Broadening a practice's growth to include different business niches isn't a new strategy in wealth management. By some measures, however, a relatively underutilized sector that remains well below many advisors' radar is nonprofit pension plans.

True, 401(k) plans represent a much larger chunk of the defined contribution market. In fact, new research by Cerulli Associates pegs such for-profit companies and similar retirement programs running $4.7 trillion in assets. The Boston-based research firm figures that's roughly five times the total of all money held in 403(b) and related platforms.

Still, two years ago the 401(k) segment "entered a period of negative net flows," notes Cerulli analyst Jessica Sclafani. In that time, as baby boomers aged and started dipping more into their retirement savings, "distributions outpaced contributions by greater than $33 billion."

Sclafani and her colleagues are now projecting the $879 billion 403(b) market to keep generating net positive inflow from plan participants over the next decade.

"It's a confluence of events coming together – assets are growing in these plans but at the same time many plan sponsors are playing catch-up with their retail counterparts in terms of changing governmental reporting standards," says Sean Deviney, a retirement plan specialist at Provenance Wealth Advisors in Fort Lauderdale, Fla., which manages about $2 billion.

A member of the Financial Times' list of top DC advisors in the U.S., Deviney adds that he's finding fertile ground these days in serving plan sponsors in higher education, hospitals and similar types of nonprofits.

Indeed, Cerulli's researchers say they're also finding colleges and healthcare to be two of the most promising sectors in 403(b) advising.

Sean Deviney
Sean Deviney

"We're coming out of a Wild West period where schools and hospitals had relatively limited reporting standards imposed by the government as compared to a typical 401(k) plan," says Deviney. Also, he observes that such plans are facing "booming numbers of investment and service alternatives" by vendors.

Another significant challenge causing disruption in a normally staid and slow-evolving marketplace, according to Deviney, is "massive consolidation" within service networks specializing in nonprofits.

"The 403(b) market is actually older than the 401(k) side but it just hasn't received as much attention over the past several decades from plan advisors," he says.

The need for "sound" fiduciary advice and "objective" benchmarking of plan performance, fees and service is only going to rise "exponentially" over the next decade, predicts Deviney. "The 403(b) world is looking more like the 401(k) universe every day," he says.

Working with nonprofits isn't for the uninitiated, points out Jake Connors, head of institutional consulting at Compass Financial Partners in Raleigh, N.C. (See "It's Getting Tougher to Do 401(k) Work on the Side.")

Also a member of the FT's elite list of DC plan advisors, the independent RIA registered with LPL Financial manages about $6.5 billion.

"The nonprofit marketplace is a very unique animal – and even within that sector, advising healthcare systems is quite different than working with higher ed institutions," says Connors.

The retirement plan specialist, who works with both for-profit and nonprofit platforms, is putting more emphasis these days on prospecting 403(b) plans. In particular, Connors is finding higher ed to be "a very attractive" subsector to pursue.

"We're not going after the Harvards and Stanfords of the world – we're targeting smaller institutions where there's still not much competition, but are growing more aware of their fiduciary responsibilities in working with plan participants," says Connors.

Focusing on mid- to smaller-tiered plans is also a strategy that long-time DC specialist Gary Handler is finding effective, particularly with healthcare providers.

The Raymond James DC advisor, who is based in Beverly Hills, Calif., is also a member of the FT's list of top DC plan consultants. His practice, which manages about $1.8 billion, recently signed a nonprofit hospital group in the Midwest with about $250 million in 403(b) and 457(b) plan assets.

Although he expects continuing growth from not-for-profit healthcare plans, Handler notes that inroads into the recent hospital client came from experience working with a benefits manager at a for-profit plan who switched companies.

That's a trend he's seeing across his practice's increasing emphasis on opening more doors with 403(b) plan sponsors. In short, Handler suggests, it pays to keep any DC client prospecting broad-based in nature and not too "niche-centric."

"While we see more of our future growth coming from working with nonprofits," says Handler, "it makes a lot of sense to us to keep leveraging our ties with established 401(k) sponsors to explore any potential emerging opportunities in the 403(b) market."