With the 401(k) world abuzz about private markets and cryptocurrency, along with PEPs, retirement income, new plan formation and convergence, advisors and the industry must distinguish between a problem in search of a solution instead of a solution in search of a problem. Put another way, quoting Maslow, “If the only tool you have is a hammer, you tend to see every problem as a nail.”
Hearing from plan sponsors at almost 50 TPSU programs this year alone and Roundtables with TPAs, record keepers, broker/dealers and aggregators, there is sometimes a disconnect at times between what clients want and what advisors, as well as services that plan sponsors and participants need, but might not be requesting and what the DC industry working on.
No one was clamoring for auto features and target date funds before the 2006 Pension Protection Act, but both have and continue to solve major issues. If we want DC plans to replace pension plans, then retirement income automatically embedded into TDFs or managed accounts is needed to create synthetic DB plans.
Today’s biggest drivers of change, as reflected in the September 3-4 pre-roundtable research by the esteemed DCIIA/RRC Executive Director Emeritus Warren Cormier, are the convergence of wealth and retirement at the workplace and the explosion of new plan formation.
Though plan administrators rarely ask for it, PEPs could alleviate work and liability, saving time and money, which could accommodate new plan formation.
Helpful but not critical, those few that are asking for include ESG funds (remember them?), private equity, crypto, HSAs and student loans. Not to diminish their value, but everything takes time, effort and money to review, implement and administer all in short supply, forcing plans to make difficult choices.
Like many changes in the retirement industry, new plan formation is being driven by government mandates. They want more people in payroll-deducted, participant-directed plans where people are 15 times more likely to save. As a result, more wealth advisors are being forced to serve their clients who need help with their retirement plans, while the advisor hopes to find new wealth or planning clients within the plans.
But convergence is the biggest driver—not only is there demand by plan sponsors and participants to provide guidance and advice on all financial issues beyond saving for retirement, but RPAs and record keepers need to find additional revenue just to survive as plan-level fees continue to decline. Those that can offer wealth services have an unfair competitive advantage, all of which is fueling industry consolidation.
Convergence brings issues:
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Whether record keepers compete or cooperate with advisors
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How to provide advice at scale to the masses
Convergence means different things to different parts of the DC ecosystem:
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TPAs need to serve wealth advisors working through home offices
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Record keepers need to figure out how to get additional revenue as costs increase and fees decline
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Broker/dealers need to help non-specialists serve the DC needs of clients and find wealth opportunities while helping specialists offer wealth services
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RPA aggregators need to buy and integrate wealth shops while developing wealth services, and RIA aggregators need to understand opportunities in the DC market better
The topic of convergence is too important to be one of many discussed at other roundtables or random sessions at industry events, and it needs all parties at the table, along with asset managers, technology providers and other service providers like Morningstar and Envestnet.
In 2026, in collaboration with DCIIA and their research division, Retirement Research Center, along with Roundtables for TPAs, record keepers, broker/dealers and aggregators, there will be a Convergence Roundtable at years end bringing together all parties focused on convergence with quarterly virtual roundtables with experts discussing pertinent topics and issues like use of data, AI, IRA rollovers, advice, and retirement income as well as independent and unbiased thought leadership and research.
If improving outcomes is the primary goal while maintaining and increasing margins critical to better serve clients, then all parties need to come together laser-focused on critical issues like convergence, not the latest fad, sponsored agendas or provider events used primarily to promote their services.
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