Who Sells Big Plans?

Topics in 401 (k) Distribution: Fifth in a Series

Specialist or “Heavy” advisors, of course, those deriving almost all of their professional income from 401(k), right?

Well, only partially.

To be sure, Heavy advisors are about twice as likely as all advisors to sell larger plans, say $10M+. But flip the axes and a slightly different story comes to light. Of advisors who sold at least one plan of $25M+ (20% of all 401(k) advisors), only about half (51%) are Heavies; the balance are mainly Medium (20% to < 60% of income) and (lucky) Light advisors (<20% of income).

What else do we know about the rarified $25M+ advisor? They have sizable books of business, averaging $250M in 401(k) assets (20% with AUM ≥ $500M), more than double the 401(k) AUM of all advisors. They are mainly fee-based (70%) and almost all of them (94%) think of themselves as a fiduciary. They are much likelier than all advisors to be hybrid or dually registered RIAs (63%). They are likelier to reside in wirehouses than any other venue in the channel. And unsurprisingly, they overwhelmingly embrace the traditional fully-bundled 401(k) service model. In the past three years, they sold an average of 31 plans (versus 15 for all advisors).

Advisors who sell big plans also have a highly distinctive set of needs when it comes to platform providers. Unlike their counterparts at the other end of the plan size spectrum who rely on due diligence support and the provider’s inside sales desk, ‘big plan’ advisors insist on tools to create custom target date and target risk funds, leading edge technology solutions, financial wellness tools, equalized fund revenue sharing and outcomes measurement to name a few. Or to put that differently, advisors who sell big plans reflect the needs and expectations of employers who sponsor big plans—they are in perfect sync.

Oh, did we mention: successful ‘big plan’ advisors are also small plan superstars? Of the 31 plans they sold in the past three years, 11 are under $1M, about double the number of plans that size sold by all advisors. And another seven of the plans they sold are between $1M and less than $3M, also about double the average for the channel as a whole. That’s to say that more than half of the plans sold by the most successful big plan advisors are under $3M. These advisors are just good, large plan or small.

For more information

Merl W. Baker, 203.487.2000; Merl.Baker@NMG-Group.com

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