Record-keeping services are essential to plan sponsors overseeing defined contribution plans. As demand has grown for low-cost investment options, it has also grown for lower plan administration fees. The larger firms in the market use their scale to compete with lower fees, while larger plans use their assets, the number of participant accounts or both as leverage to drive down costs.
Status quo: Total record-keeper assets have grown 64% since 2012, but the proportion of members and their assets held in the largest record keepers has been mostly stable.
Fees hit bottom: Market pressures have forced record-keeping fees lower, while the shift to passive funds have driven down investment management fees.
A lot changed in 5 years: Allocations to passive funds — both equity and fixed-income — dominate DC plans with target-date funds close behind, a much different picture than 2012.
The bigger the better: Most of the largest record keepers have investment arms that, when used, can lower overall costs to the participant. The three largest managers have produced, on average, better active equity
returns than the universe.*
*Equity universe consists of institutional, lowest-fee share class equity funds. Sources: P&I Research Center,
NEPC LLC, eVestment LLC