by CHRIS KARAM, CIMA®
Chief Investment Officer

As Published in InvestmentNews – RPA Convergence
(See publication here: https://www.rpaconvergence.com/investment-officers-retirement-adviser-business/)

Nearly every corner of the defined-contribution ecosystem is benefitting from advancements in technology and ongoing regulatory and legislative actions. Yet one critical stakeholder group – chief investment officers – may soon find itself tackling new challenges.

It has been well documented that new financial technologies have broken into the defined-contribution space. That includes: technology surrounding managed accounts; offering multiple qualified default investment alternatives; retirement income; digital financial planning; and financial wellness solutions. When you add recent regulatory advancements in the areas of retirement income, guaranteed insurance products and the ability to offer private equity as an asset class, the next generation of DC plans could truly offer Americans a multigenerational savings and spending experience. That is, if the current DC ecosystem can realistically support a growing number of use cases.

As the DC world turns, all its stakeholders will need to move in sync. Investment officers play a critical role, developing investment menus with a balance of active and passive managers supported by sophisticated selection and monitoring processes and investment scoring systems. Investment offices excel at analyzing problems and creating solutions. But we should ask ourselves what we are solving for in this new paradigm.
The future investment office for retirement plan advisers will need to incorporate specializations such as asset allocation, portfolio management and retirement income. These will be crucial to helping investors across the saver-to-spender spectrum, as they seek advice from their retirement plan consultant.

Broadening the scope of the investment office could also trigger a series of complex business decisions for the RPA marketplace. An internal assessment could include whether the firm has the budget or profitability to reinvest resources into an expanded investment office. Perhaps an opportunity presents itself to merge with or acquire a wealth management team, or maybe a key hire or two would fit the bill. Moreover, what skill sets should the RPA seek in adding staff? Would expertise in private equity and credit be desired, or a designation in retirement income planning be preferred? These human resources and expertise may not come as affordably as the current budget dictates. What about outsourcing a portion of your investment office to create a cost/benefit winner in the short run, while preparing for a long-term solution?

RPAs should know that going to the same investment office well asking for a broader array of solutions layered on the DC plan chassis may have its limits. A full generation of retirement plan adviser team members may not yet have been exposed to the performance accountability associated with portfolio management, asset allocation rigor or solving for retirement income. These areas of expertise could become the key differentiators for advisers and consultants.

The long-term planning of an RPA’s investment office should begin immediately if it has not already.

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Important Disclosures:
The information given herein is taken from sources that IFP Advisors, LLC, dba Independent Financial Partners (IFP), IFP Securities LLC, dba Independent Financial Partners (IFP), and it advisors believe to be reliable, but it is not guaranteed by us as to accuracy or completeness. This is for informational purposes only and in no event should be construed as an offer to sell or solicitation of an offer to buy any securities or products. Please consult your tax and/or legal advisor before implementing any tax and/or legal related strategies mentioned in this publication as IFP does not provide tax and/or legal advice. Opinions expressed are subject to change without notice and do not take into account the particular investment objectives, financial situation, or needs of individual investors.