In a landmark gathering that underscored the shifting tides of the financial services industry, senior leaders from the retirement divisions of leading broker/dealers convened at the largest-ever RPA Broker/Dealer Roundtable, hosted by Broadridge in New York City on September 3-4. This event, strategically timed just before the WealthManagement.com Industry Awards, buzzed with dynamic, mostly on-the-record discussions that zeroed in on transformative forces reshaping retirement planning and wealth management. Two dominant themes took center stage: the growing convergence of wealth management and retirement planning within the workplace, and an anticipated explosion of over 200,000 new retirement plans within the next five years. These focal points not only framed the dialogue but also illuminated the broader challenges and opportunities facing the sector, offering a window into how industry leaders are navigating this evolving landscape with innovative strategies and cautious optimism.
Key Themes Driving Industry Evolution
Convergence of Wealth and Retirement
Workplace as a Financial Hub
The notion of the workplace as a central hub for financial services emerged as a critical insight during the roundtable discussions, highlighting a transformative trend in wealth management. With defined contribution (DC) plans increasingly seen as a gateway to broader wealth management, broker/dealers are recognizing the unique opportunity to engage participants across their financial lifecycle. This shift is particularly significant given the aging demographic of high-net-worth clients, many of whom are over 60, prompting firms to build relationships with younger workers through workplace plans. The integration of retirement savings with holistic financial planning is gaining momentum, as evidenced by increased resources and executive attention directed toward retirement divisions in recent years. Tools like artificial intelligence are being leveraged to pair retirement plan advisors with wealth advisors, moving beyond traditional geographic alignments to create more tailored participant experiences, signaling a profound change in how financial advice is delivered.
This convergence, however, is not without its complexities, and a notable concern is ensuring that wealth opportunities within DC plans do not directly compete with service providers, as such conflicts could dampen incentives for wealth advisors to engage in this space. Additionally, activating and educating wealth advisors to connect effectively with plan participants remains a hurdle, though plan sponsors are increasingly adopting a more supportive role by seeking to provide financial advice to all workers. This paternalistic approach opens new avenues for advisors to expand their reach, yet technology constraints continue to pose barriers to seamless integration. The consensus among attendees was that defining success in this area requires a delicate balance between business growth and fiduciary responsibility, with a focus on prioritizing client interests under the stringent lens of ERISA regulations, highlighting the nuanced challenges of merging these two domains.
Challenges and Opportunities
Delving deeper into the convergence trend, the roundtable revealed a spectrum of challenges that broker/dealers must address to capitalize on this intersection. One pressing issue is the need for robust technological infrastructure to support the integration of wealth and retirement services without stifling innovation. Many firms grapple with outdated systems that hinder the ability to match participants with suitable advisors or to provide personalized financial planning at scale. The discussions emphasized the importance of developing tools that can streamline these processes while maintaining compliance with regulatory standards. Furthermore, the tension between leveraging wealth opportunities and avoiding direct competition with service providers was a recurring theme, as misalignment could undermine collaborative efforts essential for success in this space, pointing to a need for strategic partnerships and clear delineation of roles.
Beyond technological and competitive challenges, the roundtable also spotlighted the opportunity to redefine success in this converging landscape. Perspectives varied, with some leaders advocating for a client-first approach, ensuring that any integration prioritizes participant outcomes over mere business expansion. Others highlighted the potential to replace aging high-net-worth clients by fostering early relationships with workplace plan participants, viewing this as a long-term growth strategy. The diversity of viewpoints underscored the complexity of aligning business objectives with ethical considerations, especially within the regulated environment of retirement plans. As firms navigate these waters, the emphasis on innovative solutions and advisor education will be crucial to unlocking the full potential of this trend, setting the stage for a more integrated future in financial services delivery.
Explosion of New Plan Formations
Scaling for Growth
The projected surge of over 200,000 new retirement plans in the next five years was a dominant topic at the roundtable, presenting a transformative opportunity for broker/dealers and advisors alike. This “explosion” is particularly impactful in the small business market, where demand for retirement solutions is rising rapidly. Firms are exploring scalable approaches to manage this influx, with digital tools and electronic documentation emerging as vital components to simplify plan design and formation. For instance, online marketplaces offering instant pricing and streamlined processes are gaining traction as ways to ease entry for small businesses. Additionally, innovations like Pooled Employer Plans (PEPs) are helping to reduce administrative burdens, making it more feasible for smaller entities to offer retirement benefits, thus significantly expanding the market for advisors and providers.
The financial upside of targeting this growing segment was evident in examples shared during the discussions, with some firms reporting that advisors focusing on defined contribution solutions for small business owners saw their revenue triple, illustrating the lucrative potential of this trend. However, scaling operations to handle such volume requires more than just technological solutions; it demands a rethinking of traditional engagement models. The challenge lies in ensuring that these new plans are not only formed efficiently but also managed effectively to retain participants and advisors. As broker-dealers position themselves to capture this market, the emphasis on user-friendly platforms and cost-effective strategies will be paramount to meeting the needs of a diverse and expanding client base, while also maintaining profitability in a competitive environment.
Operational Efficiency
Operational efficiency was identified as a cornerstone for managing the anticipated wave of new retirement plans, with roundtable participants stressing the need for systematic and repeatable processes. Reducing costs while maintaining high service quality is a priority, especially when engaging wealth advisors who may be unfamiliar with the nuances of defined contribution (DC) plans. Some leaders questioned whether private-label solutions might be necessary to create tailored, efficient workflows that can handle large volumes without sacrificing personalization. The discussions highlighted successful case studies, such as significant increases in new wealth assets derived from workplace plans, demonstrating that focused efforts in this area can yield substantial returns. This underscores the importance of aligning operational strategies with the unique demands of new plan formations.
Moreover, the push for efficiency extends beyond internal processes to how firms collaborate with external partners, ensuring seamless integration and communication. Building robust systems to integrate data and streamline advisor engagement was seen as essential to managing growth at scale. However, concerns about maintaining data security and ensuring compliance with regulatory frameworks were also raised, as inefficiencies in these areas could erode trust and hinder progress. The consensus was that operational excellence must be paired with innovative thinking to address the logistical challenges of this market expansion. As broker/dealers refine their approaches, the focus on cost-effective, secure, and scalable solutions will determine their ability to thrive amidst this unprecedented growth, shaping the future of retirement plan services for years to come.
Emerging Trends and Challenges
Technology and Data Dynamics
Innovative Tools
Technology’s role in reshaping the retirement and wealth management landscape was a recurring theme at the roundtable, with a particular focus on innovative tools driving client engagement. Artificial intelligence is increasingly being utilized to match participants with advisors based on specific needs rather than mere geographic proximity, enhancing the personalization of financial advice. Additionally, data sharing with record-keeping partners has opened new avenues for advisors to target and connect with clients more effectively. These advancements promise to revolutionize how broker/dealers interact with plan participants, offering insights that can tailor solutions to individual circumstances. Yet, the adoption of such tools is not uniform across the industry, as varying levels of technological readiness among firms create disparities in implementation and impact.
While the potential of these innovations is undeniable, the discussions also acknowledged significant hurdles that temper enthusiasm. Legal and cybersecurity risks associated with data sharing remain a substantial barrier, as mishandling sensitive participant information could lead to breaches of trust and regulatory penalties. Many firms are cautious, imposing strict guidelines on data usage to prioritize engagement over direct sales tactics. This cautious approach reflects a broader industry trend of balancing the drive for technological advancement with the imperative to protect client interests. As broker-dealers navigate these challenges, the development of secure, compliant systems will be critical to harnessing the full benefits of tech-driven engagement, ensuring that innovation serves as a catalyst for growth rather than a source of vulnerability.
Balancing Act
Navigating the intersection of innovation and compliance has emerged as a central challenge in the technology discussions at the roundtable. The availability of participant data offers unprecedented opportunities to personalize financial advice and improve outcomes, yet it also raises complex questions about privacy and security. Firms must adhere to stringent regulations while striving to implement cutting-edge tools, a balancing act that often slows the pace of adoption. The risk of data breaches or misuse looms large, prompting many broker-dealers to limit access to sensitive information and focus on engagement strategies that avoid overstepping legal boundaries. This cautious stance, while necessary, sometimes hinders the ability to fully leverage technological advancements, creating a tension between progress and protection.
Further complicating this balance is the need to ensure that technological solutions are accessible and equitable across diverse client bases and firm sizes, especially as the industry evolves. Smaller broker/dealers, in particular, may lack the resources to invest in advanced systems, widening the gap between industry leaders and emerging players. The roundtable highlighted the importance of collaborative efforts to develop shared platforms or standardized tools that can level the playing field. Additionally, educating advisors on both the capabilities and limitations of these technologies was seen as essential to maximizing their impact without compromising compliance. As the industry moves forward, finding harmony between innovation and regulatory adherence will remain a defining challenge, shaping how technology transforms retirement and wealth management services.
Retirement Income Solutions and Beyond
Skepticism on In-Plan Products
A notable point of contention at the roundtable was the slow adoption of certain retirement income solutions, particularly in-plan annuities, within defined contribution (DC) plans. Despite booming sales of annuities outside of these plans, their integration into workplace retirement offerings faces significant obstacles. One key issue is advisor compensation, which is substantially lower for in-plan products compared to external options, diminishing the incentive for advisors to promote them. Additionally, many participants lack the account balances necessary to justify such products, raising questions about their relevance for the average plan member. This skepticism reflects a broader concern about whether these solutions are truly aligned with participant needs or if they primarily serve business interests, prompting a reevaluation of their place in retirement planning.
Beyond compensation and participant readiness, the inability to provide personalized, one-on-one advice within Defined Contribution (DC) plans further hampers the adoption of in-plan retirement income products. Unlike external annuities, where tailored guidance is often available, the structure of workplace plans limits such interactions, reducing their appeal. The roundtable discussions underscored the structural challenges in aligning these products with the realities of DC plan participants, many of whom may not see immediate value in them. As a result, there was a call for innovative approaches to redesign compensation models and enhance participant education to bridge this gap. Until these issues are addressed, the integration of retirement income solutions within plans is likely to remain a niche offering, overshadowed by more accessible alternatives outside the workplace framework.
Managed Accounts and Asset Management
In contrast to the challenges with in-plan products, the growth of advisor-managed accounts and related services is viewed as a promising avenue for scalable advice within defined contribution (DC) plans. These solutions enable advisors to offer personalized guidance to participants, often uncovering external assets that can be managed alongside retirement savings, thus creating additional revenue streams. Services facilitating the management of outside assets are gaining traction as tools to increase engagement and provide a more comprehensive financial picture for participants. However, competitive dynamics and plan sponsor permissions introduce complexities, as some major players in the industry have restricted access to certain services, potentially aiming to retain assets internally, which raises questions about market fairness and participant choice.
The discussions also highlighted the potential of managed accounts to reshape traditional investment approaches within DC plans, challenging the dominance of target date funds. As participants seek more tailored advice, the shift toward managed accounts could redefine how retirement assets are allocated and managed over time. Yet, the success of these solutions hinges on overcoming barriers related to permissions and ensuring that advisors are adequately trained to handle diverse asset portfolios. The roundtable emphasized the need for transparency with plan sponsors to build trust and facilitate broader adoption. As these services evolve, their ability to balance scalability with personalized service will be key to their long-term impact, offering a glimpse into a future where customized financial advice becomes the norm within workplace plans.
Asset Leakage and Participant Engagement
Retaining Wealth
Asset leakage from DC plans to Individual Retirement Accounts (IRAs) was identified as a critical issue at the roundtable, with current estimates pegging the outflow at $800 billion and projections suggesting it could reach $1.15 trillion by 2030. This significant loss of assets represents missed opportunities for broker/dealers to capture broader wealth management potential, as for every dollar moved to an IRA, there is often a much larger pool of untapped financial assets. Technological solutions aimed at retaining assets within plans through institutional platforms and efficient workflows are being explored as countermeasures. However, the consensus was that forming strong relationships with participants before they leave the plan is the most effective strategy to mitigate leakage, ensuring continued engagement and trust over time.
The implications of asset leakage extend beyond mere numbers, affecting the long-term sustainability of workplace plans as a cornerstone of financial services. Roundtable participants stressed the importance of early intervention through education and personalized outreach to demonstrate the value of keeping assets within the plan ecosystem. Such efforts not only help retain wealth but also position broker-dealers to access additional financial opportunities tied to participants’ broader portfolios. While technology offers promising tools to streamline retention efforts, the human element of building rapport and trust remains irreplaceable. As the industry grapples with this challenge, a dual focus on innovative platforms and relationship-building will be essential to curbing leakage and maximizing the workplace as a hub for comprehensive financial planning.
Building Early Connections
Fostering early connections with plan participants emerged as a pivotal strategy to address asset leakage and enhance overall engagement. By establishing trust and providing value through financial education and tailored advice long before participants consider rolling over their assets, broker-dealers can create a sense of loyalty that discourages external transfers. This proactive approach requires a shift in how advisors interact with younger or less-engaged plan members, emphasizing consistent communication and demonstrating the benefits of staying within the plan structure. The roundtable highlighted successful examples where early engagement led to higher retention rates, underscoring the potential of this strategy to transform participant behavior over the long term.
Moreover, building these connections involves leveraging data and technology to identify at-risk participants and tailor interventions accordingly, ensuring that the right support is provided at the right time. However, this must be balanced with strict adherence to privacy and security protocols to maintain trust. The discussions pointed to the need for a cultural shift within firms to prioritize long-term relationships over short-term gains, ensuring that participants view their workplace plan as a lifelong financial partner. As competition for assets intensifies, the ability to connect early and meaningfully with participants will distinguish leading broker/dealers from their peers. This focus on engagement not only addresses leakage but also positions firms to capitalize on the broader wealth opportunities tied to a participant’s financial journey, reinforcing the workplace as a critical nexus for financial services.
Strategic Takeaways from Industry Dialogue
Reflecting on the RPA Broker/Dealer Roundtable, the event served as a vital platform for dissecting the seismic shifts in retirement planning and wealth management, highlighting the critical changes shaping the future of these sectors. The intense focus on merging wealth and retirement services at the workplace, alongside the looming wave of new plan formations, illuminated both the immense potential and the intricate challenges within the industry. Conversations around technology’s dual role as an enabler and a risk, coupled with debates over retirement income products and asset retention, painted a picture of a sector at a crossroads. Looking ahead, broker/dealers must prioritize scalable digital solutions to manage growth while investing in secure data practices to protect participant trust. Strengthening early relationships with plan members offers a proactive path to curb asset leakage, while reimagining advisor incentives could accelerate the adoption of in-plan solutions. As the workplace solidifies its role as the epicenter of financial services, strategic adaptation and thoughtful innovation will be the cornerstones of sustained success in this dynamic field.
