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June 28, 2021 12:00 AM

Record keepers making changes for the long haul

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    Recordkeepers cartoon
    Roger Schillerstrom

    Our June 28 selection showed how record keepers are racing to gain scale and add services to secure future opportunities but also to produce better retirement outcomes.

    Get big. Get cheaper. Get the technology up to date.

    Those 10 little words pretty much sum up the marching orders for record keepers under unrelenting fee pressure from plan sponsor clients, which also are demanding robust cybersecurity protections and new services to bolster participant engagement. Those aren't unreasonable asks — but it's not an easy circle to square.

    In the past few years, we've seen record keepers responding in several ways to accomplish those goals.

    Mergers continue apace as firms race to gain scale and add services. Empower Retirement's acquisition of MassMutual's record-keeping business, completed earlier this year, solidified its No. 2 spot in Pensions & Investments' latest survey for the year ended Sept. 30. The deal brought 2.5 million participants in 26,000 workplace retirement plans to Empower's platform and boosted its assets by roughly $167 billion, to a total of $883.5 billion. Even so, the firm also credited investment in both front-end client-facing services and back-end data and infrastructure technology services for enabling it to grow assets.

    Meanwhile, two other big players, Vanguard Group Inc. and T. Rowe Price Group Inc., have opted to outsource their technology systems to partners with the expertise of running complex reporting systems.

    It's still too early to evaluate how these individual bets will pay off. Nevertheless, hopes are high among firms that building better systems for clients and developing better tools and services for participants — everything from budgeting help, HSAs and emergency savings to student loan services — will produce better outcomes for all.

    And all of these efforts serve to set these firms up for opportunities in the future.

    Cerulli Associates Inc. estimates that retiring employees are transferring some $500 billion annually from defined contribution plans to retail firms.

    With that flow likely to continue as more and more baby boomers move into retirement, it is hard to overlook the connection between today's investments and alignments and tomorrow's business. We hope that this means retirees, as they move beyond fiduciary-led plans, also will be served well.

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