Latest Perspectives

Two major developments in the recordkeeping space have dominated the 401(k) news cycle over the last few weeks: TIAA’s partnership with Accenture and Voya’s agreement to acquire OneAmerica’s recordkeeping business. While the steps that TIAA and OneAmerica took are different, both developments seem driven by the enormous cost of maintaining a competitive recordkeeping platform. And, not surprisingly, our member conversations have been peppered with the inevitable questions of “who’s next?”

As we prepare for our 2024 Sales Executive Forum, TPAs continue to pop up as an agenda item. TPAs have long been a critical partner for all of our small market recordkeepers and have been, like many other providers in the retirement plan space, going through significant consolidation. Private equity firms have also had a hand in the growth and consolidation of some TPAs.

We are wrapping up our research that takes a deep dive into pooled solutions and wanted to share a few highlights in advance of our PEPs webinar next month. By way of background, the research examines the current state and expected future growth of recordkeepers’ pooled plan solutions. Our goal is to get a much more detailed understanding of the size of the opportunity.

In March, we published our big DCIO strategic research study called Operating in a New Oligopoly. This 2024 research highlighted the concentration of power amongst centers of influence in the DCIO space. A select set of recordkeepers are controlling more of the business as well as a select group of distributors.

We’ve spent a lot of time in recent months talking to recordkeepers, advisors, and DCIOs about more “forward-looking“ topics: their expectations in areas like PEPs, retirement income, and the convergence of retirement to wealth. What strikes us as we pull back and look at the bigger picture is that, depending on the direction these trends take, the industry could look very different a decade from now…but then again, it might look pretty much the same.

Across the last three years, we’ve dedicated a lot of time and research real estate to the convergence of retirement and wealth. The opportunity for advisors that move beyond a 3Fs conversation and initiate a broader financial conversation with participants presents a significant opportunity for differentiation and revenue growth.

We are midway through a deep dive on the pooled plan market, and as with any of our research projects, some facts are becoming clear while others are still a bit fuzzy. And, perhaps most interestingly, some initial beliefs about the benefits of PEPs aren’t proving true whatsoever. As we work on the research, we wanted to share some early insights from our interviews with recordkeepers.

According to Cerulli, CITs have surpassed mutual funds as the top investment vehicle for DCIO assets last year. The two main drivers of this growth have been cost (RLF research finds that the typical CIT is 15% cheaper than your cheapest mutual fund share class) and the ability to offer even deeper pricing discounts to sizable plans and partners (e.g., relationship pricing for both distributors and recordkeepers).

Tomorrow, we will hold our semi-annual virtual roundtable for relationship management leaders at the top recordkeeping firms. As we analyze the pre-meeting survey results, one trend stands out: for most firms, RFP activity in the large market is up and pricing is down. Thirty percent of recordkeepers report that RFP activity is significantly higher in the first half of 2024 compared to the same time last year, and another 30% say it’s somewhat higher.

Retirement income continues to dominate industry headlines this year. There have been countless new innovations launched, middleware companies rising up to solve for connectivity issues, and major recordkeepers like Empower and Fidelity live or going live with suites of in-plan income products. Firms have worked hard to simplify retirement income by wrapping it within a target date fund or managed account offering.

Financial Wellness and Managed Accounts are often talked about as separate offerings, but interestingly, the current trend is to combine them into a single, integrated participant experience. The most recent example of this trend comes from Morningstar, that revealed that they are launching “Personal Financial Builder,” a financial wellness solution that tackles participant issues such as dept reduction and student loan repayment.

As part of our joint venture with NAPA, we shared early results from our first NAPA Advisor Research Institute (NARI) survey at the NAPA 401(k) Summit in Nashville. The session was packed with advisors that actively engaged in sharing their thoughts on the survey results and areas where they think the data can help them most.

On March 13-14, we held our annual DCIO Executive Forum in Boston. We hosted 40 executives to discuss how they are operating their DCIO businesses in an environment that increasingly looks like an “oligopoly.” That is, with consolidation of recordkeepers and advisor firms, DCIOs are faced with selling through a smaller number of extremely large and influential players.

On Wednesday, the RLF will host its 2024 DCIO Executive Forum. This marks our 8th annual DCIO event since founding the firm and it comes at an interesting time for the DCIO business. We’ve titled the research “Operating in an Oligopoly” as we continue to see a small set of partners wielding more power over the retirement plan space (and investment decisions).

It’s still only February, but it looks like 2024 might be “the year of the PEP.” Recent retirement-related headlines have featured a flood of new PEP offerings from the likes of HUB, JULY, Ascensus/American Funds, and others. Meanwhile, PEP assets at Ascensus and The Standard recently surpassed the $1 billion threshold, joining other significant PEP players like Transamerica, Empower, Voya, and Principal.

Late last year, the RLF joined forces with NAPA to create NARI, NAPA Advisor Research Institute, and just before the holidays we launched our first advisor survey. As we head into NAPA Summit, we have responses from nearly 200 practices that manage more than $200B in DC assets.

We just completed our annual survey where we ask our members to tell us about their top priorities for the year. At a high level, and in contrast to the same time in 2023, the overall outlook is positive. Most recordkeepers believe they will experience sales growth of 10% or more. DCIO firms are slightly less optimistic but still expect to see single-digit growth.

Private equity firms, and their investments in the aggregators, have captured a lot of headlines in recent years. However, as we wrap up interviews for our March 2024 DCIO Executive Forum, private equity has been a hot topic for a different reason: several asset managers are putting more energy behind making private equity in DC plans a reality.

On December 6th, we held our semi-annual roundtable for relationship management leaders. There were two sessions, one for small market leaders (under $50M) and one for the large market (over $50M) and both sessions focused on expectations for the coming year. The most striking data point to come out of the event was that large market providers expect a very active year for RFPs in 2024.

Despite rising interest rates and tighter credit, private equity firms continue to fuel an evolution of the RIA landscape. A recent report from MarshBerry highlighted the impact of these investments: from funding acquisitions to providing the capital for technology and staff enhancements that promise to provide a scalable way to impact the financial wellbeing of all participants.

Our most recent survey of DC sales executives shows high levels of optimism about 2024. Seventy-five percent of small market sales leaders expect 2024 plan sales to meet or exceed 2023, with 42% expecting a 20% or greater increase. Large market executives had an equally positive view on 2024.

Last week, at Invesco’s office in NYC, the RLF hosted almost 70 sales executives from its recordkeeping and DCIO member firms. The big theme of this year’s event: the importance of strategic alliances in a new world where recordkeeper, DCIO, and distributor economics are more intertwined than ever before through things like co-manufactured products and partnership programs.

Next week on November 2nd and 3rd, we’ll bring together sales leaders from most of the top recordkeeper and DCIO firms for our annual “Sales Executive Forum.” As we prepare the research for the event, what strikes us is just how critical partnerships among these two constituencies are to each other’s success.

Last week, Michael Kitces posted a news article about Hightower’s layoffs on LinkedIn and he commented that after a long, rapid (revenue-focused) growth phase, PE-backed RIAs are shifting their focus to profitability. This post came one day after our 2023 aggregator meeting, where we heard about this shift firsthand.

On September 12th, a press release announced the launch of the NAPA Advisor Research Institute (NARI), a joint venture between NAPA and the Retirement Leadership Forum. From a researcher’s point of view, the thousands of NAPA members are an incredible, yet untapped, source of insight for the retirement industry.

Last week, SHRM’s fall HR magazine highlighted 3 “Megatrends” that boost retirement savings. One of which was AI and its ability to improve plan design, participant engagement, and benchmarking. The topic of AI and its impact on the retirement business (both the back office and client interactions) seems to keep bubbling to the top with our members.

As we near the end of summer, RLF members are entering the throes of 2024 planning. From a number of calls and surveys with our members, we’d characterize the outlook for 2024 as one of cautious optimism. From the recordkeepers’ point of view, the optimism is driven by expectations that 2024 will be a strong sales year.

Last week, RLF hosted its DCIO members for a mid-year virtual forum. With budgets tightening and partnership spending skyrocketing, DCIOs continue to refine their approach to the business. Some of the most interesting commentary from the meeting included: A Solid Sales Start. While a very slow January made many firms nervous about how 2023 would shape up, YOY sales are higher for 53% of DCIOs.

We’re working on new research in the retirement income space for release this Fall, and we wanted to share a few of the early findings. At a high level, adoption of existing solutions by plan is slow so any thought we may have had around measuring asset flows into retirement income products as part of this research is a non-starter.

An ongoing theme in our research this and last year is partnership reciprocity. Between industry consolidation, overlapping value propositions, and unrelenting margin pressure, all of our members are being more selective about the firms with which they partner.

Last week, we hosted our semi-annual virtual event for recordkeepers’ relationship management leadership.  The overall theme of the discussions across the small and large ends of the market was one of “getting back to normal,” where most of the disruptions of COVID have faded to the background.  

The RLF is hosting its Q2 2023 Recordkeeper Sales Executive Council virtual meetings on Thursday, June 8. Small market sales executives will meet in the morning and our pre-meeting survey shows that they are facing slower than expected sales in the first half. In interviews, some small market executives commented that plan sponsors’ indecision was hampering the sales environment and others pointed to the stable value market as a hindrance.

Ever since the pandemic first disrupted the day-to-day business operations of almost every company in the world, recordkeepers have been concerned about post-pandemic proposal and RFP activity. That is, with businesses focused on more urgent issues during the pandemic, at some point, we’d face a flood of activity as companies return to their fiduciary duties.

Retirement income has long been a topic of interest for our members, dating back to our first-ever retirement income case study on Genworth’s Clearcourse, which was launched 18 years ago this April! While level of effort behind retirement income products has ebbed and flowed in the intervening years, activity has spiked in 2023 and it feels more substantial this time around.

We are wrapping up new research on recordkeepers’ participant education and engagement practices and one of the most interesting findings is that utilization of financial wellness continues to increase.  Eighty percent of recordkeepers indicated that plan sponsor adoption has increased across the last year, while 70% said that participant utilization has increased across the same time.

The “aggregators” have grown substantially over the last 5 years and have become the most powerful distribution partners in the retirement plan space.  In the last two years alone, the group has grown from $1.4T in plan assets under advisement to an eye-popping $2.3T.  The trend and aspiration of increasing home office control of the investment line-up continues to cut across all aggregator firms.

We are midway through the research process for our upcoming report on participant education and engagement, and we’re already uncovering some interesting insights from our recordkeeper members. At a high level, the consistent theme of our research calls, to date, has centered on “digital participant engagement.”

Last week, the RLF held its annual DCIO Senior Executive Forum in Boston. Thank you again to Putnam for hosting us!  We had record attendance with 45 executives representing 25 different firms. This year’s research centered around the theme of the high-stakes nature of the DCIO business.

Last week, PEPs were the hot topic among national consultants. On the same day that Willis Towers Watson announced its new PEP offering, one its chief competitors, AON, revealed that they had made significant additions to their PEP sales team.

There have been a handful of articles recently pointing to financial advisors’ struggle with navigating the tools and technology available to them. Advisors often have access to tools through systems like RPAG as well as tools and technology available through their own home office. What works? What’s worth it? Who should they partner with?

At the end of every year, we poll our members about their key initiatives and interests for the coming year. For recordkeepers in 2023, it’s all about the participant. For example, product leaders that we surveyed told us that all three of their top areas for additional investment in 2023 are participant related.

RLF recently completed a member-requested report on CIT minimums and breakpoints. Based on a survey of 13 DCIO firms, the report revealed that a majority of firms still maintain minimums but are able to waive them for the right opportunity (e.g., the right distribution relationship).

As the calendar flips to 2023, the RLF already has a busy slate of research and events scheduled for the first quarter.  We wanted to provide a snapshot of a few of the more important initiatives.

For the last six months, RLF has consistently heard from members that hiring is a challenge. We heard it in early November at our Sales Executive Forum and it is a topic of interest for this week’s RM Executive Roundtable (virtual). The sales and RM leaders are not so much seeing it with their teams as they are with the day-to-day account managers and operations staff.

At our recent forum for DC sales executives, one of the trends we discussed was the increase in the number of service-related issues among recordkeepers. Some sales leaders indicated that they’d been getting more than the usual number of complaints from advisors about service lapses and wanted to understand if this increase was limited to their firm or more of an industry-wide trend.

Last week, the RLF hosted nearly 60 sales executives from leading retirement providers with representation from recordkeepers’ large and small market sales teams as well as DCIO sales management. The event centered around the theme of building and refining partnerships between recordkeepers, DCIOs, and their distribution partners.

Next week, we’ll bring together sales leaders from top recordkeeping and DCIO firms for a two-day event in Nashville. As we finalize the agenda for the event, partnerships among DCIO, recordkeeping, and advisor firms have emerged as a key theme.

We are midway through October with conference season in full swing and many of our members in the throes of 2023 strategy/budget planning. We will be conducting our formal 2023 agenda poll in the next week to determine topics and events for next year but have already started having conversations about topics of interest.

The subject of retirement income came up at a recent roundtable event we attended with about 30 DCIO, advisor, and recordkeeping firms. As the attendees debated the size and scope of the opportunity, what really stood out was the subtext of the conversation: there were three key areas of disagreement among the attendees that, without clear answers, threaten to stall recent progress in the development of retirement income solutions.

With participant demand for personalization, new launches on recordkeeping platforms, and aggregators’ focus on the convergence of retirement and wealth, the RLF has been closely tracking the progress of advisor managed accounts.