Specialist retirement advisors will continue to increase their market share of retirement plans, according to Joe Masterson, a senior vice president and chief sales and marketing officer at Diversified.
According to a Diversified report, the market share of professional retirement plan advisors in the $10 million to $500 million market, a targeted segment, will grow to 40% from 25%, and the number of plan advisors will increase by nearly 50% during the next three years.
To support this growth, firms will need to focus on recruiting and developing talent, as the pool of qualified candidates may not be large enough to meet demand.
Thousands of advisors generate some revenue from retirement plans, but the number focused primarily or exclusively on mid-sized to large plans is estimated at approximately 550 professionals. With an increasing number of health and welfare advisors and wealth management advisors poised to migrate toward this market to enhance their practices, the industry is about to embark on a new era of growth and development.
Masterson also said:
Achieving retirement readiness will become the most important criterion in selecting a retirement vendor. Clients will ask, How are you going to help my employees reach a fully funded retirement?
A 10% deferral will become the new industry goal, up from the current 7% average deferral.
Custom target date solutions will see greater utilization across all segments of the market. Advisors will be hired to design a custom glide path fund lineup to match the employer’s demographics.
Higher education institutions will move from annuity products. The replacement: open architecture independent third-party custom recordkeeping solutions.
Fund revenue equalization will be widely-adopted. The goal will be to address fairness of fees issued for passive and active investors, avoiding possible litigation.
Paul LaPiana, the senior vice president of individual distribution, at MetLife said product manufacturers will roll out significant product pricing and design changes in 2013.
Those changes will result from the sustained low interest rate environment and the potential for regulatory changes.
Given the low interest rate environment, which is predicted to remain low for the next four to six years, and regulatory changes that are on the horizon, we predict that manufactures will shift away from some of the products that have been staples of the industry for the past decade. That includes no-lapse guaranteed life insurance.
Less capital intensive products like cash-value life policies will gain ground. This will significantly alter the way that financial planners sell products and work with clients to help build financial security.
LaPiana also said:
Product manufacturers will focus on having the right product mix. In the current economic environment, manufacturers are keenly aware of the need to manage morbidity, mortality, interest rate and equity risk. Therefore, they will work hard to ensure they aren’t increasing their risk profile by taking on too many long-term liabilities. They are looking to diversify their product mix to achieve the right risk profile and achieve the right returns, and will look to financial planners to help them achieve this.
Financial planners will focus on tax-efficient ways to meet their clients’ wealth accumulation needs. Given the potential for tax changes in 2013, financial planners have the opportunity to work with their clients to develop holistic plans that meet their wealth accumulation needs in a tax-efficient manner. Clients can only allocate so much of their income to qualified plans – once they have maximized their contributions, financial planners will need to refocus their accumulation strategies on opportunities that provide tax deferral options.
Such options include traditional variable annuity and indexed annuity products without riders. Properly owned and designed life insurance is another way for clients to reap the benefits of tax deferral while accumulating wealth for retirement, education funding or other long-term needs.
Joe Hurley, the founder of SavingForCollege.com said that more fee-based share classes in 529 plans will become available. The trend towards offering no-load share classes in advisor-sold 529 plans, to better accommodate fee-based planners, will continue.
He also said that:
Asset levels in 529 college savings plans will increase. The combination of heightened concern over student debt, higher tax rates on non-529 investments, and operational efficiencies (such as omnibus accounts) will lead to an acceleration in contributions to 529 plans.
There will be increased client awareness and interest in 529 plans. New crowdfunding services will inject a viral component to the marketing of 529 plans. As a result, more clients will be looking for professional advice in selecting and managing their 529 plans.
