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Barrer will apply his 32 years of ERISA retirement plan experience for dead reckoning navigation of 'yet to be determined' liability under the new fiduciary rules
November 3, 2016 — 5:45 PM UTC by Sarah O’Brien
Brooke's Note: If you seek hard evidence that our understanding of how the DOL rules will play out is soft, have a look at the whirlwind of personnel moves going on with ERISA experts being granted unprecedented power and opportunity. Andy Sieg replacing John Thiel at he helm of Merrill Lynch was the mega-example. See: Using DOL as cover, Bank of America cuts the Merrill Lynch bull as it adds a robo, stops paying brokers to stick around and kicks John Thiel upstairs Here is a wee $11 billion case.
In 1943, the Federal Home Loan Bank System created Pentegra Retirement Services to deliver a defined benefit pension trust, namely the Savings Association Retirement Fund. Now, thanks to another government-sponsored push to safeguard the retirement savings of Americans, Pentegra is poised for a major push into the TPA market, this time with a laser focus on recordkeepers and investment advisors.
David Barrer will lead the charge as newly created national director of T.P.A. (third-party claims administrators) markets at the White Plains, N.Y.-based company, which has $11 billion in assets under management in the retirement plan marketplace.
With 18 regional directors under his command (he was a regional director himself before his promotion) Barrer is on the hunt for new assets as advisor firms and recordkeepers scramble to meet the requirements of the Labor Department’s fiduciary rule, which goes into effect in April. The rule mandates that retirement savings are managed in the best interest of clients. See: Why Obama and the DOL are all wet when it comes to the proposed fiduciary rule.
Barrer, Pentegra and industry watchers expect the need for fiduciary outsourcing to increase among advisors and recordkeepers as they seek to minimize fiduciary legal liability by handing it to a company whose raison d'etre is doing just that for the last 63 years. See: Capitalizing on 'unintended consequences' of DOL changes, Ken Fisher pounces on a fat-margin 401(k) opportunity
We recently had a back-and-forth with Barrer about his new responsibilities and Pentegra’s bigger push into the TPA space.
RIABiz: Is this a newly created position for the company? And how does your experience at your previous position prepare you for your new responsibilities?
Barrer: Yes, this is a new position for Pentegra and I’m excited about the opportunity. Our sales force is designed for 18 regional directors who work with advisor and recordkeeper representatives across the country. My job is to expand those opportunities for both Pentegra and for our recordkeeping partners. I first began working with ERISA retirement plans in 1984 so I have been preparing for this role with Pentegra for roughly 32 years. In 2012, my business partners and I merged our TPA operation with Pentegra and it is my experience working with our TPA operations team and my career-long interaction with platform recordkeeper firms such as Transamerica and Empower and Nationwide that also prepared me to expand our TPA services throughout the industry. See: The second-largest 401(k) provider drops 'Great-West' for 'Empower'
RIABiz: How did the impending DOL fiduciary rule factor into this new direction for Pentegra? How does the rule create new market opportunities?
Barrer: Pentegra was founded in 1943 and has continuously served as the principal fiduciary for our clients’ retirement plans. So while the new rules help further define the fiduciary role it does not factor specifically into a new direction for us. With increased emphasis on fiduciary governance, we believe that the conversation is shifting not from whether or not a service provider acts in a fiduciary manner but rather, what is the depth of the fiduciary services they provide.
RIABiz: With your focus on recordkeepers and advisors, what sorts of differences will Pentegra face when offering their services to them, versus to, say, community banks, which appear to be the bulk of Pentegra clients?
Barrer: We –Pentegra -- expanded into the TPA world with the acquisition of the ABG-Carolinas company in 2011 and with the company I co-owned, Advanced Pension Solutions, in 2012. Both of those companies worked and collaborated with recordkeepers and advisors for decades. Also I want to point out that the portion of our company working with banks has also worked mostly through advisors for years as well. I have relationships with recordkeepers and advisors that span my 30-plus years in this business. See: Two years after the $199 million FolioDynamix sale, Aaron Schumm jumps back in the B2B RIA game but not to compete -- yet
RIABiz: Investment advisors, for instance, operate under different rules and regulations from community banks. Will that difference in regulatory structure present challenges?
Barrer: No. Again, we have been working with advisors for many years.
RIABiz: What market segment are you targeting? i.e., small, midsize, large? How big of a market are we talking about?
Barrer: Short answer – yes small, midsize and large. Our recordkeeper partners are increasingly being asked to deliver a fiduciary solution. This includes plans of a few million in assets and under 100 participants to plans with hundreds of millions in assets and thousands of participants. The truth is, HR professionals are being asked to do more with fewer resources all across our country. Our ability to serve as the plan administrator for our clients provides relief not only operationally -- tasks and participant events -- but legally -- fiduciary liability. See: One-Man Think Tank: Yes, advisors, there is a way to cope with fiduciary liability
RIABiz: Some industry pros have expressed concern about the increased potential for lawsuits as a result of the DOL fiduciary rule. New regulations always bring new concerns of legal liability, but is this particular rule any more legitimately troubling than any other new rule?
Barrer: I think the best answer is that it is yet to be determined. The rules are new. Some of the biggest names in the ERISA legal industry are just now interpreting what effect they will have. Certainly, the financial advisor industry is more immediately affected than we on the administrative side are or likely will be. Phyllis Borzi [DOL assistant secretary in charge of the Employee Benefits Security Administration] specifically stated [at the ASPPA’s annual conference] that DOL’s intention is to concentrate on helping the industry comply and not to immediately bring actions against firms and individuals. Now, in the past year we have seen an increase in fiduciary lawsuits specific to the investment side of the industry and yes, I personally believe those will continue to expand.
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