The convergence of wealth, pension and workplace benefits is exposing the strengths and weaknesses of the defined contribution system. At its core, convergence has the potential to pit advisors and registrars who collaborated against each other as both parties seek to serve and ultimately monetize participants.

The forces driving convergence in the workplace are based on social pressures that the DC system cannot control or mitigate. The move away from defined benefits to DC plans shifted the obligation, but also the power, to individuals. And although most average people are neither engaged nor able to afford personalized financial advice, the power of AI is likely to change that.

Along with the need to move beyond increasing participation and contributions or placing them in target date funds and hoping for the best, record holders, advisers and asset managers must seek new forms of income as ways the old have been commoditized, resulting in dramatic tariffs. reductions.

Recently announced the sale of OneAmerica's pension division for Voya it is a cautionary tale and perhaps a watershed moment. So far, valuations of 401(k) record holders and retirement plan advisors have skyrocketed, compared to active fund managers, with buyers and investors supporting a firm's ability to return participants. Typically, record holders are estimated at $500 to $600 per participant, which, while high, was dwarfed by the reported $1,000 paid by Empower for MassMutual's retirement business. Fintech record holders with little or no profit have raised over $1 billion. If correct, One OneAmerica, with 1.1 million participants for an initial price of $50 million with a potential close of $160 million, is valued at $50 to $200 per participant.

Could this be the moment when private equity firms, venture capitalists and potential acquirers begin to take a more realistic view of who can execute on the convergence potential than who is able to do so? It won't happen? Remember when the value of active asset managers plummeted?

All of this pits the advisers who sell the plans against the record holders who serve them. In one of RPA Record Holders Roundtable 2019s, the head of a major provider asked why advisers were being paid more than his firm, which made 40 million participant calls, forgetting who sold the plan in the first place. How much would it cost to replace that sales force?

And while some have an optimistic view of how advisors and data custodians can and should collaborate, realistically there is a winner for each participant. Those record holders like OneAmerica that don't compete for participants, perhaps because they can't, will have a hard time competing with Fidelity, Schwab, Vanguard and Principal.

In the last RPA Broker/Dealer Roundtablethe group mailed to a record holder who advocates their advisor support while openly competing for participants who didn't even want to sign sales agreements that put restrictions on who they could call.

This is the current reality for partners who are now being forced to compete due to the need to generate more revenue and justify their valuations, the demand from plan sponsors to help more of their employees, and the obvious need and opportunity. for helping average people.

401(k) plans are an illusion—they conveniently and cost-effectively pool individuals' tax-efficient retirement savings. Most of the DC industry is finally realizing and trying to take advantage of the participants' services, just like the Arab world did when they became aware of the underground resources of what seemed like a barren land.

Plan-level services are like the hard-to-survive Arabian deserts – the participants are underground and untapped resources. Who can mine them and who owns them or has the right to do so?

While data is key, it is like crude oil. It must be refined, stored and distributed safely without spilling oil. In other words, how to use the resource to scale advice for measures? Of course, data custodians and perhaps RPAs are well positioned, but so are wealth managers who have more experience and access to technology, acting as refiners.

Those who can use AI will win, not by replacing humans, as robo-advisors promised and failed to do, but to augment and complement advisors, as well as by seeking and engaging.

Within this framework, we asked several providers and consulting firms what they were doing to partner. It's a complicated and sensitive subject that few wanted to discuss on the record. Some of the best answers include:

• Kameron Jones, SVP at NFP Retirement (an Aon company) wants their recordkeeping partners to be flexible and collaborative, willing to share data with the understanding that no one party can do everything for all participants.
• Joe DeNoyior, president of Hub Retirement and Private Wealth, seeks help with branding, particularly through accounts managed by advisors who provide Hub-like education while generating leads.
• Jack Barry, head of product at John Hancock Retirement, said his firm is willing to share data with plan sponsor permission, as well as branding through adviser-managed accounts.
• Brad Arends, CEO of Intellicents, wants record keepers to refer their services to their website with instructions on how to get there, providing data for laid-off employees while closing their efforts if the customer agrees.
• T Rowe Price provides advisor branding, data, co-developed products and integration of advisory solutions.

While some note takers were cited as unfriendly or friendly, it may not be fair to cite them with such a small sample size that may depend on the size and solutions of the consulting firm. That said, the “usual suspects” wouldn't even comment.

The new aim of DC plans is to reach and engage with more people in the workplace to improve not only retirement income but ultimately financial situations through a plan that includes advice on debt, credit, savings and investments.

Beyond investment performance, participation and contribution rates and match maximization, the DC industry, particularly holders and advisors of record, will be judged and evaluated on holistic outcomes with customer experience not against each other, but against what the customer takes out their DC plan and wealth management services.

Who wins will depend on their ability to mine, refine and deliver advice at scale by partnering with willing providers while building brand and ultimately a relationship built on trust over time with employees using data, technology and AI tempered with sensitivity.

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