Hello and welcome to this week's edition of 401k Real Talk. This is WealthManagement.com's Fred Barstein Omnichannel RPA Contributing Editor & CEO at TRAU, TPSU & 401kTV – I Review everything from the past week's stories and pick out the most relevant and interesting ones offering an open honest and frank discussion that you wouldn't get anyway. So let's get real!

Although the annual 2023 P&I Record Keeper study shows DC assets up 23% from last year, many experts still expect significant provider consolidation with NEPC's Bill Ryan predicting 3 of the top 15 record holders will be acquired in the next 18 months. Although data custodians are paid for assets with costs associated primarily with participants, which were only 5%, margins are still very thin and are expected to decrease as the benefits of economies of scale diminish as providers grow.

Surprisingly, 80% of record holders are pursuing start-ups according to Cerulli and SPARK who are likely to use PEPs with 30% acting as PPPs. Ascensus had $1 billion in their PEP as of 2023, while AON, the leader with over $2.5 billion, is expected to tap into its NFP holdings soon, which has a significant retirement base and customer benefits. Cerulli predicted almost 1 million 401k plans by 2029 while the P&I study reported over 843,000 DC plans last year.

While Fidelity and Empower are 1-2 in assets and participants, ADP and Paychex have more plans.

For advisers, the key is to find providers who are unlikely to be bought as they will be blamed if a record holder recommends leaving, which can also cause a return to their client base. And as the convergence of wealth and retirement heats up as a result, in part, of declining fees, advisors must determine who are friends and who are foes.

Is the convergence of wealth, retirement and benefits a fad as some industry and association leaders have recently suggested questioning whether advisers can realistically tap into their participating client base, most of whom have limited assets?

According to the three main RPAs, significance level of convergence in their practice it is one of if not the highest priority. Not only have they integrated wealth and retirement into their practices using DC plans as a source of wealth resources, they argue that they will ultimately be judged by participant outcomes, not just the plan. And as plan-level fees drop, the advisors that participants use will be more competitive and want to grow.

Looking at the advisor M&A market, RPA Aggregators are buying more wealth practices following Captrust's lead while a growing number of RIA aggregators like Creative Planning and more recently Mariner are buying retirement practices.

Encore Fiduciary, a leading insurer, is hoping for a big one change in the way fees are calculated from the average Book 401ks including indirect payments will stem the tide of litigation.

Previously, a $200 million plan with 2,000 participants showed an average of $5/participant in recordkeeping fees – in 2024, that number has risen to $97 when revenue sharing is included plus $70 for advisors .

It likely doesn't include the fees paid by fund companies to be on record-keeper platforms and for advisory firms to have access to their proxies, which is a story for another day.

We all know that AI will impact and likely improve DC plans and participant outcomes, but no one is sure how and what measures should be taken to limit fraud and abuse, especially in a multi-fiduciary world. controversial.

or thoughtful column from a leading law firm outlines the issues that present whether plan fiduciaries who do not use AI will be at risk while those who do may also face liability.

Should 321 or 338 co-fiduciaries use AI when selecting and evaluating investments that include plan demographic information? If they do, what are the plan tasks to monitor? Should AI be used to combat cybersecurity risks and can it predict black swan events? Should AI questions be included in the RFP?

Along with plan fiduciaries, regulators are raising questions about AI with the SEC suggesting that algorithms can be manipulated to benefit advisers.

Even with the interesting move by IBM to eliminate their 401k match by putting 5% into a DB-like plan, no one is suggesting that pension plans will make a comeback.

But the shift of responsibility to participants in the move from DB to DC plans by having each participant manage their own personal retirement plan is changing the role of retirement plan advisors.

Read my latest WealthManagement, com column how RPAs are now becoming not only pension managers for their participants, but also external administrators of DC plans that used to be done by in-house pension professionals as many HR and finance people jump into the job of overseeing their DC plan with limited knowledge, training and resources.

So those were the top stories from last week. I listed a few others that I thought were worth reading:

Please let me know if I missed anything or if you would like to comment. Otherwise, I look forward to talking with you next week on 401k Real Talk.