VI Lenin once said: “There are decades where nothing happens; and there are weeks where decades happen.” The perception of time passing can be subjective, and sometimes life feels uneventful, while other times, it feels like a lot of important events happen within a short period of time. All of this is an apt description of the retirement plan advisor business right now, which is about to undergo a dramatic transformation.

Many factors are forcing this transformation now, but let's first review the relatively short history of RPAs.

Defined contributions, particularly 401(k) plans, began to explode among small markets in the 1990s led by Fidelity, which used proprietary mutual funds and 12(b)(1) fees to offset sponsor costs. along with insurance providers. which used annuity wrappers to subsidize plan costs and pay intermediaries without cap or transparency. All of this opened the door for pension salespeople, benefit brokers and eventually wealth advisors to sell 401(k) plans with advisor-friendly mutual fund companies like Putnam, MFS and American Funds entering the 401(k) market. .

The fledgling RPA industry, which began in the 1990s, grew almost unnoticed by most broker/dealers and insurance firms. The 2000s saw enlightened brokers acting and signing as co-fiduciaries offering due diligence on investments with some promises to lower recordkeeper fees, which were unregulated in part because they were hidden.

Triple F advisors (funds, fees and fiduciaries) at the time were a revelation, with most brokers and brokerage firms unable to adopt. It was a dramatic transformation that has run its course over the past 20-plus years. Like all transformations, latecomers or late adopters eventually catch up or go out of business. Triple F's RPAs are commoditized because:

1. Fund due diligence has become table stock as firms like Fi360 and RPAG churn out reports in seconds, enabling blind squirrels to see and causing a mass exodus to index and target funds.
2. Investment due diligence services can be provided to firms such as Morningstar and Mesirow for a few basis points.
3. Fees remain important to planning sponsors, resulting in less experienced advisors being willing to pay less by outsourcing fiduciary and fund services –Record holder fees have been squeezed close to their limit courtesy of experienced RPAs and lawsuits.

The dramatic transformation of RPA's business, highlighted by a shift in focus to participant rather than plan fees, has been driven by:

1. Convergence of wealth, pension and workplace benefits
2. Consolidation of data custodians and RPA and RIA advisory firms
3. Greater government focus on DC plans:

   1. Features like HSAs, student loans, and emergency savings accounts that aren't directly related to retirement plans
   2. State mandates
   3. Tax credits

4. The re-emergence of wealth advisors due to:

   1. The explosion of small plans
   2. Opportunity to develop and find new affluent clients
   3. The need to serve customers who manage or own a business

5. ACTIONS
6. Request for customization
7. AI beyond streamlining processes, enabling advisors to serve infinitely more clients, bringing advice to scale measures and financial planning as a benefit with relatively low costs
8. Private equity money looks for results and better business leaders who can deliver those results
9. Plan to awaken sponsors by going from unconsciously incompetent five years ago to consciously incompetent on the path to consciously competent, resulting in:

   1. DC plans as a strategic versus tactical benefit used to recruit and retain
   2. Disclosure of conflicts of interest with their co-fiduciary advisors
   3. Pension income
   4. More RPA due diligence and solicitation

Few firms are ready, willing and able to make this transformation and even fewer are implementing it now. Although aggregators are well positioned, many are still focused on integration and culture building, which will be required before they can execute.

And just as Triple F advisors clashed with brokers, making them look outdated and conflicted, the new breed of RPAs will test Triple F advisors, resulting in accelerated consolidation and the exodus of brokerage firms. unable or unwilling to evolve.

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