The number of micro 401(k) plans with less than $5 million in assets will grow to more than 1 million over the next decade, making advisers even more critical to record keepers, according to a new report from Cerulli Associates released Jan. 9.
Record keepers rely heavily on advisers to sell retirement plans, with 57% reporting that 50% to 99% of plans sold in 2023 were sold through advisers, Cerulli said in a new release.
With the expected surge in new micro 401(k) plans from roughly 670,000 in 2022, Cerulli’s expects the role of advisers to become even more prevalent.
Cerulli anticipates that wealth advisers will leverage their relationships with small-business owners to sell them retirement plans, which advisers see as an opportunity to source new wealth management clients.
Some 1 in 4 participants in 401(k) plans who work with a financial adviser found their adviser through their 401(k) plan provider, Cerulli said.
Record keepers of 401(k) plans are taking note, with 83% saying that the percentage of wealth advisers who sell their plans will increase over the next three years.
“Record keepers and plan advisers have always had to collaborate to serve plan sponsor clients best,” said Elizabeth Chiffer, a Cerulli research analyst, in the news release.
As evidence of the collaboration between record keepers and plan advisers, Chiffer cited Cerulli research showing that 83% of record keepers share participant data with advisers.
“The growth of the micro 401(k) market will further the ongoing convergence of the wealth management and DC (defined contribution) plan markets,” she said.
Chiffer added that while record keepers and plan advisers work together, they nevertheless compete to capture rollover assets and build retail relationships. Nearly half of record keepers (48%) share only some rollover business and participant services with plan advisers, she said.
“We expect that record keepers will continue to develop clearer lines of separation with advisers and execute agreements about data sharing, financial wellness and rollover business to help navigate this potentially competitive environment,” she said.
