A new study by Cogent Research found that although 52 percent of the estimated 315,000 U.S. retail investment advisors support at least one 401(k) plan, only 7 percent of those advisors are heavy plan producers, with $25 million or more in 401(k) assets under management.
On average, heavy producers support 30 plans, compared to an average of 11 among moderate producers, worth between $5 and $25 million, and five among light producers, worth less than $5 million, according to the 2011 Retirement Plan Advisor Trends report. The report is based on the results of a survey of 523 defined contribution plan producers with a minimum of 5 percent of total assets under management invested in 401(k) plans.
The average plan managed by a heavy producer is $4.2 million, compared to $1 million for light producers and $3 million for moderate producers.
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"There is no doubt that heavy 401(k) producers are more successfully targeting larger plans," says Cogent Principal John Meunier. "As a result, these advisors compete with retirement plan consultants for the upper tier of their business. However, more than two-thirds of plans they support have less than $5 million in plan assets, so the lion's share of heavy producers' competition is still coming from other retail advisors."
Cogent found the highest concentration of heavy 401k producers within the RIA channel, where 39 percent of advisors who sell 401(k) plans report $25 million or more in 401(k) plan assets. The result is an average $76 million of 401(k) assets under management for all RIA plan producers, four times the average $19 million of 401(k) assets under management for plan producers overall. The second highest concentration of heavy producers can be found within the National Wirehouse channel, where one in five (18 percent) plan advisors control $25 million or more in 401(k) plan assets. The proportion of heavy 401(k) producers in the regional and independent channels is 8 percent and 10 percent respectively.
In terms of expected growth, light and moderate producers expect to add about three plans over the next year, while heavy producers plan on adding about six plans over the next year.
"What is interesting when we dig into these numbers is the fact that non-RIA channel producers are predicting much higher growth rates next year," said Meunier. "To me, this suggests that the advisor-as-retirement-specialist model is spreading and swiftly being adopted across all advisor channels."
Cogent provides custom research, syndicated research products, and evidence-based consulting to leading organizations in the financial services, life sciences, and consumer goods industries.
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