The retirement plan industry talks a good game about putting participants first. You’ll hear compelling rhetoric about innovative products designed to better serve employees, enhanced engagement tools, and sophisticated investment options that promise improved outcomes. But retirement advisor Nate Moody, a partner at Lebel & Harriman, recently noted in an article penned for the National Association of Plan Advisors that beneath this polished messaging lies a darker reality: Many providers are increasingly driven by products and profits rather than participants’ best interests. This quiet but significant transformation is largely invisible in marketing materials and industry presentations, but becomes unmistakable when you examine the business incentives driving how advisory firms operate today.
The root of this evolution lies in the current structure and funding of many advisory firms. Private equity ownership has become increasingly common among the nation’s largest retirement plan advisory firms, fundamentally altering their priorities. While this isn’t inherently problematic, it creates pressure to grow faster, scale operations, and extract maximum value from every client relationship. Plan participants become profit opportunities rather than people with retirement dreams.
This structural change manifests in several concerning ways. Managed accounts, originally designed to provide personalized participant guidance, have transformed into profit centers for many firms. Advisors increasingly push their own internally managed account platforms as default options, despite higher fees and limited performance transparency. The firms collect fees both as advisors and managers, creating a clear conflict of interest.
The push for alternative investments in 401(k) lineups has intensified, with private equity, private credit, and private real estate being promoted despite their complexity, illiquidity, and higher costs. While these investments might suit defined benefit plans or professionally managed portfolios, they present unnecessary complications and risks for average participants. The financial incentives for promoting these products are substantial, particularly when private equity investors hold ownership stakes in both advisory firms and asset managers.
Pooled Employer Plans (PEPs) are being aggressively marketed before thorough vetting, often without full disclosure of embedded conflicts. When the same firm serves as the 3(38) fiduciary, recordkeeper liaison, and asset aggregator, serious questions arise about independent oversight and monitoring.
Cross-selling into wealth management, typically introduced as “financial wellness” or “participant support,” creates additional conflicts. Some advisors actively solicit participants for rollovers into higher-fee individual retirement accounts as soon as they become eligible, blurring the line between education and sales.
The growth of national advisory aggregators has created relational distance between advisors and the clients they serve. Decisions now originate from corporate headquarters rather than committee rooms, and participant needs are filtered through data dashboards instead of personal conversations. This distance undermines the judgment, accountability, and relationships that effective fiduciary advice requires.
Plan sponsors should ask pointed questions about potential conflicts of interest. Key inquiries include whether advisors recommend products their firms profit from, what ownership ties exist with recordkeepers or asset managers, who actually manages the relationship locally, and how success is measured. Prudent fiduciaries need to understand whether conflicts are being managed transparently and in participants’ best interests.
The article makes a compelling case for returning to independent advisory models—firms without proprietary products, hidden fees, or outside ownership pressures. True independence creates alignment between plan sponsors, participants, and advisors, enabling advice free from ulterior motives.
As Mr. Moody pointed out, plan sponsors must follow the money to understand their advisor’s true incentives. The people in these plans aren’t just numbers on a spreadsheet—they’re individuals working hard to provide for their families while trying to save enough for a comfortable retirement. Their life savings deserve advisors who take fiduciary responsibility seriously and prioritize participant outcomes over profit margins.
