Problems? Not For Brokers
By Tom Van Riper
Friday, February 17, 2006
NEW YORK - For decades, the army of stockbrokers at St.
Louis-based Edward Jones & Co. built most of its clientèle
by knocking on doors and relying on referrals from satisfied
But while still going strong, that method is quickly taking
a back seat to a new prospecting wave that allows many of
the firm's 8,700 brokers to see hundreds of potential
clients in one shot. Nervousness over America's corporate
pension woes has sparked demand for seminars aimed at
educating employees on retirement financing options. Edward
Jones became so overloaded with seminar business that it
recently set up a separate in-house function to coordinate
them. Its brokers have pitched to 685,000 people over the
past two years, according to Ken King, principal of the
Employee Education Program.
"We're activating relationships that otherwise wouldn't have
been there," King says.
While scrutiny over biased stock research a few years ago
may have been a scourge to stockbrokers whose business
depends on client trust, the growing apprehension over
corporate pensions has been a godsend.
Business is booming for those financial planners big and
small able to tap into the growing market of workers who are
no longer confident of trusting their retirement to their
employers. And it's not just people at old-line companies
with legacy, defined-benefit pensions. Even those whose
plans are doing just fine are concerned about the trend,
leading them to flock to financial planner's offices for
advice and, in many cases, to open a private account.
"The rank and file public doesn't make the fine distinction
between pension, profit sharing, 401(k); they hear pensions
are in trouble and worry about their own," says financial
planner Joseph Birkofer of Legacy Asset Management in
Houston. "People ask, what is the PBGC [Pension Benefit
Guaranty Corp., the U.S. government's pension bailout fund],
does it back up my 401(k) plan?"
It doesn't, which can lead employees with that type of plan
to worry about their employer's ability to keep matching
contributions. That's particularly true if a company has
recently been slashing pay or laying people off. Meanwhile,
those cashing out of a defined benefit plan are signing up
with planners and brokers, seeking advice on decisions like
whether it is better to take a lump sum or an annuity
payout. Financial education seminars, while not new, are
hotter than ever.
"We've seen a huge upswing in demand for advice," says
Birkofer, a small independent who has brought in 11 clients
investing $500,000 or more over the past year.
Pension Benefit Guaranty Corp. statistics show that the
number of private sector defined benefit plans in the U.S.
has plunged to 30,000 from 112,000 since 1985. Assets in
defined-benefit plans -- plans that promised a certain
payout on retirement -- have dropped to under $1.8 trillion
from $2.1 trillion in 1999, according to the Employee
Benefit Research Institute, despite rising asset values over
the same period. EBRI notes that almost two-thirds of
private sector retirement assets are now held in
defined-contribution plans, which specify only the funds
contributed now, not a retiree's payout. And a recent study
by benefits consultant Hewitt Associates shows that only 38%
of U.S. employers plan to offer a defined-benefit plan by
the end of 2006, compared to 83% in 1990.
Some seminars are designed to educate employees on plan
switches -- usually to a defined contribution from a defined
benefit setup. Others are geared to those withdrawing money
from company plans to invest on their own, fertile ground
for a financial adviser. And the opportunity to present
your goods to hundreds of prospects at a time beats cold
canvassing or word-of-mouth referrals any time.
"It's created an opportunity to have a conversation; more of
our financial consultants are looking at this market," says
Ed O'Neal, vice president of the retirement plan group at
A.G. Edwards. He estimated the company put on 10% to 15%
more seminars over the past year than the year before, as
the environment has created opportunities for the
salespeople to contact plan sponsors and employers to help
secure captive audiences. But brokers are not limited to
using the issue to opening new accounts. Many see pension
troubles as a way to expand their reach into their current
"Some have had these people on their books for years and
never talked to them about [retirement money] before,"
Over at Ameriprise, the financial services group recently
spun off from American Express, pension changes are
improving closing rates for new accounts by as much as 50%,
according to Rusty Field, the company's vice-president of
financial education and planning services. The unit drums
up business both by helping employers implement new plans,
and by giving employees who are withdrawing money a place to
King of Edward Jones, meanwhile, says that while the firm
was already putting resources into steadily growing its
seminar business, the accelerating problems in the defined
benefit pension world "is definitely the driver now."
Indeed, more and more people are deciding that their company
pension is something that needs to be diversified against,
with many wealth managers advising those whose pensions have
done well so far to get out at the top and spread the money
into a mix of stocks, bonds and mutual funds. And for those
already hurt, desperation to minimize losses has them
knocking down the doors of financial planners and brokers
they hope can help salvage some of their retirement funds.
Rebecca Pace, a former Wachovia rep now in private practice
in Cincinnati -- a Delta Air Lines hub -- says about 25% of
her calls over the past year have come from airline families
who are scared stiff.
"More clients are concerned about their pension benefits,
which is prompting them to call," Pace says. "This makes it
ever more important to people to be proactive about
accumulating assets and to craft a financial plan as a
roadmap to manage their own secure retirement."