Hybrid Advisors Lead With Retirement and Wealth Mix
For years, retirement plan consulting and wealth management operated as separate businesses. Today, those lines are rapidly blurring. As fee pressure intensifies across the retirement marketplace and clients increasingly seek comprehensive financial guidance, advisors are recognizing that the future belongs to practices that can connect workplace retirement plans with broader wealth management, insurance, tax and financial planning services.
Research by NMG Consulting highlights a rapidly evolving trend. A new segment of advisors is embracing this convergence: the hybrid practice. These advisors derive approximately half of their revenue from retirement plans while maintaining robust wealth management capabilities. By bridging both disciplines, they are emerging as the industry’s most successful model for serving clients holistically and unlocking growth opportunities that enhance both revenues and margins.
The business case for convergence is compelling. NMG’s research shows that retirement-only practices generate average gross margins of approximately 45%, while firms that combine retirement and wealth management achieve margins closer to 52%. Retirement plans provide advisors with access to participants, executives and business owners who often need broader financial planning, investment management, insurance, estate planning and tax guidance, all at a relatively low acquisition cost. Converting workplace relationships into personal wealth relationships unlocks margin expansion that scale alone cannot deliver.
However, higher margins are not driven by simply selling more products. They come from generating more value from existing relationships. Clients increasingly expect their advisor to help them navigate their entire financial lives, not just their retirement plan. Employers are seeking guidance on benefits, financial wellness and executive planning, while participants want retirement income planning, tax strategies, estate planning, insurance and wealth management. Advisors who can address these needs through a single trusted relationship increase revenue per client while reducing the risk of losing assets and relationships to competitors.
Still, convergence is not without challenges. Retirement plans and wealth management require different expertise, service models and technology platforms. Yet staffing alone does not explain the superior economics of hybrid firms. NMG’s research found that the average DC specialist practice employs 12 people, compared with 11 for hybrid firms and 8 for wealth-focused practices. Hybrid firms do not achieve higher margins by building larger organizations. They create better economics by generating more value from every client relationship.
Scaling the model, however, requires more than advisor ambition. It depends on strong partnerships between advisors, their firms and record keepers. Data and analytics are the linchpin. Advisors need participant insights, integrated workflows and engagement tools that help identify opportunities and seamlessly connect workplace retirement with ongoing wealth advice. Without them, convergence remains more aspiration than business model.
This presents a significant opportunity for record keepers. Though they are at differing levels of maturity, firms such as Fidelity, Empower, Principal, Schwab and Voya are investing in participant analytics, financial wellness, retirement readiness and technology designed to help advisors deepen participant relationships. The real differentiator, however, will be their ability to turn retirement plan data into actionable wealth opportunities.
Advisors will increasingly gravitate toward record keepers that help them grow not only their assets but also the profitability of their practices. Those that provide actionable insights, open technology and advisor-friendly workflows that systematically convert workplace relationships into long-term wealth clients will become indispensable partners.
Ultimately, the competitive advantage will belong to firms that maximize the value of every client relationship, not those that simply maximize the number of relationships they serve. Hybrid advisors have demonstrated that expanding from workplace retirement into broader wealth advice is one of the most effective ways to improve margins while delivering better outcomes for clients. Record keepers that enable that model will become indispensable partners in advisor growth.
