Twenty-five years ago, when a number of savvy wealth advisors, insurance agents and benefit brokers saw the potential in 401(k) plans with many acting as fiduciaries, they announced their ability to help plan sponsors reduce record keeper fees. Provider fees fell rapidly, helped in part by the 408(b)(2) and 404(a)(5) regulations of 2012, a movement started years ago by California Congressman George Miller even making 60 Minutes in 2009 when the market crashed, and investors saw big drops in their 401(k) accounts.

These actions eventually led to a reduction in the advisor's fee. While some advisers' fees were outrageous and others did nothing, it affected the entire industry as hungry competitors were willing to pay less. This, in turn, led to the exodus to index fees that some advisers used to prop up their fees while maintaining overhead costs.

Lawsuits focused on record keeping and fund fees have only added fuel to the fire.

So why, at the same time, have wealth adviser and money manager fees remained relatively stable?

There are two basic reasons. First, ERISA requires plan fiduciaries to ensure that fees are reasonable. Although they participate in the plan, the trustees are buying on behalf of others. Second, fees always seem high in the absence of value, and most buyers haven't been smart enough to recognize value. Wealthy investors are more sophisticated and willing to pay for value, while these advisors and multifamily offices have added ancillary services.

The race to the bottom is emphasizing the defined contribution system with predictable results:

1. Registrants are experiencing service issues as they struggle to maintain high quality with rising costs.
2. Counselors are forced to take on more service tasks, which means hiring and training people, which most are not good at.
3. Advisers and providers are moving to find additional sources of income to drive the convergence of wealth, retirement and work benefits, as institutional consultants have done through OCIO services.
4. Less income to support advisers and providers from fund companies as they move to passive investing.
5. Industry-wide consolidation.

At the same time, plan sponsors are waking up. They went from being unconsciously incompetent to consciously incompetent about five years ago and are quickly moving to being consciously competent, demanding more from their providers and counseling partners.

The cost of the technology is only increasing, with record keepers constantly plugging holes in outdated and leaky systems, unable or unwilling to start over. Meanwhile, the price of cyber security is also rising, requiring armies of highly skilled professionals.

Meanwhile, The GAO is looking into industry practices of using the data to sell or sell to third parties, with recommendations due out next summer.

Private equity firms have spent billions buying or investing in record-keeping and advisory firms, which will eventually have to cash out or sell at a discount. The only way to justify these prices is that drilling for oil under the barren desert or participants.

Although some have predicted the death of third-party administrators through PEPs, payroll and fintech. which may serve the explosion of small but limited-service plans, the opposite is true as more record holders than ever work with TPAs, culminating in Fidelity finally entering the market.

TPAs are an external service army at no cost to data controllersalthough plans may charge more. As the expected influx of wealth advisors moves in to accommodate new and smaller plans, they will need TPAs ​​to help just as RPAs did 25 years ago. While the promise of PEPs is intriguingso far, adoption is slower than expected, and costs are not lower due to 3(16) fiduciary services.

There is no silver bullet to solve the problems caused by the race to the bottom.

Technology and artificial intelligence can help, as can blockchain, which can securely release participant data. The need to cross will only increase if lawmakers, courts, and regulators create major obstacles. And the big one will get bigger as smaller providers, advisory firms and asset managers don't have the resources to compete, resulting in accelerated consolidation. As plan sponsors become more savvy, they may be willing to pay more for better service using their DC plan as a recruitment and retention tool.

Without tariff pressure, the DC industry may have remained complacent, staying in their lane and doing what they've always done. This is why their businesses have been forced to evolve faster than wealth advisors. Rate pressure will drive out the underdogs, with winners looking beyond plan rates to boost income and win, perhaps at a discount.

Fred Barstein is the founder and CEO of TRAU, TPSU and 401kTV.