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In Practice May 29, 2024
Recordkeepers and Participants: An Evolving Relationship
Recordkeepers are adding services and connection points with participants, which has ripple effects plan advisers should be aware of for their businesses.
Reported by Ed McCarthy
Art by Kiki Ljung
Recordkeepers’ services and potential interactions with plan participants continue to evolve alongside technological advancements and shifts in need. The way these interactions evolve will, in large part, play a role in who ultimately manages plan participant assets and guides retirement planning.
Today, at a minimum, participants can call their plan’s recordkeeper or go online to check their account balances and manage their account and investment allocations. However, at mid-sized to larger recordkeepers, participants are likely to encounter a broad and growing range of content and services to help them manage their accounts, improve their overall financial health through educational material, and plan for retirement. In some cases, they can also keep their non-plan investments on the recordkeeper’s platform for an integrated wealth management experience.
Recordkeepers’ expanding resources can cut both ways for plan advisories. Advisers, especially smaller firms, can leverage recordkeepers’ offerings to improve their services to plan sponsors and participants while avoiding dealing with multiple vendors. But there’s also potential “co-opetition” when the recordkeeper’s services compete with the adviser’s business model, particularly among larger, converged plan advisory-plus-wealth management firms.
Beyond the Basics
Amber Brestowski, head of institutional product, advice and client experience with Vanguard, says that recordkeepers and plan administrators have been moving beyond just helping participants with education about how they should be saving for retirement. Their focus has expanded to participants’ overall finances outside the retirement plan.
“We found that stress regarding other financial goals impact a participant’s performance at work,” Brestowski explains. “Other financial objectives and goals or barriers can get in the way of having a participant save for retirement … Our goal as the recordkeeper is to provide experiences that help participants with matters both within the construct of the DC plan, but also outside of it.”
Other recordkeepers are taking the same approach.
Andre Robinson, president at Voya Financial Advisors, says the company offers full-service capabilities.
“I define full-service capabilities as financial planning, both centered around everything that they have going on inside of their retirement plan, but also beyond their retirement plan,” he explains. “Voya’s unique approach is that we will look at full on workplace benefits. We recognize the fact that people may want to save for education, general investing, or whatever their goals may be.”
Rob Austin, head of research for Alight Solutions, says that while some essential services are common to clients’ plans, additional services, such as specific financial wellness offerings, differ. Sometimes, Alight provides those services internally, but works with third parties in other cases.
He cites Alight’s partnership with Kashable, a lending service that gives participants access to low-cost loans. Participants repay the loans, which do not use 401(k) funds, through payroll deductions.
“This falls under the umbrella of financial wellness, but we use a third party because we’re not in the banking industry,” says Austin. “We don’t offer people loans, but they do. It’s a very complimentary part to what we have.”
Financial Wellness and Education
Many employees want financial guidance. PwC’s 2023 Employee Financial Wellness Survey found growing use of financial wellness benefits such as coaching, webinars, workshops, and online tools. Per the report: “When we started this survey in 2012, just 51% of those who said their employer offered financial wellness services had used them, but now 68% report using the services their employers provide.”
Recordkeepers use multiple channels to meet this need.
Rich Linton, president and chief operating officer of Empower, says the company provides participant education through a call center and live meetings, including one-on-one and group sessions.
“One of our most popular engagement services with participants is webinars,” says Linton. “We get terrific attendance when we put webinars out there on various topics.”
Vanguard has a robust set of financial wellness tools, Brestowski says: “We wrap them together in a dynamic, personalized financial wellness plan that a participant could work through on our website where they tackle topics such as debt management, how they should be thinking about emergency savings, and how to think about goals outside of retirement.”
Advisory/Wealth Management Services
Recordkeepers are also taking multiple approaches to providing financial and investment advice. Brestowski says that Vanguard offers a digital advisory service, a hybrid option that combines the digital platform with a dedicated adviser, and a situation adviser for more narrowly focused financial topics. In addition, Vanguard has a sub-advised relationship with Edelman Financial Engines that provides a managed account solution using the plan’s fund lineup. It’s predominantly a digital solution, but participants can access Vanguard’s adviser contact center if they need help, Brestowski says.
Alight also has a sub-advisory relationship with Edelman Financial Engines for managed account services. Designated Alight employees are certified as Alight Financial Advisers, and these advisers use Edelman Financial Engine’s tools and planning methodologies. Voya has a national advisory field force and virtual advisers; Empower also offers participants personalized advice.
Managing Co-opetition
Recordkeeper’s financial advisory and wealth management services create a potential conflict of interest in relationships with converged plan advisory and wealth management firms. Sources recognize this issue and believe they deal with it effectively to avoid co-opetition.
Linton explains that Empower receives all its new retirement plan business through intermediaries—it does not market directly to plans.
“If the adviser wants to serve as the designated adviser for wealth consultations, we would refer those opportunities to that adviser,” says Linton. “It’s all determined by how the adviser wants us to support them and how the plan sponsor wants us to work with that adviser.”
Similarly, Robinson says that Voya and the advisory or consulting firm determine rules of engagement in advance. The agreement specifies the parties’ respective expectations and roles in providing wealth management services to participants. This approach helps prevent conflict, Robinson maintains. “It’s more collaborative in nature,” he says. “I would say we are in some of the early innings, but we’re encouraged about the collaboration that we’re seeing in what’s being signaled out there.”
Vanguard has a group dedicated to working with the large consulting and plan advisers, says Brestowski.
“Our whole goal is to make sure that we’re offering the services that create the best outcomes for participants,” she explains. “So, we partner with consultants to work out, based on their offers, what are the best ways for them to engage with the participants on our platform.”
