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Societal Shifts, Technology Forcing Changes to 401(k) Industry

And accelerating record keeper and advisor consolidation.

Change is inevitable, a fundamental, immutable and irrefutable law of nature. Yet most of us resist rather than lean in, wasting valuable time, resources and energy. The defined contribution industry is no exception. As retirement planning takes center stage, emerging from what was once a slow-moving financial services sideshow, it will further accelerate record keeper and advisor consolidation.

According to the seminal Harvard Business Review article by AT Kearney consultants analyzing 1,345 mergers entitled “Consolidation Curve,” all fragmented industries that can consolidate eventually will. Societal shifts, technology and laws, including litigation, are having major effects on an industry that has moved slowly to adapt but now has no choice.

So what are the societal forces, and how will they affect advisors, providers and asset managers?


Some cynics still question whether the convergence of wealth, retirement and retirement at the workplace is overblown. Though we are just at the beginning, there is little doubt the workplace is ideal to help people without access to personal advisors or financial planners for a myriad of reasons.

Declining plan fees are forcing both record keepers and advisors to search for new revenue sources while asset managers, especially active managers and those without a top target date fund, struggle.

Explosion of Small Plans

Federal and state lawmakers are focused on increasing access to retirement plans at work, leading to an unprecedented explosion of small plans through state mandates, tax credits and PEPs. Most advisors and providers face what Harvard Business School professor Clayton Christensen called the innovators’ dilemma as their current business models are not suited to leverage this explosion.

COVID-19 as a Catalyst

The world forever changed because of the pandemic. More people are working remotely, which can be challenging, but it also affords opportunities. Most people, especially remote workers, are comfortable getting financial advice, which lowers costs. The pandemic has also led to historic job growth, creating a war for talent making retirement plans a key strategic weapon to recruit and retain workers and continues to fuel the gig economy.


It’s hard to think of any part of our lives technology has not affected. Fueled by more accessible data, people expect personalization as technologies like AI and ChatGPT are creating new paradigms.

Shifting Retirement Liability to Individuals

As traditional DB plans fade because companies do not want the liability associated with people living longer, DC plans are being retrofitted to help participants manage their own personal pension plans. Yet, even with the great strides made through auto-plans, wellness programs, and eventually in-plan retirement income, most people without an advisor still struggle to manage their finances and retirement planning.

So how will these outside influences affect the DC industry?

RPA 401(k) Record Keepers

The inevitable drumbeat of consolidation continues as providers are and have been squarely in the third of four stages of the consolidation curve, called “Focus.” After ferocious consolidation in stage two, “Scale,” survivors look to expand their core businesses and outgrow their competition. This stage includes megadeals as survivors ruthlessly attack underperformers.

The poster children are Empower’s acquisitions of the retirement groups of MassMutual and Prudential as well as Principal buying Wells Fargo’s division. There also have been recent, small eruptions like Ascensus acquiring Mutual of Omaha’s group. There are over 40 national record keepers and another almost 200 regional record keeping TPAs, which is unsustainable.

There are about a dozen providers likely to not just survive but thrive, which include:

  1. Scale – those with almost 10 million or more participants
  2. Niche – those leveraging convergence like Schwab or proprietary distribution like American Funds and payrolls like Paychex
  3. Fintechs – those riding the small plan wave through technology and efficient processes

Though consolidation for most other providers is inevitable, firms without scale or massive distribution that leverage the convergence wave, which continues to prop up valuations, may keep some in the market.

Convergence also sets up a showdown between some providers and advisors over who owns the participants.


RPAs are in stage two of the consolidation curve, when major players emerge rapidly, buying up competitors and honing integration skills, core culture, retention and a scalable IT platform. RIA aggregators like Creative Planning and Mariner see the value of large participant bases to grow their wealth client businesses while RPA aggregators have or are trying to leverage their relationships with and access to participants to build their wealth capabilities.

Local or regional RPAs, even those able to leverage the convergence, will struggle to keep pace—larger ones will find it harder and harder to resist the big checks aggregators are offering. Leveraging PEPs and technology, institutional investment consultants like AON, who recently bought NFP and have gone through their own consolidation curve, are greedily eyeing smaller plans.

And wealth advisors that have traditionally avoided DC plans are starting to get religion as more of their clients who own or run a business are asking for help while technology is enabling them to access a subset of the participants that are attractive for their wealth business while outsourcing most of heavy lifting and fiduciaries services.

Even DCIO firms and broker/dealers are experiencing their own form of consolidation though not driven by, but certainly affecting, 401(k) plans like the recent acquisition of Putnam by Franklin Templeton.

Creating or expanding new business models is not easy, requiring different skill sets, clients and technology, but those that resist will be drowned by the consolidation wave stoked by societal forces that are growing and aimed straight at the 401(k) industry.


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

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