PLANSPONSOR - April/May 2019 - 19

What Recordkeeper Consolidation
Means for Plan Sponsors
THE trend of recordkeeper consolidations
has been going on since at least
2009. In fact, an analysis of the top 20
recordkeepers by assets that year vs.
in 2017, performed by Brian O'Keefe,
PLANSPONSOR's director of research and
surveys, finds only four have not pursued
an acquisition-based growth strategy.
Robyn Credico, managing director
of retirement at Willis Towers Watson,
says the primary reason for recordkeeper
consolidation is that recordkeeping is
not a big money-making business on its
own. " Some providers want to get out of
the business, some want to create scale
because the more leverage and infrastructure,
the more money a provider can
make, and some want to move upmarket
to serve larger plans, " she says.
" I think plan sponsors will see
improved services due to recordkeeper
consolidation because, typically, the
TALKING POINT
Most Knowledgeable About Borrowing
When asked what they know on various financial literacy topics, respondents
showed their grasp of borrowing money, first. Comprehending risk was last.
Personal finance topics and the percentage of questions respondents answered correctly:
62%
58%
Source: 2019 TIAA Institute-GFLEC Personal Finance Index
Borrowing
Saving
53%
52%
50%
Earning Consuming Accessing
information
48%
Investing
46%
Insuring
38%
Comprehending
risk
acquiring company would look at services
offered by itself and by the organization it
acquired and pick the best of both worlds, "
Credico says.
She adds that when one company
acquires another, it usually commits to
charging the resulting new clients the
fees their former provider charged. She
notes that, in general, service provider fees
have been getting compressed over the last
several years, which is why some recordkeepers
have left the business. But, she
says, it appears fees could be leveling off.
As for benchmarking or requests
for proposals (RFPs), Credico acknowledges
there is a smaller group from
which to benchmark a comparable plan
and, in a vendor search, fewer providers
to compare. " One might expect that, with
less competition, fees could increase. But,
from a business perspective, the recordkeepers
left standing will have to make
money and will have to decide whether or
not to raise fees, " she says.
She adds, " But, I don't think that's a
bad thing. Plan sponsors don't want their
recordkeepers to go out of business. "
Chad Parks, founder and CEO of
Ubiquity Retirement + Savings predicts
there will also be movement and consolidation
at the software level. According to
Parks, there has been little major improvement
or investment in recordkeeping
systems for decades. " How do recordkeepers
deliver a good experience with
lower revenue and outdated software?
There is some movement to build platforms,
but it's a major investment and not
all can do that, " Parks says.
" Recordkeepers will see demand from
plan sponsors that will drive change, but it
will take time, because modifying a 20-year
software system is not easy, " he says.
-Rebecca Moore
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