These Secure 2.0 Provisions Provide the Most Value to Your Clients

What You Need to Know

The Secure 2.0 legislation has created opportunities for deeper planning discussion with existing clients while also setting up underserved populations to grow their wealth.
While rule changes are providing new flexibility for clients, they are also complex and potentially confusing.
As client expectations evolve, advisors that don’t offer small-plan services may be vulnerable to the loss of small-business owner wealth accounts.

The passage of the landmark Setting Every Community Up for Retirement Enhancement (Secure) Act in 2019 and the success of the follow up Secure 2.0 package in late 2022 has created a host of new opportunities and competitive considerations for wealth managers.

In fact, as articulated by a panel of experts convened for a recent Broadridge webinar, the fact that most of the provisions in Secure 1.0 and 2.0 relate to workplace retirement plans should not be taken to mean that the broad sweep of reforms won’t affect retail wealth management professionals.

Instead, the legislation has created opportunities for deeper planning discussion with existing clients while also setting up underserved populations to grow their wealth and become the next generation of retail wealth management clients.

Speakers on the panel included Broadridge’s Alicia Rich, head of client and advisor digital enablement, and Michael Kleeman, a senior director of strategy and business development. They were joined by Bonnie Treichel, the chief solutions officer at Endeavor Retirement.

According to the panel, new startup plan opportunities and accelerated account growth through the widespread use of automatic enrollment and contribution auto-escalation features mean that the already sizable rollover market can be anticipated to grow even larger.

In the emerging environment, the panel warned, wealth managers who aren’t versed in the Secure 1.0 and 2.0 reforms will likely find some of their best clients are asking questions they can’t answer and seeking support with services they don’t offer.

As Treichel frankly put it, advisors that don’t offer small-plan services may be vulnerable to loss of small-business owner wealth accounts.

Secure Act Basics

As the panel recounted, both the Secure 1.0 and 2.0 legislative packages include dozens of provisions each that, broadly speaking, can be broken down into six principal categories, as follows:

Expanding retirement plan coverage and access
Flexibility for savers in qualified plans
Easing administration for plan sponsors
Longevity provisions
Provisions related to individual savers (financial planning, IRAs and beyond)
Miscellaneous provisions applicable to specific plan types, revenue raising provisions, etc.

Many of the laws’ most talked about provisions will have a particularly notable impact on small-business owner clients, such as the creation of Starter 401(k)s. Others will have a broader impact that also affects larger organizations, such as the easier facilitation of in-plan income solutions.

The panel urged wealth managers to consider how easily overwhelming the scope of new opportunities can be for their clients who own businesses or have significant wealth tied up in workplace retirement plans. That’s why it’s so key for wealth managers to be informed about the legislation, because not having the answers to clients’ questions is a surefire way to lose credibility.

Another key development is the creation of more generous startup tax credits as an incentive for smaller businesses to offer a retirement plan.

Before the passage of the new law, a three-year small business startup credit was available to offset up to 50% of administrative costs, with an annual cap of $5,000. The Secure 2.0 Act increased the startup credit from 50% to 100% for employers with up to 50 employees.