During a recent Retirement Plan Advisor RFP with an $80 million defined contribution plan, the main issues revolved around service after their prior record keeper was acquired. Their current RPA was not able to help with the transition or provide the necessary support afterward, and, as a result, they did not even make the finals. Similarly, at a TPSU program years back, two plan sponsors with the same record keeper were equally happy and unhappy because one plan’s provider was acquired.
Rarely, if ever, does a plan sponsor say that they enjoyed the integration process or that service improved immediately after. Even if the new record keeper has a better website or technology, they are different and takes time to learn.
There are currently 40 national record keepers and hundreds of local ones, which means firms like OneAmerica that do not have scale or a unique distribution or service model are likely to be acquired.
All of which is a blessing for experienced RPAs.
While advisors bombard OneAmerica clients, and the current RPAs, as well as Voya, will do everything to retain the client, even after an acquisition, DC plans with less-than-stellar advisors who did not go through the required RFP process before they accepted the acquiring provider create innumerable opportunities.
After integration, the new record keeper’s service may suffer as they may have to cut costs while struggling to train service people on a new system. This is an opportunity for RPAs who are willing to take on more service duties or who know how to navigate the new record keeper, perhaps with greater leverage.
This leads to a more delicate issue—if plan sponsors are required or recommended to conduct a full RFP when their record keeper is acquired, what about their advisor? Even if the lead advisor stays for the payout period and beyond, they are generally not the lead service or contact person. To justify the price, aggregators will need to integrate new advisors into their systems and procedures, which means change and might even have a centralized or regional service model.
The acquired advisor does not have the same authority or autonomy and may be forced to offer products and services that can create conflicts. Granted, the new advisory firm may have more resources and better technology, but it is different and takes time to get used to.
Think about two different approaches after an advisor is acquired:
- “You should conduct an RFP with an independent consultant to see if our new firm is the right fit for you going forward”
- “No need to conduct an RFP,” or, even worse, “I can benchmark our services which is just as good as an RFP.”
Like death and taxes, industry consolidation is inevitable. For some advisors, this can be a great opportunity, but it will cost those who are not proactive.
Fred Barstein is founder and CEO of TRAU, TPSU and 401kTV.