Financial Advisors: Safeguard your Clients from Robo Advisors

As a financial advisor you manage investments for your clients. With the threat of robo advisors looming large, financial advisors are having to rethink their entire business model. There is a limit to the investment returns that can be generated for a given risk profile. It will also be impossible to beat the robo advisors on the cost front. So what’s the antidote to the robo advisor?

One possible solution is for advisors to sprue up their offerings by partnering with retirement plan specialists, specifically defined benefit plan providers.

How and why is this effective in retaining clients?

  • Tax Savings:It adds another layer to your service offerings. If your clients invested after-tax money, you can now provide a pre-tax solution that lets clients contribute as much as $100,000 to $250,000 each year. The client saves taxes on this amount and there could be significant savings at higher tax rates. It is also a great selling point to close the deal.


  • Actuary certification: All defined benefit plans require the certification of an actuary. When you partner with an actuarial firm, the client becomes a mutual client for both. An actuarial firm like ours will offer services to mutual clients as long as the advisory assets remain with you. If the client explores the idea of moving the assets to a robo advisor, it will mean looking for a new actuarial firm. This is not as easy as migrating to a new investment platform and adds a certain amount of overhead for the clients which will prevent them from jumping ships. Partnering with retirement plan specialists will make your clients stick with you for the long term for administrative reasons.


If you conceptually agree with us till now, let’s elaborate further


What is the ideal client profile?

The ideal client is a self-employed individual or a small business owner. They may not be zipping around in a Tesla, but could have significant free cash flow in the business. Every business owner is always on the lookout for large tax deductions. This is the ideal client to acquire or safe guard because these people are tech savvy and might have already heard about robo advisors and may be contemplating a move soon.

What is the amount of investments possible?

The IRS limits the investments in a 401(k) plan to $18,000 and in a profit sharing plan to $54,000. An individual above the age of 50 can contribute an additional $6,000 as catch up.

Contributions in a defined benefit plan are significantly higher and are dependent on the age and the compensation of the individual. These amounts typically range between $100,000 – $250,000 and higher in exceptional cases.

This strategy also help financial advisors garner assets from the same clients year after year as the clients are looking for the large tax deductions from such plans.


Let’s assume we have a self-employed individual who has been making $150,000 – $250,000 as Schedule C income. We can design a defined benefit plan based on what the highest compensation was in the previous years.





The contribution level will be based on the age of the person, however, the exact amount can be increased or decreased each year depending on how much the client wants to contribute.

What happens if the business has a few employees?

If the business has a few employees the IRS requires the business owner to provide a pension plan for them as well. Contrary to all beliefs, doing this is not that expensive and can work out in the favor of the business owner. Below is an illustration from a real client.







Won’t my burden as a financial advisor increase significantly because of the retirement plan?

Well, not so much, as long as you use platforms for pension plans with employees as that will save you the time of re-designing the wheel. Platforms life American Funds or Nationwide are extremely efficient in accepting profit sharing contributions and enrolling new participants. We as a TPA, shoulder most of the responsibility with regards to the administration and the setup of the plan, leaving the advisor without any burden.

Explore our website for additional information about defined benefit plans. We are currently holding personalized sessions over video conference or telephone in order to answer any questions that you may have or just to get to know each other better. Please email with a time and number and we will fix your appointment. You can also use our online appointment scheduling system to fix a time and date.