FT 401: complete list of the top US retirement advisers
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When financial markets tumbled in March, there was little panic among the investors in defined contribution retirement schemes such as 401(k) plans. Fidelity Investments, one of the largest administrators of DC plans, says that from late February to mid-May — by which time markets were recovering — just 7.4 per cent of the 25m retirement accounts it oversees even changed their mix of riskier and safer assets.
It seems that most employees held their nerve amid the stock market collapse and remained focused on long-term retirement investing aims, in part thanks to the support provided by the financial advisers who guide these DC plans. Their counsel, often offered through virtual meetings and telephone conversations, kept many investors from bailing out and missing the subsequent market rebound. “I think participants have learned to deal with volatility a little better,” says Harris Nydick, a founding partner of CFS Investment Advisory Services, of Totowa, New Jersey. Recently, he has even seen some employees increase their regular contributions to DC plans as markets have risen higher.
Last year saw strong growth in the fortunes of many firms included in the FT 401, the Financial Times’s sixth annual list of top DC plan advisers in the US. FT 401 advisers managed an average of $2.01bn in DC plan assets across corporate, non-profit and government employers at the end of 2019. That is 22 per cent higher than the $1.65bn averaged in last year’s FT 401 listing thanks to more clients and rising financial markets in 2019, ahead of this year’s volatility induced by the coronavirus pandemic.
Anxiety among the employers sponsoring DC plans has also meant more demand for advice on retirement schemes. While some companies responded to this year’s events by temporarily suspending the matching contributions they make to employees’ retirement plans, 81 per cent of the plans advised by the FT 401 left those contributions unchanged.
Even before the pandemic hit, companies knew that financial stress can hurt productivity and were putting more effort into helping workers with retirement and personal finance. As a result, more workplaces offer “financial wellness” programmes along with DC plans, intended to educate workers about saving for retirement, managing debt, and other basics of personal finance.
The Employee Benefit Research Institute found that more than 70 per cent of employers already offer or are starting to offer such financial wellness programmes. These often include websites, apps, checklists and personal coaching for staff. Employees are now taking more advantage of these programmes than in previous years, possibly a side effect of the lockdowns necessitated by the pandemic. “This is the era of very little distraction. We didn’t have sports, socialising or movies, so people have time to focus on their finances,” says Stephen Oliver, founder of Manhattan Ridge Advisors.
It can be hard to offer the apps and virtual meetings that come with helping implement these programmes on top of traditional services — which themselves have been complicated by the shift to remote working.
While FT 401 advisers say they have had little problem maintaining existing client relationships, 85 per cent of them say the lack of in-person meetings has hurt their ability to meet prospects. It can be hard to offer the apps and virtual meetings that come with helping implement these programmes on top of traditional services.
As a result, the main challenge facing the FT 401 this year is acquiring new clients, cited by 46 per cent of advisers as their biggest concern. That edged out the pressure to lower fees, which was cited by 42 per cent of advisers as a challenge.
On the other hand, plan advisers have found that the need to embrace new ways of working has enabled them to hold more remote meetings with individual plan participants, both in groups and one-on-one. Some 94 per cent of FT 401 advisers expect to continue doing more remote meetings with investors even after the pandemic fades — including 30 per cent of advisers who say that at least one-quarter of those meetings will remain virtual.
Geographical boundaries mean less and less to plan advisers, particularly the larger ones. The median adviser in this year’s list has two office locations, and one-quarter have three or more locations. That is to be expected when 78 per cent of the advisers work in teams.
This year’s FT 401 advisers hail from 41 states and Washington, DC. The FT 401 is listed state by state, and states with higher populations understandably have more advisers on the list. California leads the way with 47, followed by Texas with 36 and Massachusetts with 27.
The methodology behind the FT 401 is explained fully at the foot of this list.
The FT 401 aims to provide a list of elite professionals who specialise in advising US employers on their defined contribution plans. The advisers were assessed according to quantifiable data, using the following methodology.
The Financial Times and Ignites Research, the FT’s sister company, contacted large US brokerages, independent advisers and other wealth managers to identify qualified applicants. Our research partner, Broadridge Financial Solutions, provided data that helped to identify advisers specialising in serving DC plans, including 401(k) plans and other DC accounts.
Applicants were required to advise at least $75m in DC plan assets and have at least 20 per cent of their client assets in DC plans. The qualifying advisers completed a questionnaire about their practice, and we added that information to our own research.
The formula the FT uses to grade advisers is based on six broad factors and calculates a numeric score for each adviser.
The factors were:
DC assets under management (AUM). This signals experience and success in managing money in 401(k) programmes and other DC plans.
Growth rate in DC plan business. Measured by changes in both DC plan clients and in assets, growth is a proxy for performance, client retention and ability to draw new clients.
Specialisation in the DC business. This is measured by what percentage of the overall assets managed by the adviser are in DC plans and how that concentration has changed.
Experience advising DC plans. This tracks years spent managing DC plan assets through different economic and market environments.
Industry certifications (CFP, AIF, etc). These show technical knowledge that is particularly important in the complicated DC plan industry.
Compliance record. A string of client complaints can signal potential problems.
Among the top factors in our scoring, DC plan assets accounted for roughly 60 to 65 per cent of each adviser’s score, on average. Another 14 to 20 per cent of the score derived from the growth in the adviser’s DC business (as measured in both DC assets and number of DC plans advised).
We present the FT 401 as an elite group because each adviser takes a different approach to their practices and so ranking these elite advisers from 1 to 401 would be misleading.