Joe DeSilva says ADP has been on the “advisor” journey for a while.
The payroll behemoth—ADP processes the paychecks for one in six Americans—is also a plan recordkeeper to about $59.5 billion in retirement assets through its Retirement Services Division.
In terms of number of plans, ADP Retirement is a perennial top ten provider, with about 47,600 plans within its universe, covering about 1.5 million participants.
DeSilva, who is the general manager of ADP Retirement Services, cannot underscore enough the value plan advisors play not only for the division he helps run, but for the country’s retirement landscape as a whole.
“Ten years ago we saw a lot of advisors enter the 401(k) world,” said DeSilva. “But they weren’t focused on the space and they didn’t have all the expertise needed to help sponsors and participants get to where they need to be.”
DeSilva thinks there is no faking being a 401(k)-centric advisor. He says that’s why ADP has basically moved out of the generalist advisor space when it sets out to market and partner with advisors.
“In the generalist population, people weren’t focused on the business the way we wanted them to be, and the way we were designing our back office support to offer,” added DeSilva.
ADP Retirement is likely not the only record keeper that prefers the 401(k) specialist market to generalists.
But DeSilva does think the company’s position as a payroll and human resource market leader gives it unique capabilities to mine participant data and sponsors’ expectations that inform the products and support ADP gives advisors.
“We’ve heard for years that recordkeeping is a commodity,” said DeSilva, who does not count himself among that crowd.
“But we know that advisors drive this market place. When we design our platform for sponsors and participants, we’re also thinking about what products best support advisors to deliver for their clients. The process has to be as effortless as possible for all—including the advisor.”
DeSilva says the business of recordkeeping has become fiercely competitive. That has benefited sponsors and participants, and, he also thinks, the most competitive of the advisors serving them.
That reality is certainly being borne out in the per-participant cost of recordkeeping.
NEPC, a Boston-based consultant to plan sponsors, recently published a report showing recordkeeping fees are now at all-time lows, at an average of $64 per participant. That’s down from $70 last year, and a notable decline from the average of $118 per participant in 2006.
The report speculates that there is no more room for the fees to drop, which would mean growing a recordkeeping business is going to depend on taking business from incumbent providers, and tapping the vast segment of smaller plans that don’t provide a plan.
Key to competing in that climate will be the quality of service and products recordkeepers deliver to advisors, the very gatekeepers to the future of the recordkeeping business, thinks DeSilva.
“If you are going to survive you have to be actively delivering and proving your value proposition as a recordkeeper,” he said.
“Relationships with advisors are critically important,” he added. “But there is a high demand for their attention. You absolutely have to be able to differentiate yourself.”
That means creating and communicating a value proposition, and most importantly, delivering on it.
“A lot of people do relationship well. But it’s only the recordkeepers that are delivering value for advisors that have a chance going forward.”
That value has to extend beyond the products record keepers deliver, and include the willingness to service advisors long after a plan’s point of sale.
The company’s experience delivering what it calls “human capital management” to more than 630,000 clients worldwide lends insight that DeSilva says his team channels in the Retirement Services Division.
That’s resulted in a product suite that can give advisors the type of tools the largest sponsors benefit from (the majority of ADP’s plans have less than $10 million in assets, but they do have clients in the large-plan market, he said.).
Implementation of a plan and enrollment are areas in which DeSilva thinks ADP can continue to distinguish itself among advisors.
He also says new compliance and “task tracker” tools can help advisors better help sponsors meet their fiduciary obligations.
And enhanced communications programs have leveraged ADP's overall expertise in that area.
While DeSilva says the Retirement Services Division also competes for sponsors that don’t use ADP’s payroll services, those sponsors that do use both can benefit from product and technology synergies.
ADP’s proprietary SMARTSync platform is software that allows payroll and 401(k) plans to effectively communicate with one another.
“That saves clients time and money spent on plan administration and it can reduce fiduciary risk,” explained DeSilva. “It speeds up operational processes by eliminating the need for manual and redundant data entry and it’s proven in its ability to deliver accurate data on participants.”
That means less work and greater compliance efficiencies, he said.
All necessary evolutions to stay relevant, with not only with participants and sponsors, but the advisor-specialists DeSilva is convinced will drive the market going forward.
“When you sell a recordkeeping deal, the advisor to the plan is as much the client as the sponsor and participants are,” he said.