One of the most important concepts in Buddhism is the “middle path,” as the Buddha realized that, in almost all situations, extremes do not lead to better outcomes. What is the middle path for advisors and record keepers as both seek to provide financial services to defined contribution participants?
Convergence of wealth and retirement at the workplace is heating up for various reasons. There is no denying that the economics of solely relying on plan fees is getting more difficult as costs increase, fees decline and expectations grow, brilliantly outlined by NMG Consulting Partner Josh Deitch and in the 2025 McKinsey record keeper report.
Just as important, many plan sponsors see the opportunity to provide financial coaching and planning to the 90+% employees who do not have a personal financial advisor by leveraging the DC retirement platform. It helps lower plan fees and increase employee retention and recruitment, as well as productivity. Why not offer employees help if the plan’s work, liability and costs are low or reasonable?
Retirement plan and advisors who offer wealth services to participants are better positioned than RPAs that rely solely on plan fees—they will win more plans and have higher profit margins according to the NMG study. Wealth advisors who do not focus on DC plans but have a healthy plan business that leverages the relationships to find new planning and wealth clients are also better positioned than advisors who eschew 401(k) and 403(b) plans.
No doubt record keepers see the same reality, but some struggle competing against the advisors who brought the plan. It is a dilemma for some. Is there a middle path?
There are four different scenarios:
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Neither the record keeper nor the advisor offers financial services to employees. No conflict, but the pool of plan sponsor prospects is limited, as is the economics.
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The record keeper offers participant services but not the advisor. No conflict but unless the provider is willing to sign on as a fiduciary, who will oversee their activities?
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The advisor offers participant services but not the record keeper. No conflict, but can the record keeper sustain high levels of services as margins decrease, and can advisors serve all participants?
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Both the advisor and record keeper offer financial services. Here is where conflict and tension arise, calling for a solution.
No one can blame record keepers that focus on participant services like rollovers and managed accounts, as well as other products, but it can cause issues for some advisors. As other providers ramp up their participant services focused on higher-margin businesses, they struggle to find a solution.
The middle path starts and ends with real talk—open, honest and candid discussion about difficult yet important topics, without which situations will devolve rapidly. There needs to be rules of engagement about who offers which services to which participant.
Most advisors who can offer financial services cannot serve participants with limited assets and account balances, while many providers with greater tech resources and call centers can. Providers who support the efforts of advisors should be compensated fairly and share in the revenue generated, as should fiduciary advisors that help plan sponsors oversee the provider’s participant services.
The priority, especially for fiduciary advisors, should be on what is best for the participants. Plan sponsors, as the highest level of fiduciary, need to be part of the discussion as well.
Thorny questions remain. Who owns the data? How to share it safely? What will be the impact of AI, which seems to have the potential to change many aspects of our lives? Asset managers who supply the products and often the funding need to be included in the discussions.
A reckoning is coming as the DC industry shifts its focus to participant services. For the sake of participants and delivering better outcomes, there needs to be a detente and open discussion leading to a middle path.
