While the defined contribution market is finally capturing due attention from the financial services industry and mainstream media with $12.5 trillion and 121 million participant accounts along part of the $37 trillion overall in retirement assets, the pressure is causing many record keepers to dig deep and, for many, reinvent themselves or face exiting the market before their valuations drop even further just as it did for active asset managers years ago.
Because of the many parties in the food chain, the DC industry is more complicated than wealth management, and any change affecting one segment likely will affect others, causing chain reactions. The biggest driver is fee compression, leaving those to either scramble for alternative sources of revenue or efficiencies through technology, especially artificial intelligence. Add the explosion of plan formation with low margins, something large market providers painfully know, and the stakes get higher for the 40+ national record keepers and the other 50 regional, smaller players.
At the 7th annual RPA Record Keeper Roundtable held in Washington, DC, in collaboration with the DCIIA/SPARK Public Policy Forum on June 2-3, the discussion focused on seven major themes:
1. Evolving business models driven by fee compression, rising costs and outdated technology
2. Convergence of wealth, retirement and benefits at the workplace
3. Explosion of plan formation
4. Consolidation industry-wide
5. Partners including: advisors (RPAs, aggregators, wealth advisors and broker/dealers); plan sponsors; participants; asset managers. including retirement income; TPAs; and tech and service providers
6. Plan design and investments
7. Laws and litigation
These issues are deeply intertwined, making them more complicated and difficult to handle. Unlike big tent industry conferences held within the 401(k) echo chamber by special interests or providers pushing product inviting the same advisors and TPAs, the RPA Roundtable series allows real talk focused on the attendees’ biggest opportunities and challenges as well as how to best collaborate in a market that is more competitive than ever. To reach the other side, we need to focus on the future and discuss issues that may be uncomfortable, something those with vested interests refuse or are scared to do.
Warren Cormier, the DC industry’s most respected and long-tenured market researcher, now Executive Director Emeritus at DCIIA’s Retirement Research Council, opened the meeting with research conducted with registered record keepers about their most significant opportunities and challenges, which will be covered separately.
Mark Iwry, senior non-resident fellow at the Brookings Institute, provided insights about new laws and regulations citing that DC plans were not touched in Trump’s “Big Beautiful Bill” while also noting the flurry of activity around crypto, ESG and private market assets even as agencies are stretched due to cuts and limitations.
UCLA Emeritus Professor Slomo Benartzi unveiled AI-generated research called GenP, which could dramatically change how the industry conducts field research and approaches product development.
Lori Commerford, head of intermediary relations at Voya, started the meeting by discussing the elephant in the room—how to safely share data with advisor partners. Ascensus’ Mindy O’Connor, head of business development, voiced concerns about how the advisors will use the data and their liability if it is mishandled.
The industry has attempted to come together to develop standards. In the 2000s, Warren Cormier, then at the Boston Research Group, and most recently DCIIA and SPARK, tried, but both efforts were derailed in part by the DTCC. In contrast, others wondered if the Portability Service Network could offer a solution or whether the industry should turn to professional data aggregators like Envestnet or Broadridge.
Brian Bender, Principal’s head of large markets, lamented the low margins for larger plans, opening the discussion about convergence and the need for providers to cross-sell wealth services, IRA rollovers, private markets, retirement income and managed accounts.
Though John Hancock defers to advisors to handle IRAs, according to CEO Wayne Park, leading their retirement division, he said there is still significant leakage. He added retirement income is too product-oriented, not focused on the issues, like longevity risk.
JP Morgan Head of Retirement Stephen Rubino cited the limited discussion about retirement income due to low record keeper adoption, hindered by transferability issues. At the same time, private market investments seem to be getting more attention, especially with a more sympathetic Department of Labor. When polled unofficially, 90% of the Roundtable thought 15% or more private market assets would be in target date funds within the next five years.
Managed accounts have a lot of upside, but iJoin CEO President Steve McCoy said prices must come down significantly before adoption is widespread.
Will PEPs ever really take off, Rubino asked. In contrast, others like the Standard’s Patrick Bushlack, director of business development, said they will be huge, a sentiment echoed by Alerus National Market President Mark Alley and evidenced by Paychex selling two-thirds into PEPs, according to Dan Campanelli, their retirement advisor channel manager. In contrast, Nikki Strausberg ADP’s vice president of sales and consulting, said her firm does not offer them, providing 3(16) products instead.
Big discussions about the use of AI to improve efficiencies as most record keepers are looking to service more plans without increasing staff, something Ascensus is focused on, according to Anthony Bologna, national sales director, who said clients gave higher satisfaction scores when AI is used to answer questions. Cormier’s pre-roundtable research amplified this sentiment, as many cited the “efficient frontier”—more plans and no staff increase.
All major fintech record keepers were in the room, except Human Interest, which saw no value in hearing from peers who they suggest are stuck in the old business models, just like wired phone companies before mobile. Unencumbered by legacy technology, firms like 401Go, Betterment, Vestwell and Guideline see the opportunity to make money on record keeping alone, especially with the explosion of plan start-ups.
In fact, JP Morgan Managing Director Josh Forstater, previously of Vestwell, pushed back on the cause of new plan formation by state mandates, tax credits and PEPs, claiming fintechs have driven the growth.
There is a disconnect between home offices and advisors, claimed Brian Nickolenko, Transamerica’s VP of Business Development, especially around whether to pursue small plans and IRA rollovers, with Mark Jackowitz, vice president at Voya, adding we need to ask distribution partners about their goals, which can differ by partners, according 401Go’s Stan Smith, chief growth officer, especially for regional broker/dealers.
No one refuted that more consolidation, a touchy subject, was coming, with some citing acquisitions as a growth strategy in Cormier’s research.
Finally, DCIIA’s CEO and President Lew Minsky advised record keepers to grab the low-hanging fruit while blowing some things up.
While there are differences in how to approach the opportunities and overcome the challenges, no one thought that business as usual is sustainable in the long term, which is the definition of an existential moment. Staying still might delay extinguishing or irrelevance, but it cannot avoid it. Fintechs see great opportunities to leverage technology to make services more efficient for small and large plans, and those that can will cross-sell wealth services alone or in partnership with advisors. If they have not already, they will pursue it, looking for tech and AI to streamline services and processes.
Like Dylan wrote in “Desolation Row:
Everybody is making love
Or else expecting rain
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