The 20 Rising Stars of Retirement Plan Advisors 2007 - (Page 5) THE NEW RPA: RETIREMENT PLAN SPECIALIST BY KATE MCGREGOR THE RETIREMENT MARKET has matured and is no longer the sleepy world it used to be. Retirement plan advisors are under pressure to become retirement plan specialists, as plan sponsor expectations continue to rise. Fiduciary concerns, recent litigation and growing anxiety about ensuring the baby boomer population is prepared for retirement have produced a more competitive and anxious environment, with increased shopping, benchmarking and fee turnover among better educated and more knowledgeable plan sponsors. Additionally, the trend toward automation—automatic enrollment, automatic deferral rate increases and plan simplification through the use of Lifecycle, Lifestyle and Targetdate retirement fund options, ask advisors to exhibit more skills than fund selection. “Advisors must move beyond investment analytics and focus on plan design, documenting the process, plan analytics and finding the most cost effective solutions,” said Phil Chirichotti, president of the Center for Due Diligence, an independent consulting and research firm. Today’s advisors need to be prepared to be more hands-on, offer full fee disclosure and be willing to accept a certain level of fiduciary responsibility—the latter opening the door for more liability issues. An advisor with less expertise might not be able or willing to accept this increased level of pressure and liability. But experts say that’s where the growth is. Welcome to the world of the specialist RPA. THE NEW RPA Advisors are sometimes drifting from the retail environment toward the institutional market as they see more opportunity in the institutional space. SEPTEMBER 2007 But they cannot rely on the same skills and may lack new, specific skill and knowledge to properly service both communities. An advisor needs more sophistication to deal with the fiduciary aspects, as well as larger pools of money and more complex investments, including disbursements of funds. “For the advisor community, the whole issue of knowledge and professionalism around the qualified market is a big deal,” explained Merl W. Baker, principal of research firm, Brightwork Partners. Don Trone, founder and director of the Center for Fiduciary Studies “The intent of the law is that all retirement assets be protected under fiduciary care.” A white paper published in May and conducted in 2006 found that among middle market plan sponsors—those with assets ranging from $10 million to $300 million—the most important qualities sought in an advisor are fiduciary guidance and fee transparency. But initiative, expertise, communication and the ability to coordinate services from multiple providers were also indicated by these plan sponsors as “absolutely essential,” according to the study by Brightwork and commissioned by MassMutual Retirement Services. “The era of specialization has arrived,” said the Center for Due Diligence’s Chirichotti. “And sponsors seem more interested in replacing advisors than vendors.” Fiduciary As advisors help plan sponsors select investments for the plan, they must also accept a certain level of fiduciary responsibility—once unheard of in the broker-dealer community. Advisors often help write the Investment Policy Statement—one of the most significant changes in the business today. In the IPS, the advisor avers that based on the goals of the plan, plan size, employee demographic, etc., he recommends the following investments. In the past, the advisor might suggest certain fund categories—small cap, large cap, etc. — but would not recommend specific funds. RETIREMENT PLAN ADVISORS RISING STARS 5
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