Consolidation, wellness and micro market top of mind for record keepers

Record keepers expressed excitement and concern about the future of the defined-contribution industry at the third annual InvestmentNews RPA Convergence Record Keeper Roundtable and Think Tank. which included the leading providers and supporting sponsors most interested in collaborating with retirement plan advisers.

The DC industry has an opportunity not only to improve retirement income security but also to address the financial needs of workers, especially those who cannot afford a traditional financial adviser.

The topics covered by this elite group on Sept. 22-23 (see list of the companies below) included industry consolidation, the potential for the micro-plan market to explode and how to help employees with financial issues at work. All of those issues, which come with opportunities and challenges, are interconnected.

Looming over the meeting was the convergence of wealth, retirement and health at work, as well as the the critical need for the industry, especially providers and RPAs, to collaborate.

Record keepers are the clear leaders of the DC industry — they control the data, technology and access to employees through their respective platforms. Though there are more than 40 national record keepers and hundreds more regional record-keeping TPAs, just five providers represent a significant majority of adviser-sold 401(k) participants and assets. As advisers, especially DC aggregators, continue to expand their influence, there is a need that record keepers partner with them in order to compete and survive.

With more consolidation ahead, many record keepers see opportunities to take talent – and clients – from distracted acquirers. Fintech record keepers, which collectively have raised almost $800 million in 2021 alone, see massive opportunities to serve smaller plans more efficiently and partner with providers that have massive distribution networks.

Rather than hurting business, Covid enabled record keepers to be more efficient. Clients accepted paperless communication, and firms benefitted from more digital interface, while also recognizing the power of face-to-face meetings.

For the first time in recent history, retirement is becoming a strategic, rather than tactical, benefit for many employers. Increasingly, 401(k) plans are a key component in the war for talent. There are 2 million more workers who recently retired than expected, and a growing number entering the gig economy or starting small businesses.

Many record keepers are focused on how to engage workers, most of whom will have more than 12 jobs in their careers. While in the workforce, they need help on their financial journey, which includes smart savings, spending, benefits allocation and then spending wisely in retirement. These issues will drive sales and revenue, separating the winners and losers, for both providers and RPAs.

Attendees identified three initiatives the industry should be collaborating on that would have the greatest impact:

SHARED PLATFORMS

The industry must come together and standardize data formatting to customize participants solutions, limit leakage and enable retirement income products.

MICRO DC MARKET

With government mandates looming, how can the industry offer high-touch, yet high-tech, solutions and engage RPAs and wealth managers to help these smaller enterprises?

FINANCIAL WELLNESS

This includes how to engage plan sponsors, employees and advisers. Participants must be reached at the right time, with the right message, through social media, video, mobile technology and virtual meetings. Customized messages and solutions leverage data, technology and people.

The consensus was that we have come a long way, but we have an even longer way to go, especially with K-12 and government plans. Stay tuned for the Oct. 20-21 Broker-Dealer Roundtable and the Nov. 17-18 Aggregator event, followed by the CIO program on Dec. 8-9.

Fred Barstein is founder and CEO of The Retirement Advisor University and The Plan Sponsor University. He is also a contributing editor for InvestmentNews’​ RPA Convergence newsletter.