TPAs Influence One-Third of 401(k) Assets

The survey analysts see this percentage increasing in the future and their influence expanding into the 403(b) market.

The 30% of assets that TPAs have “influence” over represents nearly $850 billion in 401(k) assets, compared to the broader 401(k) market at $2.9 trillion as of year-end 2010. When 403(b) assets are included, TPAs influence $968 billion in total assets.

“Our survey reveals that the majority of TPA firms (71%) are servicing 401(k) plans. TPAs are especially prolific in the small- and mid-sized plan markets (plans with 401(k) assets between $1 million and $50 million),” said Tom Modestino, head of Cerulli’s retirement practice. “Currently, 403(b) plans represent only about 10% of TPAs’ product mix. However, recent legislative changes, especially on ERISA-based plans, present more opportunities for TPAs to scale their 401(k) expertise to meet the legislative needs of this market.”

The survey also found the financial adviser landscape of those serving DC plans is shifting rapidly. Asset control and influence is becoming more concentrated in the hands of true specialists, with RIAs showing signs of breaking away from the pack. 

Many recordkeepers recognize the growing importance of TPAs to their overall growth plans. They are enhancing or shifting their business models to better accommodate a significant rise in their TPA distribution and to strike a better balance with shifts in adviser channels, the research found. 

For asset managers, TPAs are increasingly becoming an important part of a DCIO strategy since their services now include investment selection, and they provide an avenue to open architecture for small- to mid-sized plans.