As the NAPA Summit opens today 25 years after its inception as the ASPPA 401(k) Sales Summit and 15 years since the beginning of NAPA itself, it may herald a coming of age for DC plans as the retirement industry evolves from a niche market to mainstream driven by the convergence of wealth, retirement and eventually benefits at the workplace.
Coming of age notes the transition from a teenage, immature, and less productive life into adulthood, which comes with many challenges and opportunities. With $12.5 trillion in DC plans, over 100 million accounts, and 800,000 plans, the industry is at a tipping point. Almost a trillion dollars rolls out of DC plans, mostly into IRAs, which has $15.2 trillion. New plan formation is exploding mainly due to state mandates and tax credits facilitated by group plans like PEPs.
In-plan retirement income is lurking as is the potential for AI to not just make administration and processes more efficient but also provide financial guidance and advice to the masses.
More than its big brother, wealth management, which boasts higher profits, many more advisors and more sophisticated technology, 401(k) and 403(b) plans offer greater opportunities, which include wealth services through the workplace and also the integration of benefits. Henry Ford once said, sell to the masses and dine with the classes.
But almost every teenager coming of age has great potential, with just a few making a real impact. To fulfill our potential, we need to get real or see things as they are, not as we would like them to be. Otherwise, we live in a bubble, selecting facts that validate our positions and attacking or ignoring those that do not.
There is no going back to clunky tech, revenue sharing to hide costs or non-fiduciary advisory services. Mark Twain said history does not repeat itself, it rhymes, so while annuities in plans, blind squirrels and proprietary products in their previous form may be gone, they are coming back in the form of in-plan income, wealth advisors gravitating to DC plans, and professionally managed investments like target date funds evolving into managed accounts.
The industry needs vastly improved record keeper technology, which is the infrastructure and client base to deliver other products and services at the workplace. We need to figure out how to safely and securely use data, and we need to recruit, train and reward the best and brightest talent.
Focus is a problem for young adults (maybe some older ones), so attention and capital need to be allocated to what is transformational, not ancillary.
Unlike many other industries where better and more profitable services are the only goals, the DC industry must have a more noble purpose, putting people above profits, which make take sacrifice, but should benefit those who develop trust and credibility to deepen the relationship.
Recent news is sobering, with litigation increasing on the heels of a $39 million jury award against Pentegra and Supreme Court decisions that have and could make it easier to sue. And while EBSA Director nominee Dan Aronowitz thinks that the DOL, not plaintiff’s attorneys, should protect participants, over 22% of the best and brightest recently resigned due to DOGE initiatives.
The good news is there seems to be bi-partisan support in Congress to improve and expand retirement benefits as more and more states enact mandates.
Predicting the future is easy without consequences—the difference between a weatherman and insurance company. Those that succeed will have the best people, processes and technology willing to make big bets knowing some will fail, open to changing their points of view, admitting when they are wrong and evolve.
As the Tao says:
Not-knowing is true knowledge.
Presuming to know is a disease.
First realize that you are sick;
then you can move toward health.
The Master is her own physician.
She has healed herself of all knowing.
Thus she is truly whole.
