Prospecting

High-growth wealth managers focus on retirement plan participants

Jason Carlough

October 31, 2024

KEY TAKEAWAYS

  • Firms are accelerating their efforts to build relationships with plan participants.
  • One in 10 participant meetings uncovers a new wealth prospect.
  • Advising more retirement plans leads to greater potential wealth opportunities.

Forward-looking financial professionals are focusing on the convergence of wealth management and retirement plan business. 
 

In early 2024, a Capital Group benchmarking study showed that high-growth financial professionals were more likely to have 25% or more of assets under management (AUM) in defined contribution plans. They were also 23% more likely to have a strategy for transitioning plan participants into prospects for their practice.
 

Following that report, in June 2024, Capital Group hosted and sponsored the Retirement Leadership Forum for its top broker-dealer partners. There, executives from 15 firms confirmed that a focus on converging wealth and retirement plans is key. Eighty-two percent of firms have accelerated their efforts to build wealth relationships with plan participants in 2024. This is a marked shift from 2023, when retirement plans were largely considered a “sidecar” business. 

Two-panel graphic. The left panel, labeled “2023: Acknowledging a growth opportunity,” shows two buildings, one labeled Retirement and the other Wealth. Between them, text reads, “Retirement largely a ‘sidecar’ business. Lacking the ‘business case’ to build wealth relationships with participants.” The right panel, labeled “2024: The foundation of a bridge,” shows the same Retirement and Wealth buildings with a dotted line connecting them. Between them are icons signifying money, time, people and search. Below that is a pie chart that says, “82% of B/Ds have accelerated their efforts to build wealth relationships with plan participants in the last 12 months.”

Source: Retirement Leadership Forum and Capital Group, “Progress in Pursuit of Wealth: Capitalizing on the Potential of the Plan Relationship," July 2024.

Why focus on plan participants?

Retirement plan business offers a rich opportunity for growing your wealth business. Retirement Leadership Forum research shows that in a “typical” $5 million plan, there is more than $7 million in outside wealth opportunity for financial professionals to pursue. And the further upmarket you go, the more compelling the opportunity with a $50 million plan presenting nearly $81 million in wealth opportunity and a $150 million plan over $240 million. 

Capturing the wealth opportunity for participants with $400,000+ in outside assets, 2024

Three-column table showing plan assets, participants and total potential wealth opportunity. For a five-million-dollar plan with 14 participants, the total potential wealth opportunity is 7,390,731 dollars. For a 10-million-dollar plan with 25 participants, it’s 16,739,245 dollars. For a 25-million-dollar plan with 54 participants, it’s 37,723,814 dollars. For a 50-million-dollar plan with 121 participants, it’s 80,764,136 dollars. For a 100-million-dollar plan with 239 participants, it’s 164,946,132 dollars. For a 150-million-dollar plan with 340 participants, it’s 243,951,998 dollars.

Source: Retirement Leadership Forum and Capital Group, “Progress in Pursuit of Wealth: Capitalizing on the Potential of the Plan Relationship," July 2024.

Finding wealth opportunities in plans

Assuming you have plan business, meeting with plan participants is key to uncovering prospects. Our research revealed that for every 10 participant meetings, a financial professional can uncover one new wealth opportunity. 

Real-world examples of wealth opportunities uncovered, by plan size, 2023

Illustrated building labeled “Leading financial firm” with arrows pointing to two different piggy banks. One piggy bank is labeled “Medium to large plan” and has an arrow pointing to 10 people with one highlighted. Beneath them, text reads, “Every 10 participant meetings uncovers a one-million-dollar prospect.” The other piggy bank is labeled “Small plan” and has an arrow pointing to an identical group of 10 people with one highlighted. Beneath them, text reads, “Every 10 participant meetings uncovers a 400,000-dollar prospect.”

Source: Retirement Leadership Forum and Capital Group, “Progress in Pursuit of Wealth: Capitalizing on the Potential of the Plan Relationship," July 2024.

First step: Advise more plans

For the financial professional seeking greater wealth opportunities, a good first step could be advising more retirement plans. As you add more plans, you gain the opportunity to meet more participants.

 

In a hypothetical scenario where you add just two 30-participant plans a year, by the end of 10 years, you could have a 600-participant opportunity set.

Graphic showing the evolution of a book of business in Year 1, Year 2, Year 3 and Year 10. Each year has an equal number of “Takeover” plans (2.5 million dollars in assets, 30 participants, $150,000 in annual contributions) and “Startup” plans ($0 in assets, 30 participants, $150,000 in annual contributions). In Year 1, there is one of each (2 plans, 2.8 million dollars in new assets, 60 plan participants). In Year 2, there are two of each. In Year 3, there are three of each. Fast-forward to the end of 10 years, and there are 10 of each (20 plans, more than 60 million dollars in new assets, 600 plan participants).

For illustrative purposes only. Not intended to portray an actual investment. Assumes 8% average annual asset growth, a $2.5 million asset transfer from a takeover plan each year, and $150,000 in new annual plan contributions from both plans every year.

Reach out for help

If you’re interested in retirement plan business and turning participants into prospects, your Capital Group team is here to help. Reach out any time for guidance and resources to help you expand your opportunities in retirement plans and wealth. 

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Jason Carlough is a retirement plan counselor with 23 years of industry experience as of 12/31/23. He holds a bachelor’s degree in business and economics from Lafayette College.

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