Blending wealth and retirement advisory practices

Traditionally, wealth and retirement advisory have operated in somewhat separate realms, with retirement advisors typically transitioning clients over to wealth advisory at the point of retirement. But things are starting to change. Advisors are seeing opportunities to bridge the gap, offering a more holistic service to participants while helping businesses find new revenue sources. To explore this shift, we spoke to Stephen M. Welch, Vice President, financial advisor, corporate retirement director, and financial wellness director at Morgan Stanley and Marc Caras, Managing Director, Head of Retirement Solutions, Rockefeller Capital Management.

Key takeaways

1. Integrating wealth and retirement advisory services offers a holistic approach that enhances client relationships and provides new growth opportunities for advisory practices.
2. Specialization and clear definition of advisory roles are crucial for effectively managing both retirement plans and wealth management services, meeting diverse participant needs across different life stages.
3. The future of retirement advisory will require leveraging new tools, technology and financial wellness strategies to stay competitive in a highly dynamic market.

The value proposition of integrating wealth and advisory

For Stephen, his entire practice is built around the integration of wealth and advisory services. “Our practice is essentially a 50/50 split,” he explains. “I handle the retirement plan side and my partner, Sean, focuses on the private wealth side. We’ve grown our business that way because both sides feed each other. I focus on the retirement plan and its participants, and then when participants decide they want to become individual private wealth clients, the handoff is smooth.”

Marc has seen growth in this area too. “A lot has changed over the last five, even two years. There’s a tremendous opportunity to grow new wealth advisory clients by offering a holistic client experience. It allows advisors to touch all aspects of their clients’ financial lives. This gives them greater and more meaningful impact with their clients.”

That holistic approach is also important for Stephen. The transition from asset growth to retirement creates an opportunity for both retirement and wealth advisors to work with plan participants. “Participants are building their assets in their retirement plans — it’s the number one way that people accumulate wealth. The other side of the equation is decumulation, which is where wealth comes in. And, from a business perspective overall, offering both helps diversify revenue, especially in times of pressured margins.”

Specializing, but with a broad base

“It’s easier to start doing this today than it ever has been,” says Marc. “You can look at peers and partners to define the offering to get into that wealth advisory space. But that definition of what you’re trying to achieve and how you want to go about it has to be part of the discussion within your practice.” He adds that “it’s important to think about scalability and growth. Will you offer personalized services, or will you scale with digital services to meet different client demographics?”

Stephen agrees, highlighting the need for expertise in both areas. “Retirement plans are full of moving parts. You have to specialize. Wealth management is the same — you have to be experts on both sides to talk about in-plan assets and speak to participants about their wealth journeys. And as plans get more complex, so do participant needs.”

Marc echoes the need for specialization and sees it as central to defining the advisor’s business model. “We have to have that laser focus on our lanes. Once that’s defined, we need to articulate that to clients. The business model determines client targeting too. Some advisors will target high net worth or C-suite clients, while others target mass affluent or emerging participants. Advisors should look for gaps, as participants are asking for more from their employers, and they are going to need assistance from accompanying wealth advisors.”

Stephen also considers the differing needs of participants throughout their careers. “All participants, whether young or old, face different challenges. Younger clients are focused on things like buying a home or getting kids into college. At the other end of the spectrum, the focus could be elder care, or tax liabilities, or just thinking about when, where, and how do I retire? You have to meet the needs of both ends of that spectrum and treat them equally, regardless of account balance.”

A lot of the process involves advisors gaining new knowledge, learning new skills and engaging with new technology partners. For Marc, this has to be a very deliberate process. “It comes back to the services being offered, how the advisor delivers. It has to be thoughtful. But the push is due to that holistic need, so it is worth it.”

“One of the biggest challenges is scale,” says Stephen. “You have to hone your skills and be very focused, but you need scale. For example, to properly conduct group education meetings you’ve got to utilize technology. You can create efficiencies there. But scaling is challenging because, while as a financial advisor I want to go after that multimillion-dollar account, I can’t neglect the participant that just started two weeks ago and has questions about how to enroll. I have to be efficient.”

The future evolution of wealth and retirement

The retirement advisory industry is constantly evolving, with changing regulation, products and best practices constantly pushing advisors to keep learning. For Stephen, blending wealth and advisory is just another step on that journey. “We’ve gone from a pension environment where everything was done for you, to a defined contribution environment, which is almost DIY. Now we’re seeing the advent of a hybrid environment with lifetime income solutions bridging those two. Advisors need to work with those participants who want to ‘set it and forget it,’ and with those who want to be more hands-on.”

Stephen also believes that plan sponsors can use this integration to differentiate themselves. “Benefits are one of the most important aspects people consider when taking a job. If plan sponsors aren’t focused on this, they’re going to lose the race for talent because people are making decisions around the type of retirement plan available.”

There is no doubt in Marc’s mind that this integration is inevitable. “There’s no denying that there needs to be a concerted effort towards integration. With new tools and digital capabilities, the next couple of years will be very telling. We are better able than ever to work with plan providers to understand participant demographics and find wealth opportunities that can match those, including the delivery of bespoke and specialty retirement planning solutions for HNW and UHNW individuals. That dovetails into financial wellness and differentiated solutions that can help facilitate that broader balance.”

For Stephen, this blend is something of a no-brainer. “It opens the door to so many other revenue generating opportunities — whether that be mortgages, managing private wealth assets for the C-suite, other types of retirement plans such as non-qual, stock plans, or even managing corporate assets. But you’ve got to have an organization that supports those business lines effectively.”

[Like what you’re reading? Subscribe to receive our Retirement insights.]