RIAs Set Sights on $4 Trillion 401(k) Business

A growing variety of platforms, like Skip Schweiss’s TD Ameritrade retirement plan platform, help independent wealth managers capitalize on their advantages in serving smaller plan sponsors.


As thousands of wealth managers have left big banks over the past decade to become independent registered investment advisers, custodians and service providers have responded with tools to enable them to serve affluent families on a par with their former employers. Now firms that cater to RIAs are seeking new opportunities to help their clients win more business. Perhaps no prize is more enticing than the U.S. defined-contribution-pension space, whose total assets exceed $4 trillion, according to the Arlington, Virginia–based American Society of Pension Professionals & Actuaries.

Large corporate sponsors can negotiate 401(k) plans that are tailored to employees’ needs and offer a high degree of service, but small and midsize plans are often expense-heavy and service-light. Many RIAs already work with families who own companies that act as plan sponsors, and they can choose from a growing variety of products that make them more competitive with banks and other major retirement services firms.

“We have been acting as a custodian for RIA-directed defined contribution plans for almost 20 years,” says Skip Schweiss, who oversees TD Ameritrade Institutional’s Retirement Plan Services platform and is president of Denver-based TD Ameritrade Trust Co. “Yet we discovered over time that fewer than 10 percent of the RIAs we had as clients were doing business in the retirement plan space.” Last fall Schweiss and his team polled advisers and found that plan management — everything from administering regulatory expenses to choosing recordkeepers — was onerous for smaller RIAs. Also, many of the 300 respondents noted that plan sponsors were skeptical of using an independent provider, even when they had a personal relationship with the adviser.

Introduced in January, TD Ameritrade’s offering handles plan sponsors’ recordkeeping, ERISA regulatory requirements and service needs while allowing independent advisers to be full fiduciaries and manage the plan’s investment options. Independent RIAs have key competitive advantages in the small and midsize plan space, according to Schweiss. “In all likelihood, they have business owner clients already, and they can go to them and say that they can provide a better product at a lower fee,” he explains. Schweiss says many advisory firms on TD Ameritrade’s custodial platform that weren’t pursuing retirement plan business have embraced the new program.

Paradigm Financial Advisors, a Des Peres, Missouri–based RIA with more than $300 million under management, entered the defined-contribution space in 2012. “We consistently reviewed individual client 401(k) accounts and saw that many were poorly constructed and fee-intensive,” says wealth manager Ryan Powers. Paradigm president and CEO James Reding managed U.S. chemicals and biotech giant Monsanto Co.’s 401(k) program for six years before going out on his own in 1999. The firm, which uses the Retirement Plan Access platform offered by Malvern, Pennsylvania–based Vanguard Group, focuses on plans with at least $10 million in assets but also works with smaller clients.

Envestnet Retirement Solutions, a division of Chicago-based Envestnet, a unified managed account provider with $196 billion in assets and an additional $376 billion managed by banks and brokerages using its custodial and execution technology, is also pursuing new entrants like Paradigm. ERS group president Babu Sivadasan says his firm’s program, which launched in February, allows advisers to work with multiple recordkeepers and custodians to accommodate individual plan sponsor preferences. Like TD Ameritrade’s platform, it aims to help RIAs cut costs for plan participants by lowering administrative fees.


Industry observers want to see defined-contribution-plan participants save more and choose appropriate investments. Between 2007 and 2009, when equity market declines were already slashing fund balances, median contributions to 401(k) plans by workers aged 50 to 64 fell 9.3 percent, according to the Center for Retirement Research at Boston College. An independent adviser can meet with employees individually and determine each one’s risk tolerance, an exercise that would be impractical for a big administrator. It comes down to educating participants and key decision makers, says Paradigm’s Powers. “Employees need to fully understand the options available in their plan and the importance of saving early in their careers.” • •