As advisors continuously look for growth and ways to deliver more of their value to more clients, retirement and workplace benefits have emerged as an avenue to do so—and a top opportunity.
Financial advisors stand to benefit from new technologies in the retirement marketplace—including those that minimize fiduciary concerns and plan servicing challenges—making it easier for them to offer retirement services as part of their practice. Offering retirement services provides a way to holistically manage more of their client’s wealth, deepen client relationships and attract new clients. And importantly, it aligns with Americans’ increased focus on planning for retirement, which according to Envestnet’s latest generational research, is their primary financial concern.
As the workplace becomes a significant path for advisors to grow their business, it’s important to identify and understand three types of potential clients.
Small and Mid-Size Businesses
Helping small business clients to begin offering a retirement savings plan for their workers is a win for everyone—and advisors looking to expand their offerings and address more of their clients’ financial needs can work with their business owner clients to understand their retirement plan goals and objectives.
Today, as many as 56 million private sector workers—nearly half (48%) of workers in the U.S.—lack access to a retirement savings plan through their jobs, and the retirement-savings gap stands to create a $1.3 trillion economic burden through 2040, according to Pew Research. At the same time, only 34% of small businesses currently offer retirement savings to employees today, according to Fidelity Investment’s 2023 Small Business Retirement Index.
Across the country, there are ongoing campaigns at the state and federal levels to encourage more small and midsize businesses to consider offering employees some type of retirement plan. The SECURE 2.0 Act, for example, offers new tax incentives to small firms that do offer retirement savings options to employees.
What's more, employers are increasingly looking to integrate financial wellness tools into their benefits packages as a competitive differentiator, yielding higher employee satisfaction, productivity and employee retention rates.
Retirement/Rollover Business
According to government data, nearly $40 trillion is currently sitting in U.S. retirement plans and accounts, of which $26.3 trillion was in employer-sponsored plans and $11.5 trillion was in IRAs. Over the last 10 years, around 25 million Americans left behind money in a 401(k) account when separating from an old job, according to the Government Accountability Office. Millions left behind money in two or more accounts, according to the research. The need for financial guidance in these instances couldn’t be more apparent.
Advisors are already winning rollovers through existing relationships and the playing field is wide open. According to Cerulli, $535 billion in defined-contribution plan assets managed by a plan advisor rolled over in 2022, and most (85%) of those rolling over the accounts went on to stay with the same advisor after the rollover.
Meeting NextGen at Work
According to PwC research, Gen Z and millennials currently make up approximately 38% of the global workforce and this percentage will rise to about 58% by 2030. Meanwhile, Cerulli research suggests young consumers meet their advisors through seeking advice on their 401(k) plans.
In addition, according to research from J.P. Morgan Asset Management, an increasing number of American employers (40%) are now offering employees the option to open a “self-directed brokerage account” within their 401(k) as an alternative to only investing in the company-selected plan menu. All factors considered, advisors who offer retirement services can find a perfect storm of opportunity in onboarding new clientele.
Next Steps
The retirement market presents a significant growth opportunity for financial advisors who want to take advantage of evolving dynamics. And technology innovations have made it easier than ever for non-retirement-expert advisors to offer retirement solutions.
By understanding the rising demand, embracing technology, adopting a holistic approach and implementing effective strategies, advisors can position themselves as leaders in the retirement planning space. Tailoring retirement plans to align with individual goals, risk tolerance and lifestyle preferences demonstrates a commitment to meeting the specific needs of clients, enhancing the overall client experience.
Seizing this opportunity requires a proactive mindset, a commitment to ongoing education and a genuine dedication to helping individuals achieve a secure and fulfilling retirement. As the retirement landscape continues to evolve, advisors who embrace innovation and prioritize client-centric solutions will undoubtedly thrive in this expanding market.
Dana D'Auria is Group President, Envestnet Solutions and Co-Chief Investment Officer at Envestnet