The retirement industry is changing rapidly and profoundly. How can TPAs and record keepers adapt and remain relevant? An interactive workshop session at the 2016 ASPPA Annual Conference Oct. 24 explored emerging opportunities for business development and expansion.
Led by speaker Scott Betts, SVP at National Benefit Services LLC, the 100 or so attendees identified a wide range of opportunities that exist today:
3(16) fiduciary services. Certainly a growth area, currently offered by about 10% of attendees. With a long list of services in this area, the key is to determine what clients need, and then determine which services you can do well. Also a key: having strong workflow and controls.
Fiduciary consulting and training. Fewer than 10 attendees are now in this area. This is another growth area, with fiduciary training in particular demand. Other opportunities exist in helping plan committees with facilitation and due diligence tools like calendars, checklists and workflow.
DB/cash balance plans. About two-thirds of attendees are in this space, working with an actuary by outsourcing, through partnerships or adding an in-house actuary.
Non-qualified deferred comp plans. Just a few attendees are in this space; several agreed that the opportunity is growing but employers are not moving in that direction. Using an attorney is key, via outsourcing, partnering or adding in-house counsel. One good way to gain knowledge in the NQDC, DB and cash balance areas, Betts recommended, is to pursue the QPA credential.
Governmental and non-profit markets. About 10% of attendees indicated they’re in both spaces, with about 30% in the 403(b) market. The opportunity here lies not in the creation of new plans, Betts noted, but in the growing use of multiple providers in the wake of the 2009 403(b) regulations.
ESOPs. About 10% of attendees are now in this space, but the barriers are coming down. In particular, the volume submitter program has diminished the need for legal help with an ESOP, though an attorney is still needed. Increasingly, ESOPS are seen as a tool for transitioning to the next generation of ownership.
Boutique services. Betts suggested a range of services for creating new opportunities, including participant communications, plan audit support, pre-retirement education, fee and service benchmarking, advanced plan design, customer support, health care plan compliance and reporting, flex plans, payroll and Health Savings Accounts (HSAs).
Industry focus. Just a few attendees indicate that they focus on clients in a particular industry, like law firms, family medical practices, tech firms or transportation companies, for example.
New geographical focus. Opportunities exist in expanding your practice to another area or region. But it’s important to do your research first. Look at competition/market saturation, number and size of businesses, and whether the local economy is growing or shrinking. Then gauge the new capabilities that will be needed, like a local or traveling sales force and a local or remote service team.
Growth via acquisition. The key here, Betts advised, begins with knowing what your end game is and building a realistic strategy to achieve it. The acquired firm must be a strategic fit in terms of geography, culture and operations. And you must be prepared in terms of appropriate levels of capitalization and financing. Finally, he said, the opportunities that an acquisition creates must be a good fit financially.
Betts noted that in pursuing any of the opportunities that were discussed, it is important to ensure that you remain in compliance with ASPPA’s Code of Conduct – especially the sections regarding compliance (Sec. 4), professional integrity (Sec. 10) and qualification standards (Sec. 11).