services, employers now see DC plans as a strategic advantage that can be used to retain and recruit employees. could. Activists expect financial solutions such as student loan repayment programs and emergency savings plans to be offered at work. For most workers, their RPA may be the only advisor they ever meet.

government intervention

With a federal mandate and more than 30 states that either require or induce employers to offer a payroll deductible retirement plan at work, local and federal legislators and regulators expand coverage to 5 to 6 million businesses. Plans that focus on doing.

While there are concerns about the use of participant data to sell other products, as well as privacy issues, there is an understanding that the workplace is the ideal area to help people prepare for not only retirement but other important things. Also deals with financial issues.

Triple F RPA (Fees, Funds and Fiduciary) Asset-based plans charging level fees are the walking dead with limited growth.

Until the Creative Planning deal, wealth managers left the DC market, ignoring their advantage over other RIAs to find and build relationships with 5% of their DC participants who can afford traditional wealth management and financial planning services.

Fisher Investments has built its huge business through Content Marketing and growing Smart Asset through Calculator and Content Marketing to generate wealth prospects. Imagine the impact these marketing efforts might have on a captive audience of DC participants, where the consultant has the support of the plan sponsor and access to employees and their data. And what better way to bond with Henry (the high earners not yet wealthy) than at work where his prime asset is his paycheck?

No RPA firm has considered how it is possible to financially serve 95% of the less affluent workers, but for now, offering third-party financial wellness tools may be enough to meet the needs of the plan sponsor. could. And replace the Triple F advisors who don’t.

RPA and RIA will gain a significant advantage over competitors by leveraging the convergence of wealth, retirement, and benefits at work to reach the 109 million DC participants whose mantra is: “I live in my street.” That street is narrowing as the convergence of wealth, retirement, and benefits at work diminishes the opportunities that limit their growth.

Fred Barstein is the founder and CEO of TRAU, TPSU and 401kTV.

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