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Independent 401(k) Record Keepers Offer Alternatives

As RPAs go after participants and need data, firms like iJoin provide options.

There are 43 401(k) national record keepers currently, down drastically from well over 120 15 to 20 years ago as these providers enter the third of four phases of the consolidation curve. Retirement plan advisors are a step behind, currently in the second phase, epitomized by a significant number of deals compared to larger ones in the third phase.

Fees are a big driver of consolidation with compression pushing both advisors and providers to target participants, which could make them competitors, raising the question of whether there are viable alternatives willing to share data, such as independent mostly regional record keeping TPAs who have gone through their own consolidation.

Just five of the 43 providers have significant scale separating them from the rest with five others like payroll companies, American Funds and Schwab in unique, impossible to replicate positions. So while the other 33 could struggle and become either hunters or prey, there are almost 200 regionals, down from almost 400 a decade ago.

Acquisitions by firms like Alerus, Epic and American Trust have winnowed the regional provider field who use third parties like Broadridge’s Matrix, Fidelity, Schwab and MidAtlantic (owned by American Trust) providing trading, clearing and custody services. Ascensus’ acquisition of mostly compliance-only TPAs, which include 3,000+ firms, resulted in spinning off the record keeping divisions of many of those firms.

But reality has forced the smaller providers to exit as very few had even $1 billion, which is a minimum to be viable, holding on way too long because they bundled their advisory and compliance practices, afraid they would lose everything if they sold their record keeping divisions. The cost of technology, especially now with cybersecurity risks, has only grown but so too has the user interface and advisor support, which pale in comparison to most of the majors.

So while these regionals, most of whom do not use FIS’s Omni system, opting instead for less expensive services like Relius, Schwab’s SRT and SS&C’s small provider technology, there really has not been a user experience integrator that serve plan sponsors, advisors and participants alike while safely serving up data. Sure, there were many third-party providers but that left it up to the regional record keepers to find and seamlessly integrate the solutions.

Enter iJoin, which has a relatively long and interesting journey under different owners. It started as a tech enabled enrollment solution and has morphed into a complete user front end that also provides very low cost managed account or LDI solutions as well as providing engagement tools for advisors.

Their solutions include:

  1. Goal-based engagement tools
  2. Outcome-focused engagement services
  3. Plan and participant success metrics
  4. Education and financial wellness resources
  5. Managed accounts

Nothing revolutionary in and of the separate parts and what most major providers offer but certainly more than what most independent firms can afford. In discussions with iJoin, I struggled to understand who they were as they meticulously described each service until I asked how many participants they could access with the smaller providers they service. At 4 million, they still would not crack the Fab Five, but it is significant.

And just as importantly, these smaller record keepers will likely never compete with advisors over participants. Additionally, data overseen by a savvy tech firm like iJoin can be more safely shared.

We live in a world of outsourcing, relying on third parties that have scale and wisdom to do the work we cannot. Outsourcing has enabled plan sponsors to create and oversee plans with even more expected through PEPs, government mandates and SECURE 2.0 tax credits as well as the 275,000 wealth advisors who do not specialize in DC plans. What iJoin does for smaller over 60 providers aggregated functionally and even some of the next level record keepers can make their user front ends and data backends competitive.

For RPAs, that could mean an alternative to the record keepers they see as potential competitors because as wealth, retirement and benefits converge at the work place, all roads lead to the participant. iJoin may offer a safe and faster way to get there for RPAs.


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

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