An Interview with Fielding Miller

fielding_miller1 Fielding Miller is the Co-Founder and CEO of CAPTRUST Financial Advisors, a widely-regarded firm on the leading edge of the emerging retirement advisory industry. Headquartered in Raleigh, NC, CAPTRUST employs 140 professionals and operates from twelve offices around the country.

BrightScope: Can you tell us a little bit about CAPTRUST?  What percentage of your business is retirement plan business? How has your firm grown and changed in recent years?

Fielding Miller: CAPTRUST actually began in 1989 as a two-man practice with one retirement advisory account.  From the beginning our primary focus has been qualified retirement plans but our business evolved to include foundations, endowments, private investors and non-qualified plans.  We feel very blessed to have chosen the path we did, but in the beginning the opportunity was not so obvious.  However, we invested aggressively, kept building and now serve over 500 retirement clients with $30 billion in assets and over 500,000 plan participants.

BrightScope: At the recent PLANADVISER National Conference you said that the current market is “a huge bull market for some retirement advisors.” Can you explain what you meant by that?

Fielding Miller: Sure, we are very excited about the prospects for our industry and our firm.  So many factors are coming together to produce a unique and interesting opportunity.  At the highest level, this is a bull market for advice.  Plan sponsors are facing more problems – and more complex problems – than ever before.  The vagaries of the recent market and the aging of our population are shining a huge spotlight on the value, and security, of retirement funds.  Plan sponsors are facing all sorts of regulatory and legislative changes in response to these pressures.  Their world is changing quickly, and they need strong, clear guidance.  That being said, I do not think this bull market for advice will propel all firms equally.

BrightScope: Can you explain how you think firms may be impacted differently?

Fielding Miller: Plan sponsors are focusing more than ever on the relative quality of advisors.  We are seeing increased use of RFP’s in the advisor selection process.  We are seeing much greater emphasis on fee disclosure.  And, we are seeing far greater emphasis on an advisor’s ability to provide holistic guidance on the complete retirement package.  Advisors who have relied on personal persuasiveness or hidden commissions will be exposed – and may find themselves struggling under the scrutiny.  I believe firms who can respond successfully to the three issues mentioned earlier will experience massive demand.  These will be the firms which experience a “huge” bull market.  These advisors will benefit from both the market tide and from their ability to provide the independent, cost-effective, and comprehensive advice plan sponsors are seeking.

BrightScope: Some industry experts are expecting major consolidation in the retirement plan marketplace.  Are you seeing this trend?

Fielding Miller:  Regarding consolidation in the plan provider market, I can only see the trend accelerating.  The providers are in a classic game of scale which will force many of the smaller players to find a dance partner.  As for the advisor consolidation, I do not believe that we have begun to see meaningful trends.  The industry has been expecting advisor consolidation for quite some time.  Many people, including us, thought it would come at a faster pace than it actually has.

BrightScope: If you don’t see a great consolidation trend among advisors, what other trends do you see in the advisor space?

Fielding Miller:  We are beginning to see a trend of increased delineation among the firms based on some of the factors mentioned in the last question.  Over time, I believe the successful retirement advisors in our industry will become aligned into three segments:

  • The small plan market (under $20 million) will be dominated by advisors with the wire houses and insurance brokerages which specialize in retirement and are supported by a home-office support structure.  These advisors will be less interested in sharing the fiduciary role and will emphasize a transactional approach which provides an efficient but “set menu” of retirement solutions.
  • The mid-size plan market (under $1 billion) will be dominated by specialist advisors primarily with the independent firms who embrace the fiduciary role and have reached the level of scale and resources to create more specialized solutions for their plan sponsors and participants.
  • The large plan market (>$1 billion) will continue to be dominated by the major consulting firms which provide retirement services mostly within a suite of other human resource consulting solutions.  In most cases, the revenue generated by pure retirement advisory services does not move the needle in these large consulting firms.  Thus, they typically approach retirement advisory as an additive service versus a primary focus.

The mission and goal of CAPTRUST is to serve the middle market.   That is our intention and the framework for our growth strategy.

BrightScope: If you aspire to be a dominant player in the second group – what is your growth strategy?

Fielding Miller: The secret to our success, today and in the future, is our ability to attract the best talent.  We truly believe that we are in the right industry, at the right time with the right model – and to accelerate our growth and success, we need more high quality advisors, analysts and client service personnel.  In recent years our primary growth has come through organic increases in our client base – although we have completed acquisitions when we have had opportunities to attract great talent in desirable markets.  I expect we will continue to grow in this manner.

BrightScope: What are your thoughts about the continued focus on investment advice by Congress and the DOL?

Fielding Miller:  Most current advice proposals seem to address either the availability of conflict-free advice or the safety and appropriateness of retirement asset allocations.  Congress and the DOL want American workers to have advice free of conflict that directs them to safe and appropriate asset allocations.  In theory that is a great goal.  Legislating, or regulating, that outcome has obviously become extremely challenging.  “Conflict-free” is probably easier to define, and we expect to see that part of the equation nailed down first.  The recently re-issued DOL ruling on this issue made good progress, although it is hard to imagine the logistics involved in a government agency certifying the impartiality of a computer model.

We have the most concern with attempts to mandate, legislate, or regulate the asset allocation.  Mandated index funds or target date funds are not the answer.  These funds have advice embedded in their design, and as such, they have a place in the line-up of options.  But mandating either of these options presupposes preferences about the glide path which may not hold up for all participants within a given company or industry.

Finally, we feel that Congress and the DOL may be speaking to the means when the most powerful focus could be on the end.  Few of the advice proposals speak to the need for plan participants to understand whether they are tracking appropriately toward the final income needed to sustain them in retirement.

Obviously the solutions are not easy.  Participants need to understand more clearly the compounded impact of their retirement savings decisions over time.  There is currently much evidence of inertia and confusion.

BrightScope: Are your clients concerned about the recent rise in ERISA litigation, specifically as it relates to fees in defined contribution plans?

Fielding Miller: Clients are certainly concerned about trends in litigation, and fees are no exception.  We have always advocated fee transparency, so our clients have an above average understanding of their fees – both the components and the costs relative to other market options.  The law does not state that plan sponsors have to provide for the lowest fees – just that the fees associated with their plans be fair and reasonable.  To meet the fiduciary standard in this area, we encourage our clients to have the right processes in place for fee examination, to document their analysis, and to keep up with their disciplined investigation.

And, while we certainly encourage close examination of fees as a deterrent to possible litigation, we also make sure our clients understand that their fiduciary liability extends beyond fees.  Our clients understand that at the end of the day, the investment process can have a far greater impact on retirement outcomes than fees.  The difference of a few basis points in fees pales in comparison to poor oversight on the investment side.  Both are critical parts of the fiduciary standard and must be balanced accordingly.

BrightScope: What has your firm done to help plan sponsors address fee disclosure issues? Have you adopted or created any fee benchmarking tools?

Fielding Miller: Fee benchmarking is critically important.  We believe that it is a central component of our value proposition to have regular discussions with each of our clients pertaining to their plan fees – the components, the actual charges and who is bearing the end cost associated with each fee.  We benchmark fees for each new plan, review the information with their committees and document the entire process.  On an ongoing basis, we benchmark fees approximately every three years unless the client has undergone a major event, such as a merger, which could impact the participants, assets or services needed by the plan.

CAPTRUST is very close to having the internal resources and critical mass of data from our client plans to create our own tool. We are about a year away.  In the meantime, we are combining our data with an industry tool.  A firm of smaller scale would obviously need to partner exclusively with an outsourced service.

BrightScope: If you put yourselves in the shoes of a plan sponsor fiduciary, what do you think are the most important things to consider when selecting an advisor or consultant?

Fielding Miller:  A plan sponsor should start with the givens and make sure the advisor is independent and objective.  Conflict-free advice from a fee-based advisor should be a baseline requirement.  Close on the heels of these two factors, a plan sponsor should get comfortable that the advisor has the necessary intellectual resources, technology, and disciplined processes to satisfy the investment objectives and fiduciary responsibilities.  We consider these the “entry tickets” – the basics that gain us admittance into the discussion.  After these considerations, I believe plan sponsors should ask three questions.

Does the advisor have direct experience with the specific issues we are facing?  A plan sponsor should probe for proof where positive outcomes were achieved in similar circumstances.  Next, a plan sponsor should try to determine how important the client relationship will actually be to the advisor.  Will this feel like a true partnership?  Will the advisor be proactive – in both practice and mindset?  And finally, a plan sponsor should consider whether there is a good match in personality and temperament.  This may sound trite, but an advisor should feel like a trusted member of the team.  A plan sponsor needs to work with someone who thinks and responds in a similar manner.  Our work is a business, but it is also a relationship.

Interview disclaimer: Fielding Miller’s opinions are his own and do not necessarily reflect the opinions of BrightScope Inc.