The relationship between retirement plan advisors and their provider partners, especially record keepers, is changing driven by consolidation and the convergence of wealth, retirement and benefits in the work place, as well as the evolving business models of both parties. More than ever, it is critical that advisors choose partners that not only survive a challenging business environment, but also have compatible business models.
401kTV recently connected with T. Rowe Price, a leading provider in the retirement plan space, to gain insights into their business and how they collaborate with Retirement Plan Advisors (RPAs). Mike Shamburger, Head of Core Markets and Retirement Plan Sales at T. Rowe Price, highlighted a key trend shaping the dynamic between advisors and recordkeepers: “I think one important trend that we’ve both seen is advisor consolidation. So a lot of advisors are joining, new firms are being acquired, which is changing their model a bit.”
Most of the larger RPA groups, commonly referred to as “aggregators,” are backed by private equity, placing significant pressure on them to achieve rapid growth. For many, this growth strategy involves expanding into participant services. Similarly, recordkeepers face comparable pressures, which can sometimes lead to conflicts of interest between the two groups.
Shamburger noted, “We’ve continued to have our fees reduced. Advisors are beginning to feel some of that challenge. So I think going forward, that’s creating is a little bit of conflict, I think at times between certain record keepers, depending on their business model.”
Some providers are clear about their intentions to serve participants even as they covet RPA relations while others are less so. If an advisor wants to and has the resources to service participants, there needs to be clear rules of engagement. There may be some resources that providers have that should be leveraged and some segments of participants that are better served by them. Ultimately, as fiduciaries, advisors need to do what is in the best interests of their clients focused on improving outcomes.
It can be a tough but necessary conversation for advisors to have with all partners as plan sponsors look for help for the less affluent employees. T. Rowe Price has decided to support advisors rather than compete over participants. “We provide great record keeping services to our clients, and we combine that with exceptional investment management.” Noted Shamburger. “When we can put those two things together, it creates a conflict-free business model which allows us to sit on the side of the table with the advisor and really understand their strategic priorities and figure out how can we assist them.”
Advisors are seeking tangible support from providers, beginning with access to robust data and extending to co-branding opportunities, shared resources, and tools that enhance their ability to engage with and serve participants effectively.
Beyond participant services, advisors need to independently evaluate if their partner can compete and survive in a tough environment that requires significant capital and infrastructure. When asked what questions advisors should ask, Shamburger stated, “The commitment to the business, the scale that the record keeper has within the business and then a better understanding their business models.”
T.Rowe Price has historically sold direct to plan sponsors working with larger DC plans and over the past decade has shifted focus to advisor because, as Shamburger noted, “We’re reading the industry.”
Regarding helping advisors to leverage the convergence, Shamburger noted, “We think we can build that bridge. And when we look at the digital experience that we create through record keeping, there’s the ability to leverage that to help drive things like branding for the advisor, even custom messaging to those participants. We have a tremendous amount of data on those participants too, to understand what their needs are. So it even makes lead generation for the advisor [possible] within that scale.”
