With over 66% of the advisor-sold defined contribution market controlled by the 15 RPA aggregators and growing, while rapidly expanding into the institutional market organically and through acquisitions and poised to enter micro markets through PEPs and referrals from benefit firms, these companies, along with other elite RPAs, have an amazing opportunity and awesome responsibility.
At the 5th annual RPA Aggregator Roundtable & Think Tank held at the WealthManagement EDGE Conference at The Diplomat Beach Resort in Hollywood, Fla., covering elite RIAs and emerging wealth tech, attendees at the discussed how to collaborate given their biggest opportunities and challenges.
The discussion began with aggregators calling on the media to bring awareness about the existence and growth of this group of 15 firms and another 1,000 independent elite RPAs framing the issues properly. In other words, stop talking about who owns the participant and the data and start talking about an emerging new business paradigm of working with employers to better equip and enable their workers to handle financial issues and prepare for retirement.
Data, which is the new oil, is at the crux of the issue without which the engine cannot move forward. Together, aggregators can force record keepers to agree on a common plan file format as well as share participant information responsibly. Using the healthcare industry as a model, it’s unthinkable that a doctor, hospital or insurance company would withhold critical data that could jeopardize a patient’s life. Isn’t a person’s financial health just as important?
RPAs still need record keepers but are there technology and wealthtech firms that can help procure data from outside the system like from payroll companies, healthcare systems and outside assets as well as behavioral patterns and then apply AI to enable better decisions? All of which is critical to getting retirement income solutions into plans which is at the crux of retirement and wealth at work.
The group at the roundtable stressed that the discussion needs to be shifted from leveraging participants services to subsidize plan level fees, which could cause legal issues and diminish important plan level services.
Aggregators need to keep aggregating, which is getting more difficult as many of the larger RPA firms with more seasoned leaders have already sold. How do the aggregators reach out to the lesser-known elite firms with younger leaders as well as entice RIAs by showing the value of access to DC participants?
Wealth managers need to be part of the discussion. Not only do they have more advanced and evolving financial planning techniques, the technology to which they have access is vastly superior and plentiful. They also have relationships and trust with businesses owners and senior managers which they can leverage to either manage the retirement plan or partner with an RPA. Everyone is watching the Creative Planning integration of Lockton’s retirement division closely.
To help participants with issues other than saving for retirement, technology, data and AI is needed to scale services. It will be hard if not impossible for any firm alone to develop and integrate the required wealth stack. Can RPA aggregators partner to develop some common platforms that each can leverage and customize? Don’t RPAs use the same record keepers but are somehow able to distinguish their services?
Though elite RPAs and aggregators have many advantages over dabblers, institutional consultants and wirehouses growing much faster, without collaboration, the impact on their clients, their businesses and the industry will be muted and slow. Tother they can have their own distinct voice in Washington, leverage and develop emerging technology, get the data they need to fuel the engine and create awareness with plan sponsors that all advisors are not created equally.
Elite RPAs and aggregators are best positioned to help and protect employers while helping workers tackle difficult financial issues but together, in collaboration with providers, the impact will be exponentially greater.
Fred Barstein is founder and CEO of TRAU, TPSU and 401kTV.