Infographic

The shift among 401(k) advisors from a mainly commission- to a mainly feebased model continues at a brisk pace. Today, 41% of advisors say they are mainly fee-based, up from only 24% six years ago.

When it comes to recommending 401(k) service models to plan sponsors, do advisors stay within their comfort zone and generally recommend the same service model to most comers? Or do they move seamlessly from service model to service model, selecting different platforms based on the specifics of a case?

RIAs—both “pure” RIAs and dually-registered reps—are playing an increasingly prominent role in providing advisory services to 401(k) plans. It’s a two-way movement with RIAs expanding into the 401(k) world from wealth management and longstanding 401(k)-focused advisors reorienting their practices to become fee-based formal fiduciaries.

Half of all advisors with a 401(k) plan practice are actively pursuing the opportunity to generate Rollover IRAs from departing plan participants—50% say they “make a special effort” to do so.

The allure of collateral sales from a 401(k) book of business is a longstanding enticement to draw successful retail FAs into the world of employer-based retirement plans. Convert business owners and company executives into retail wealth management clients goes the argument. Harvest the Rollover IRAs. Sell group insurance or other business financial products to your 401(k) plan sponsors.

After nearly a decade of intense development, testing and promotion, guaranteed income features are available in only 10,000 to 12,000 defined contribution plans nationally, about two percent of the total. What gives?Advisors aren’t the problem. According to our current research, nearly seven in ten 401(k) advisors are at least somewhat interested in a guaranteed income feature within a DC plan. Among heavy advisors (the 25% of 401(k) advisors who derive 60% or more of their income from 401(k))...

Advisors active in 401(k) acquire about three plans per year on average, an annual sales number that rises to nearly seven plans for the typical Heavy advisor (one who derives at least 60% of total practice revenue from the sale and servicing of 401(k) plans).

Over the past five years or so RIAs rolled into 401(k) big time and in doing so rocked the once familiar business model of more traditional 401(k) advisors. We define two groups of 401(k)-active RIAs.

Section 401(k), added to the IRC by the Revenue Act of 1978, formally sanctioned the use of salary reduction as a source of tax-deferred retirement plan contributions. The law went into effect on January 1, 1980 and the first 401(k) plans became operational after the IRS issued regulations in late 1981 (though a few brave pioneer sponsors did jump the gun).