Over the years, we have reviewed issues surrounding the adviser-sold qualified plan market and ways that advisers can be more successful in this market. But for many, the defined contribution market made popular by 401(k) plans is not an important part of their practice, for many good reasons. So what are the reasons that most advisers do not focus on DC plans, and why should they consider changing this strategy?

Of the 300,000 or so financial advisers that actively sell and service the investing public, half, or 150,000, manage at least one DC plan. This is an astounding number given that there are only 5,000 that have a least 10 plans, $30 million and three years' experience - which is a minimum to be successful. Additionally, there are only 1,500 true experts who have more than 25 plans or $75 million under management. Selling DC plans is hard - it takes multiple meetings, many months and sometimes years to close the sale to a buyer who is not sure they even want to have a DC plan. More advisers are being forced to become named fiduciaries under ERISA, exposing themselves and their broker dealer to growing liability. Meanwhile, the first few years' revenue is small compared to health care plans or financial planning and wealth management.

Selling points

So why should an adviser not already in an adviser's version of 401(k) heaven - 10 plans, $30 million and three years' experience - even consider attacking the DC market? Because the DC market is hard to navigate - many wealth management and health care advisers as well as financial planners are either dabblers or sit on the sidelines.

Because few competitors sell DC plans, the adviser with a multiple disciplinary practice has an advantage, or a so-called blue ocean strategy. Selling different products to current clients is easier and cheaper than selling new clients current products or services, leveraging administrative staff as well as technology across a greater revenue base.

DC plans are a hedge against bad markets when individual investors pull out their money and refuse to invest - witness the recent Great Recession. Meanwhile, though DC account balances dropped, plan participants continued to contribute, proving the power of automatic payroll deduction. Finally, with continued health reform implementation looming, health care advisers are scrambling to find other sources of revenue.

So do the benefits outweigh the risks? You cannot go a day without reading a survey about how Americans, young and old, are concerned about retirement and not confident that they are properly prepared. As pension plans are available to fewer Americans, with the deficits in the Pension Benefit Guaranteed Corporation, with more state and local governments unable to meet their unfunded pension liabilities, and doubts by younger people about the viability of Social Security, DC and 401(k) plans become that much more important. Employers know that workers not distracted by fears of outliving their savings are more productive, and that older workers unable to retire on time have higher salaries and put greater burdens on health care plans while clogging the opportunities for younger employees. With all these compelling reasons to become a DC plan adviser, do not tread lightly - the liability and short-term money is not worth it. Go hard or go home - there is no middle ground.

A FAREWELL

This is my last column for EBA. I appreciate the opportunity that this great publication and its staff have provided to me, especially Elizabeth Galentine and Brian Kalish, as well the late Robert Whiddon who originally recruited me, and his successor John Ortman. I have been fortunate to have many opportunities emerge since I restarted my business two years ago, which has forced me to make the difficult decision of giving up my post as retirement columnist. Mostly I appreciate the readers who have provided valuable and insightful feedback.

Barstein is founder and executive director of The Retirement Advisor University in collaboration with UCLA Anderson School of Management Executive Education. Reach him at Fred.Barstein@TRAUniv.com.