Change is inevitable and is a fundamental, unchanging and irrefutable law of nature. But instead of leaning forward, most of us resist, wasting precious time, resources, and energy. The defined contribution industry is no exception. Retirement planning will take center stage from the once slow-moving sideshow of financial services, further accelerating the consolidation of record keepers and advisors.

According to the influential Harvard Business Review article “The Consolidation Curve,” in which consultants at AT Kearney analyzed 1,345 mergers, every industry that is fragmented has the potential to eventually consolidate. Social change, technology, and the law, including litigation, are having a major impact on an industry that was slow to adapt but now has no choice.

So what are social forces and how do they impact advisors, providers and asset managers?


Some cynics wonder if the conflation of workplace wealth, retirement, and retirement is overblown. Although we are still in our infancy, there is no doubt that this workplace is ideal for helping people who, for a variety of reasons, do not have access to a personal advisor or financial planner.

Declining plan fees are forcing both recordkeepers and advisors to look for new revenue streams as asset managers, especially active managers and those without high-end target date funds, struggle. .

explosion of small plans

Federal and state lawmakers are focused on increasing access to workplace retirement plans, leading to an unprecedented proliferation of small retirement plans through state mandates, tax credits, and PEPs. . Most advisors and providers are facing what Harvard Business School Professor Clayton Christensen called the “Innovator's Dilemma” because their current business models are ill-suited to take advantage of this explosion. .

COVID-19 as a catalyst

The pandemic has changed the world forever. More and more people are working remotely, and while that can be challenging, it also presents opportunities. Most people, especially remote workers, are comfortable receiving financial advice that can save them money. The pandemic has also led to historic employment growth, created a war for talent, made retirement plans a key strategic weapon for recruiting and retaining workers, and continues to fuel the gig economy.


It's hard to think of any part of our lives that hasn't been influenced by technology. As technologies like AI and ChatGPT create new paradigms, people expect personalization powered by more accessible data.

Transferring responsibility for retirement to individuals

As traditional DB plans decline because companies don't want the responsibility that comes with people living longer, DC plans are improving to give participants control over their own personal pension plans. But even though great advances have been made with automated plans, wellness programs, and ultimately retirement income within plans, most people without an advisor still struggle to manage their finances and retirement plans. .

So how do these external influences affect the DC industry?

RPA 401(k) Record Keeper

The inevitable drumbeat of consolidation continues as providers sit in the third of four stages of the consolidation curve called “Focus.” After intense consolidation in the second stage, “scale,” surviving companies aim to expand their core businesses and outperform their competitors. This stage involves a big deal in which the survivors brutally attack the underachievers.

Highlights include Empower's acquisition of MassMutual and Prudential Retirement Group, and Principal's acquisition of the Wells Fargo division. Recently, there have been some minor upheavals, such as Ascensus' acquisition of Omaha Group's Mutual. He has over 40 national record holders and around 200 regional record holders, which is unsustainable.

There are about a dozen providers that have the potential to not only survive, but thrive. Among them are:

  1. Scale – approximately 10 million participants or more
  2. Niche – something that leverages convergence like Schwab or proprietary distribution like American Funds or payroll like Paychex.
  3. Fintech – People riding the small planning wave through technology and efficient processes

Consolidation among most other providers is inevitable, but companies without the scale or massive diversification to take advantage of the wave of convergence that continues to support valuations may leave some in the market.

Convergence also sets up a showdown between some providers and advisors over ownership of participants.


RPA is in the second stage of the consolidation curve, with major players rapidly emerging, acquiring competitors, and honing their integration skills, core culture, retention, and scalable IT platforms. While RIA aggregators such as Creative Planning and Mariner recognize the value of large participant bases for growing wealth client business, RPA aggregators leverage participant relationships and access to grow wealth clients. You're building or trying to leverage functionality.

Local or regional RPA will struggle to keep up, even if it can take advantage of convergence. Large-scale RPA will find it increasingly difficult to resist the big checks offered by aggregators. Institutional investment consultants like AON, which recently acquired NFP and has gone through its own consolidation curve, are greedily eyeing smaller plans, leveraging PEP and technology.

Wealth advisors who have traditionally avoided DC plans will also be able to access some of the participants that are attractive to wealth businesses while outsourcing, thanks to technology, while clients who own or run businesses Many of them are starting to have faith because they are looking for help. Most of the heavy lifting and fiduciary services.

DCIO firms and even broker/dealers are seeing their own forms of consolidation, albeit not driven by 401(k) plans like Franklin Templeton's recent acquisition of Putnam, but certainly influenced by them. have experienced.

Creating or expanding new business models is not easy and requires different skill sets, customers, and technologies, but companies that resist are facing consolidation driven by growing social forces directly targeting the 401(k) industry. will be swallowed up by the waves.

Fred Barstein is the founder and CEO of TRAU, TPSU, and 401kTV.

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