Defined contribution record keepers continued to focus on financial wellness, cybersecurity and digital engagement in 2018 — a year in which assets under administration rose nearly 8%.
While the number of blockbuster deals has slowed in recent years, record-keeper consolidation is also expected to remain a trend. In fact, on April 9, Principal Financial Group Inc., Des Moines, Iowa, announced that it will be acquiring Wells Fargo & Co.'s record-keeping business for $1.2 billion.
"There has been a lot of vendor consolidation, and there is going to be more to come," predicted Robyn Credico, Arlington, Va.-based defined contribution consulting leader for Willis Towers Watson PLC.
Record keepers are "continually looking to stay profitable, but it's thin margins," Ms. Credico said.
Record-keeper assets totaled $7.45 trillion for the year ended Sept. 30, Pensions & Investments' latest survey of the largest record keepers showed. That figure is affected by Alliance Benefit Group, PNC Bank NA, BOK Financial Corp., and Reed-Ramsey Inc., which did not participate in the 2018 survey. When omitting the four firms from the 2017 survey data, this year's total represented an 8.7% increase from 2017.
The number of DC participants among survey respondents, meanwhile, rose to 101.1 million in the latest survey, a 3% increase from 2017 — or a 4.4% increase when omitting Alliance Benefit, PNC, BOK and Reed-Ramsey.
Protecting data and assets from cyberattacks has been and will continue to be an area of intense focus for record keepers and their clients, sources said.
"It's a boardroom topic for our plan sponsors, and it's a boardroom topic for our firm," said Robert Salerno, senior vice president of relationship management at Fidelity Investments, Boston.
Cybersecurity initiatives at Fidelity include, among other efforts, proactively monitoring accounts, requiring multifactor authentication at login and for certain transactions, sending text updates when transactions or account changes are made, holding routine meetings with advisers to discuss cybersecurity trends and best practices, and providing a customer protection guarantee. Fidelity officials declined to provide details on the cost of its cybersecurity initiatives and the size of its team.
Other record keepers echoed Mr. Salerno's comments about the importance of building up cybersecurity protections. "Cybersecurity is always going to be something we're focusing on," said Martha King, managing director and head of Vanguard Group Inc.'s institutional investor group. "The kinds of threats evolve constantly. The people who are trying to get at you or people's assets, that group is constantly evolving. It's an area where we're never going to take our foot off the gas," Ms. King said.
Survey respondents reported spending an aggregate $92 million on cybersecurity technology for the year ended Sept. 30, a 35.3% jump from 2017. (That number is likely to be higher because Fidelity and several others did not provide dollar amounts.)
Over the same period, the number of cybersecurity professionals employed by survey respondents rose 18% to 3,969 professionals. Meanwhile, the number of professionals working in record-keeping operations declined 7.8% to 20,999; investment analysis and due diligence, down 20.8% to 4,062; and relationship managers, a 23.4% decline to 2,728.