Consolidation of record keepers and other vendors to defined contribution retirement plans is a positive trend that leads to better services for participants, according to four speakers at Pensions & Investments’ Defined Contribution East conference March 10.
“It’s a business. You have to continually invest in significant ways,” said Richard Linton, president and chief operating officer at Empower Retirement.
Linton explained that acquisitions allowed Empower to scale up and invest in things such as cybersecurity, technology modernization and product innovation.
“Those with scale have the ability and the capital to reinvest that are so very important to our customers,” he said.
Today, there are roughly 15 record keepers, down from 400 15 years ago, and that number “will continue to shrink,” he added.
Mike Manning, managing partner at NEPC, and Bob Oros, chairman and CEO of wealth management firm Hightower Advisors, agreed, saying consolidation leads to a better customer experience, lower fees and better participant outcomes.
While panelists agreed on the benefits of consolidation, they noted that service providers needed to work together, something that many of them are unwilling to do.
“We’re all going to play different roles in different situations, and today I think we’re just too separate and we need to see those walls break down,” Oros said, referring to the rivalry between different groups of providers.
Oros complained that as a wealth manager some record keepers are “incredibly difficult to work with,” while others are “quite friendly to work with.”
NEPC’s Manning said the trick is understanding how plan sponsors want to work with record keepers, advisers and other providers.
“It’s all about how that we can work with the data in such a way that it makes it easy for advisers to serve their customers,” Manning said.
Manning also urged plan sponsors to “put pressure on their record keepers to work with all the other folks in the ecosystem.”
Jennifer Doss, senior director and defined contribution practice leader at CAPTRUST, agreed. “When we talk about working together as partners, whether record keepers or wellness providers or consultants, it really does take a village,” she said. “We couldn’t possibly do it individually. We have to do it together.”
