Cerulli and Morningstar: 63% of surveyed advisers see DC plans as a prospecting priority

Cerulli Associates and Morningstar published a white paper this morning, "Building the Bridge to Wealth," reporting that 63% of an unspecified number of surveyed advisers view leveraging defined contribution plans for wealth client prospecting as at least a moderate priority. The same paper found that advisers, wealth firms and recordkeepers are investing heavily in strategies that turn plan relationships into broader wealth advisory opportunities, which is a statement about where the industry is spending rather than what the spending has returned.

"The lines between retirement advice and wealth advice are blurring," said Donnie Ethier, Morningstar's director of retirement, in the report.

The 63% arrives without a denominator behind it: Cerulli does not say how many advisers it surveyed, and the figure is a self-reported ranking of what matters to a practice rather than a count of what a practice has budgeted. Stated priority and funded priority are different things, so the number is best read as a direction of travel for sales effort rather than a measurement of what the crossover actually earns.

The participant side of the paper carries more detail. Forty percent of surveyed participants reported working with a financial adviser for ongoing financial planning, retirement planning and investment management. Among those without one, 20% said they would like to hire an adviser and 45% said they were undecided. That undecided block is the one a plan adviser should mark, because it describes people who have not ruled the idea out. Advisers, the paper says, see an opportunity to leverage existing plan relationships to provide more holistic financial guidance, which is the intention the 63% figure describes; the participant responses describe something narrower, which is interest paired with a price objection.

Cerulli also asked the participants without an adviser why they had not hired one. Fifty-four percent said they did not believe they were wealthy enough to work with an adviser, and 31% said they did not know where to find one. Separately, 67% said advisory fees are not worth the cost. Those three arrive as separate findings rather than a ranked list, and they do not sum to a single population, which suggests the objections stack: the same participant can doubt the fee and doubt the account size at once.

Fee resistance is the one objection a plan adviser can work on from inside the plan. The relationship already exists, the participant can see what the help is worth before a wealth-management invoice is ever discussed, and the subjects participants said they want support with, budgeting, emergency savings, home purchases and college funding, sit outside retirement projections altogether. Those are conversations an adviser can hold across a participant base rather than one client at a time, which is the practical version of getting paid for guidance inside the plan instead of at the rollover desk.

The ambition numbers run near-universal. More than 90% of participants called maintaining a good quality of life and achieving financial peace of mind at least moderate priorities, and 92% called retirement savings a moderate or major priority. Answers that broad describe nearly everyone, which makes them a weak guide to who will actually buy something. The sharper signal is in the 54% who ruled themselves out on grounds of not being wealthy enough, because the objections the paper documents, account size and fee, are about net worth, while the help participants describe wanting is about cash flow. That is a service line that is cheap to describe and expensive to staff, and it is the one the 54% would have to be sold on.

The paper's logic is funnel logic: a plan relationship is worth what it produces downstream rather than what the plan itself pays. That makes the conversion rate the entire investment case, and a practice that runs plans and never converts a participant is operating a service line at whatever the plan covers and booking the difference as marketing.

A separate study from Crisil Coalition Greenwich, also published this morning, complicates the clean handoff. "Advised and Self-Directed: Winning the Hybrid Wealth Client" found that affluent investors are increasingly combining adviser-led and self-directed accounts, which the study reads as demand for advice models that extend beyond traditional retirement planning. Set beside the Cerulli findings, that suggests a participant who already manages money somewhere without professional help, and who may never present the single-account rollover that a plan book's conversion playbook assumes.

Retention is where the picture thins. Converting a participant is a sales event that can be scheduled around an enrollment meeting; keeping the relationship is a service business that has to survive a drawdown and a tuition bill. Decumulation work, Social Security claiming, income floors, the shift from saving to spending, is the durable part of that relationship, and none of the surveys described here measure how many participants ever get it.

None of the figures Cerulli released describe an actual conversion from participant to wealth client. The paper measures what advisers say they prioritize and what participants say holds them back, and the bridge in its title remains unmeasured. The number worth carrying into a later edition is the one this one does not have: how many of the undecided 45% ended up in somebody's book.