Greetings and welcome to this week’s edition of 401k Real Talk. This is Fred Barstein contributing editor at WealthManagement.com’s RPA Edge and CEO at TRAU, TPSU & 401kTV - I review all of last week’s stories and select the 5 most important and interesting ones providing open honest and candid discussion you will not get anyway else. So let’s get real!
A few major DC record keepers reported year-end results led by Empower and Fidelity furthering the gap between the Fab 5 RPA providers and the rest of the almost 40 other national record keepers.
Empower showed an impressive 17% increase in assets at $1.5 trillion with 18.5 million participants while Fidelity’s DC assets jumped 22.3% to $2.3 trillion and 2.3 million participants distancing them from other elites like Vanguard, Principal and Voya.
Empower’s wealth division grew 268% over the past 3 years to $72 billion which still pales in comparison to Schwab which reported assets of $8.56 trillion, 35 million brokerage accounts and 5.2 million DC participants.
Other major DC providers include the two payroll companies, asset managers like American Funds and T Rowe Price, both leaders in TDFs, fintechs and regional TPA record keepers leveraging cheaper, more accessible and shared technology.
So while the consolidation of providers is expected to march on, advisors will still have many good options.
Pontera announced a partnership with Captrust to enable their advisors to manage client’s DC accounts as part of their overall financial planning.
While Pontera has seemed to focus more on wealth firms and broker dealers, RPA Aggregators like CAPTRUST, which is the leader at $817 billion, can use Pontera to not only work with wealth clients but also participants in their DC plans. Expect others to follow as the convergence of wealth and retirement picks up steam.
As expected, the brokerage and insurance industries pushed back on the DOL’s new fiduciary rule at a recent Congressional hearing arguing that the agency has overstepped their jurisdiction and it will hurt investors served by brokers and insurance agents.
Michael Kitces, who also seems to oppose the rule, recently wrote that the solution could be to require financial advisors to clearly label themselves as “sales people” rather than advisors giving unbiased advice.
The issue is that most DC participants are unsophisticated which is why the DOL focuses on restricting behavior rather than more disclosure the SEC proscribes.
And does it make sense for an advisor to wear the hat of sales person and fiduciary to the same clients just as wd we want our doctors also to represent pharmaceutical products?
The DOL’s EBSA division announced $1.4 billion in recoveries last year, similar to 2022, with $844.7 coming from enforcement actions. There was a focus on terminated and vested participants just as the DOL prepares for their database in 2025 as required under SECURE 2.0 and recently announced auto transferability rules. $444 m was restored to workers who made 197,000 inquiries to the agency.
All eyes are on the election which could change the tenor of the DOL and their willingness to defend the fiduciary rule in court as well as the Supreme Court’s Chevron case which would further limit the agency’s rulemaking ability.
As plan sponsors wake up going from being consciously incompetent to consciously competent, they will drive change in the DC industry which has previously been led by record keepers, advisors and asset managers.
Read my recent WealthManagement.com column about how plan sponsors will dramatically increase the pace of change and force both advisors and providers to leverage the workplace to holistically help employees with all of their financial and benefit related issues.
So those were the most important stories from the past week. I listed a few other stories I thought were worth reading covering:
- LPL makes massive acquisition of Atria
- TDF assets reach $3.5 trillion
- OneDigital makes big acquisition in Chicago
- TIAA settles SEC charges
- Morningstar provides insights about PE in DC plans
Please let me know if I missed anything or if you would like to comment. Otherwise I look forward to speaking to you next week on 401k Real Talk.
