The convergence of wealth, retirement, and benefits at the workplace is shedding light on both the strengths and vulnerabilities of the defined contribution (DC) system. This shift is creating tension between advisors and record keepers, who once partnered together but are now competing to serve and monetize participants. As the shift from defined benefit to defined contribution plans has transferred liability to individuals, many participants lack the financial literacy or access to personalized advice, although the growing power of AI may bridge that gap. Meanwhile, record keepers, advisors, and asset managers are facing fee compression and commoditization of traditional services, prompting them to seek new revenue sources.
The sale of OneAmerica’s retirement division to Voya highlights how the financial industry is reevaluating the value of record keepers and advisors. In the current environment, record keepers and advisors are forced to compete, particularly as plan sponsors demand more comprehensive support for employees. The future of DC plans lies in enhancing participant services, much like wealth managers, by using data, technology, and AI to scale personalized advice. The firms that succeed will be those that can build trust and effectively leverage these resources to meet participants’ holistic financial needs, including advice on debt, credit, savings, and investments.
Read more insights in Fred Barstein’s Wealth Management article titled, “Convergence Pitting Advisors Against Record Keepers at the Workplace.“
