With all due respect to the “401(k) whispers” trying to calm purist retirement-plan advisors and keep others mesmerized so they retain power and influence, the convergence of retirement and wealth at the workplace is full on. One of those naysayers, as recently as last year, arrogantly demanded, “Show me the data.” Well, the data is in, and the leading advisory firms, record keepers and asset managers are leaning in, threatening to leave those who do not out in the cold as consolidation sweeps through all industries.
In an interview at the recent Wealth Management EDGE conference, Creative Planning CEO Peter Mallouk, arguably one of the leaders in the convergence, admitted that no one, including his firm, is doing it well, though he hopes to become the leader. Mallouk declared that the convergence of wealth and retirement at work is his firm’s biggest opportunity over the next couple of years, and he is optimistic about its progress.
Similarly, Michael Doshier, a DC industry veteran who joined LPL over a year ago to lead its retirement efforts, noted recently that advisors who also do retirement plans grow 2.1 times faster than purists, which he is hoping to use to entice more wealth advisors to convert existing relationships with business owners and members of retirement committees.
There is also renewed interest by Edward Jones, according to Katherine Roy, principal in charge of retirement products, and financial advisor Joshua Wynne—they see their firm uniquely positioned to help small business owners with advisors and offices in almost every city and town. “The barriers are not complexity,” noted Wynne. “The barrier is that advisors need to get it done quickly without friction.” They are building an ecosystem to help, and recently invested in a tech-first TPA, Aboon, along with expanding their roster of record keepers to include JPMorgan Chase and T. Rowe Price.
RPAs and aggregators have gotten the message, with 70% offering wealth services according to a recent NMG Consulting survey, trying to catch up with Captrust, which had a 10-year head start. The issue for RPAs is not whether they should be leaning into wealth, but how they can do it either organically, in partnership or through acquisitions, with the most successful firms choosing the latter.
But it’s still early for most wealth firms-, which include broker/dealers (independent, wirehouses and insurance) and RIAs (regional firms and aggregators), with Creative Planning the exception. Their acquisition of Lockton’s retirement division in 2021, with over $100 billion, and the recent Sageview purchase, with $285 billion, have gotten competitors’ attention, but few others have made the same commitment. Hightower bought institutional consultant NEPC with over $1 trillion, with Cerity buying Veras, and Mariner acquiring Andco, and Mercer Advisors hired former McKinsey consultant Jimmy Zhao, who had headed up its retirement group, but others are still either unconvinced or focused on wealth opportunities.
Who can blame them? Wealth assets at $74 trillion, according to Cerulli, are more than five times bigger than DC assets and four times more than IRAs. When you consider that wealth advisor fees are eight times more than DC plan fees, the revenue opportunities are 40x with even greater margins. So why bother? No wonder there are 27 times more wealth advisors than RPAs.
According to Michael Kitces, most people with more than $1 million already have an advisor. Some firms are trying to connect with those about to become rich either through an IPO like SpaceX or when a company with an ESOP is acquired, but the timing must be almost perfect. It’s why 35% of advisors in the Fuse report say it is easier to find new wealth clients at the workplace than through traditional means, and why Morgan Stanley, which captured $300 billion in wealth from the workplace from 2020 to 2025, is leaning in ahead of most other broker/dealers. According to Empower, there are three times more assets held away for every dollar in a retirement plan.
Artificial intelligence can help advisors work with mass affluent investors, with higher touch reserved for wealthier clients. Doshier noted that advisors meet clients at a younger age and engage at a lower cost at work, while others claim that the close cycle is significantly shorter. Providing advice at scale through managed accounts is catching on, and why, in large part, Edelman Financial Engines, with $221 billion in their managed accounts and over $300 billion overall, over 300 wealth advisors, and 140 locations from their 2014 Mutual Fund Store acquisition, is revisiting workplace opportunities under new CEO Ralph Haberli, formerly head of retirement at Capital Group and Blackrock’s DCIO.
The relatively tiny DC industry, with a limited number of specialists and declining fees, leaks $1 trillion annually to IRAs but has 100 million active participants, with new plan formation exploding due to government mandates. It is getting a lot of attention as the convergence heats up. No wonder the largest U.S. asset managers like Blackrock, Fidelity, Vanguard, Capital Group, State Street, JPMorgan Chase and T. Rowe Price have leaned into the retirement market and record keepers like Fidelity, Vanguard, Empower and Schwab, along with Voya and Principal, focused on convergence are the biggest, growing the fastest. The assets are sticky and provide a hedge when the markets reverse course.
It’s time to tune in, turn on and drop out to a new, fast-changing DC world that offers infinitely more opportunities than can be found in the relatively sterile 401(k) echo chamber, with all due respect to the “whisperers.”
