When I entered the recordkeeping business many years ago, it was growing so quickly that I likened it to fish jumping into the boat. Over time, however, the business became increasingly service- and price-competitive, requiring firms to build greater scale, deliver services more consistently and efficiently, and identify new sources of revenue to sustain growth and profitability. Arguably, the retirement plan advisory business finds itself at a similar inflection point today.
For advisors, retirement plans offer scale, consistency and access to institutional assets, but those advantages are increasingly offset by declining margins and rising operational demands. By contrast, wealth management is often viewed as more profitable and relationship-driven, yet slower and less predictable to grow. As a result, the two have traditionally been treated as separate and distinct businesses.
Today, that perceived distinction is breaking down. New research shows that advisors who intentionally integrate retirement and wealth management are outperforming peers on the metrics that matter most—profitability, client retention and long-term sustainability.
Data from NMG’s Defined Contribution Advisor Insights 2025 study underscores the point. Advisors offering both retirement advisory services and wealth management generate average gross margins of approximately 52%, materially higher than practices focused solely on retirement plans. In a market defined by fee compression, staffing pressures and rising technology costs, that margin advantage is meaningful.
The Margin Challenge Facing Retirement-Only Firms
The economics for advisory practices where retirement plans are the backbone are increasingly unforgiving. As plan size grows, margins shrink. Smaller plans often deliver gross margins in the mid-to-high 50% range, while the largest mandates struggle to clear the low 40s. Further, the increase of fixed fee pricing further inhibits both revenue growth and margin expansion. To combat this, advisors often focus on sizes or types of plans to create efficiencies through standardized offers. However, focus is not a singular salve to the margin and profit growth dilemma.
This dynamic helps explain why DC specialists often pursue aggressive growth strategies supported by larger teams. Scale is essential just to maintain economic viability. Yet scale alone does not solve the problem. Retirement advisory work is operationally intensive, requiring ongoing benchmarking, compliance oversight, participant support and fiduciary documentation. Each new plan adds complexity as well as revenue.
The result is a growth-oriented mindset that prioritizes volume over margin expansion. While top-line revenue may grow, it leaves firms vulnerable when costs rise faster than fees.
Why Diversification Works
To manage this risk, many firms are diversifying their practices by expanding beyond retirement plans alone. Pairing retirement plans with wealth management, financial planning or insurance services enables advisors to capture higher-margin revenue from the same core relationships.
Business owners, executives and plan participants often need individual advice, be it on investments, insurance or beyond. When advisors are positioned to serve those needs, the economics improve quickly. In this context, the retirement plan is not an endpoint but a door to new revenue possibilities. Disciplined focus on strategic adjacency rather than service sprawl can reinforce the core retirement relationship and improve profitability.
Retention, Stickiness and Share of Wallet
Diversification also delivers a less visible, but equally powerful, benefit: stronger client retention driven by higher switching costs. When an advisor serves both the employer-sponsored plan and the individuals within it, or provides other employer-sponsored benefits, the friction associated with changing providers increases significantly.
Hybrid practices that balance retirement and wealth management are particularly well-positioned as a result. By pursuing growth across both domains while maintaining healthy margins, they capture a greater share of wallet and embed themselves more deeply in client relationships.
A Blueprint for Sustainable Growth
The message for advisory firms is clear. The future is not about choosing between retirement and wealth but about thoughtfully integrating them. Single-line business models face mounting pressure as fees compress and expectations rise. Diversified practices, by contrast, are structurally better equipped to grow profitably.
Moving beyond the plan is no longer just a growth strategy. It is becoming the defining characteristic of the most resilient retirement advisory businesses.
