Financial Planning as Employee Benefit Gains Momentum
Brad Arends, CEO and co-founder of Intellicents, has been a long advocate for making financial planning a tax-free employee benefit just like healthcare, dental and 401(k) plans. He’s mostly advocating for personal reasons, believing it’s the right thing to do, and it makes him feel better. “If I were only a Triple F advisor or wealth manager,” Arends notes, “I would have retired.”
But good intentions do not move markets, although they can start a movement—there must be one of three elements:
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Client demand or competitive advantage and/or
Providing financial planning to all, as Arends advocates, has challenges. Rob Barnett, then head of Wilmington Trust’s CIT business at a pre-COVID RPA Aggregator Roundtable, questioned Arends on how advisors could make money.
Cerulli reports that participants have low confidence in knowing how much to save, where to invest and how to use the tools provided by their record keeper—hardly a surprise. Most want and need an advisor, and the 30% who have a written plan are more confident and successful.
Pre-retirees also want retirement income solutions that offer flexibility and guarantees, according to a recent LIMRA report—something the defined contribution industry has struggled to deliver. Cerulli notes that participants’ greatest fear is outliving their savings, which can lead them to underspend in retirement while worrying about maintaining their lifestyle, healthcare costs and whether they will need to keep working.
The need is obvious. Arends cites research indicating:
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72% do not have a written plan
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78% are living paycheck to paycheck
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50% have credit card debt
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79% think their employer should help
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71% are comfortable getting advice at work
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60% are more likely to stay
“We lead with offering financial planning to prospects,” states Arends. His group moved from being a TPA and record keeper, which they sold in 2015, to Alerus, going from being a regional provider to a significant RPA firm. “Wealth management has become 75% of our top line revenue now.”
Challenges include gaining access to complete data, which can take anywhere from two hours to two months to gather, though Arends thinks artificial intelligence will help. “Once they have the data, our planners can create 40 holistic financial plans per week {using eMoney] and half that if they meet in person.”
The other challenge is getting employees to engage, which depends greatly on whether plan sponsors support the program. Arends notes, “About 10% to 15% are do-it-yourselfers not wanting to pay and will rely on tech alone.”
As healthcare costs explode, with 79% of small to midsize businesses experiencing double-digit increases and one in five by 30% or more, will employers be willing to pay for financial planning? As more of the benefits’ costs are pushed onto employees, can they afford it?
For financial planning to become an essential employee benefit, advisors will have to believe that it will result in more wealth clients. Captrust once claimed that they uncover over $1 million in outside assets in one out of eight meetings, assuming 20% will actually meet, which equates to 2.5%. Recent Fuse research indicates that a majority of advisors convert 6% of DC participants into clients, and larger RIAs more that 17%. Empower recently noted that for every dollar in DC plans, participants have $3 outside those plans.
Michael Kitces noted at a recent Wealth Management EDGE conference that it is getting harder to find investors with $1 million or more without an advisor. Jamie Gorman, former Morgan Stanley CEO, quipped in 2024 that the workplace will become the greatest source of wealth assets over the next decade.
More plan sponsors are demanding that their RPA offer advice to participants and go beyond the Triple Fs, which are expected and commoditized.
So how should advisors go about offering wealth services at work? Arends noted at a Wealth-at-Work conference years ago that his firm needed to buy experienced groups and could not create it organically.
Three groups must cooperate to make this movement take off:
A new group of advisors or financial coaches needs to be hired, trained and managed to deliver these financial plans leveraging data enabled by tech and AI. It’s why Empower bought Personal Capital. Prime Capital leverages managed accounts to deliver advice at scale, meeting one-on-one with employees, charging 30 bps. Edelman Financial Engines is well-positioned, as are aggregators like Creative Planning, Captrust, Hub, OneDigital, Wealthspire and, of course, Intellicents. More RIA firms and broker/dealers are exploring their options.
Cerulli appropriately recommends that advisors and record keepers collaborate rather than compete and reduce institutional friction. Participants value human advice because it is personalized, questions are answered immediately, and it builds confidence—more so than AI, according to a FINRA study. Advisors are also increasingly willing to act as fiduciaries, putting clients’ interests first with compensation structures that do not favor one product or service.
Record keepers bring significant technology, data, call-center capabilities, cybersecurity and scale. While a few have the capabilities and desire to provide participant services independently, most do not. To succeed, providers should partner with advisors, with each leveraging their respective core competencies.
Financial planning as an essential tax-free employee benefit now makes sense, fueled by the convergence of wealth, retirement and benefits at the workplace, as well as client demand. Well-intentioned RPAs who want to help need to go beyond fees, funds and fiduciary duties, just as Arends discovered. They will feel better and generate their own wealth.
