The prospect of plan fees for advisors and record keepers hitting zero may seem improbable, given that a significant portion of their revenue is derived from plans. However, a trend of declining plan fees over the last two decades persists, driven by industry consolidation and the emergence of larger entities handling more plans and assets. Wealth advisors, traditionally cautious about the lower fees and higher liability associated with DC plans, are increasingly drawn to this space.
Retirement plan advisors and major record keepers are actively shifting their focus to generate more revenue from participant services, capitalizing on the increasing intersection of wealth, retirement, and workplace benefits. While this transition encounters obstacles, such as the need to access employee data and update outdated record keeper platforms, the potential rewards are significant. The rise of small plans, government incentives, and technological progress creates opportunities for fintechs, payroll providers, and wealth advisors to enter the competition for managing DC plan assets. As plan fees trend toward zero, not only does this alleviate fiduciary liability, but it also opens doors for new players, highlighting the importance of proactive readiness in a dynamic market.
Read more in Fred Barstein’s Wealth Management column this week, “Can 401(k) Plan Fees Fall to Zero?”
