Need for Guidance Creates Opportunity for RIAs

More Choices and Need for Guidance Creates Opportunity for RIAs

Retirement plan sponsors and participants want choices. The opportunity for retirement-focused registered investment advisors is immense.

Given recent economic news — including higher inflation, stock market volatility and rising rates — along with the impact of the Russia-Ukraine war, it is understandable that plan sponsors and their participants want more to help them meet their short- and long-term financial goals.

66% of Americans agree or strongly agree that they are worried about the impact of inflation on their ability to save enough for retirement.*

These realities have renewed curiosity in previously seldom-reviewed participant retirement accounts. The increasingly concerned participant will need help, but also tools and choice delivered in a personalized fashion.

What can we learn from history?

Well, history teaches us that in the retirement plan space, inertia is a huge deal! Sir Isaac Newton taught us that an object at rest will stay at rest and an object in motion will stay in motion. Although he was describing the characteristics of physical objects, his law is comparable to the concept of inertia in behavioral finance, including the retirement space. New products, services and features that require action from the participant simply have not seen great acceptance and adoption. On the other hand, auto features have seen dramatic results.

With legislation that green lighted the use of behavioral finance concepts like this and mainstreamed auto features, retirement plans have started automatically putting participants on a path toward success instead of failure.

For example, the Pension Protection Act of 2006 paved the way for qualified default investment alternatives to be the default option in nearly all defined contribution plans. Participants are now defaulted into a target date fund, balanced fund or managed account instead of a money market fund or other cash account. Next default auto-enrollment, auto-increase and rebalancing became widely accepted and are helping increase participation and contribution levels.

Where do we go from here?

As the retirement industry evolves, more sophisticated features are becoming available.

• The mainstreaming of managed accounts – As the price point on managed accounts starts to rival a target date fund and more participant date becomes more accessible, managed accounts will become almost a second-generation target date fund. Accounts will be personalized on five to ten data points that the participants won’t even need to provide. If the participant chooses to engage, the allocations will get even more personalized and refined.
• Decumulation products will start in earnest – With the Secure Act creating a fiduciary safe harbor for annuitized insurance options, we will likely see the mainstreaming of decumulation products. This makes sense as more of the population reaches retirement age and longevity continues to rise.
• Other tools, resources and education – With technology integration constantly improving, we will see the defined contribution plan as the core offering being complemented by additional features including financial wellness and education tools, student loan repayment programs, HSA offerings, emergency savings accounts and many more.

The opportunity for advisors

The same way participants need guidance due to the proliferation of personalization and other features; plan sponsors need guidance because choosing the right features for the plan is critical. Unlike the participant experience, there is no default setting for plan sponsors. They will need a strong partner to help sift through many options to include the best features and services for their employees.

With more legislation and more choice, this is increasingly complicated. Consider the number of vastly different decumulation programs hitting the market such as SPIAs, QLACs, GLWBs and GMIBs. The advisor has never been more important. It will take consultation and expertise to design, implement and monitor a next generation retirement program.

How Ameritas is positioned to partner

• Digital transformation –Technology improvements are helping all aspects of our business model, from efficient and effective client service to increased capabilities. It is a core strategy for now and the future.
• Choice, choice, choice – We are bringing to market multiple options for building a successful retirement program. Whether it’s multiple managed account providers, options in the decumulation space or complete investment open architecture, we are working hard to provide flexibility and choice so advisors can provide value-added and responsive options to their clients.
• Well-known providers– Many mega providers have built their own proprietary services. Too often this leaves advisors with one option that is designed primarily to benefit the provider. Ameritas has taken a different approach by teaming with some of the industry’s top providers for wrap-around features and services. These are trusted companies you know and work with regularly.
• Niche but growing markets – With multiple employer plans and pooled employer plans becoming more prevalent daily, Ameritas has pushed into this space in a big way. With the recent acquisition of BlueStar Retirement Services, we are now one of the leading providers of MEPs and PEPs and have the systems and expertise to help advisors capitalize in this fast-growing area. Additionally, we are seeing more advisor engagement in our specialty areas of governmental and nonprofit plans. There is substantial opportunity to introduce MEPs, PEPs, technologies, services and fiduciary protection to these historically underserved markets.
• Stability – As a very successful 135-year-old mutual insurance organization, Ameritas is in the retirement space for the long haul. This stability from a fast-growing provider has been appealing to many advisors, especially in this time of global stress and economic uncertainty.

About Ameritas

Ameritas is a marketing name for Ameritas Mutual Holding Company and its affiliated subsidiary companies, including Ameritas Life Insurance Corp. and Ameritas Life Insurance Corp. of New York. Founded in 1887, Ameritas offers a wide range of insurance and financial products and services to individuals, families and businesses. These products and services include life insurance; annuities; individual disability income insurance; group dental, vision and hearing care insurance; retirement plans; investments; asset management; and public finance. Securities offered through affiliate Ameritas Investment Company LLC., member FINRA/SIPC and investment advisory services offered through the business name of Ameritas Advisory Services.