Following in the footsteps of many banks and big accounting firms, there’s been a growing trend toward consolidation among retirement plan service providers. But for the most part, less competition hasn’t translated into higher fees for plan sponsors — at least not yet. If anything, the costs for recordkeeping and administrative functions have tended to trend downward.
Moreover, there’s the potential for additional value for sponsors as a result of M&A activity among larger industry players, with the possibility of enhanced resources for clients. For example, plan sponsors may benefit from advanced back-end technology, more robust financial wellness offerings, and improved investment tools.
But the impact of consolidation may also differ depending on the size of your plan, with larger plans potentially having fewer choices available to them. If your service provider has a merger in the works, your advisor can help you navigate uncertain waters and review your agreements to ensure service levels remain consistent. He or she will be familiar with the larger service provider landscape and can help you evaluate the potential impact of any changes should they occur. Networking with other sponsors and communicating directly with your record keeper and plan administrator may also help you prepare for what lies ahead in an evolving service provider marketplace.
While it’s advisable to put your plan out to bid every three years, a potential merger could call for tightening that timeline should any concerns arise. And if increased consolidation continues to result in more favorable plan pricing generally, it may indicate that lower fees — or higher levels of service for similar fees — might be available for your plan elsewhere. Even if your service provider isn’t currently merging with another firm, investigating other options may be beneficial.
A 2021 survey conducted by NAPA to gauge the impact of recordkeeper consolidation on overall service levels found mixed results. Whereas 58% saw comparable service post-merger, 11% reported better or much better service, while 31% said service had deteriorated or reached “OMG bad” levels.
The jury is still out, and sponsors should adopt a wait-and-see approach to determine whether provider consolidation will be a net plus or minus. But even if the overall impact on the retirement plan industry turns out to be positive, a provider’s merger may still create some level of disruption within your organization. That’s why it’s prudent to remain vigilant about any upcoming changes in the marketplace, monitor for continuity of service quality following a merger, keep all lines of communication open and remain prepared to seek out a new provider if necessary. Because in the end, it’s the impact of your provider’s consolidation on your own plan that matters most.
For more information, please contact Preston Englund at 402-461-4893 or .
Securities offered through IFP Securities, LLC, dba Independent Financial Partners (IFP), member FINRA/SIPC. Investment Advice offered through IFP Advisors, LLC, dba Independent Financial Partners (IFP), a Registered Investment Adviser. IFP and Ridgeline Advisors are not affiliated.
The information given herein is taken from sources that IFP Advisors, LLC, dba Independent Financial Partners (IFP), IFP Securities LLC, dba Independent Financial Partners (IFP), and it advisors believe to be reliable, but it is not guaranteed by us as to accuracy or completeness. This is for informational purposes only and in no event should be construed as an offer to sell or solicitation of an offer to buy any securities or products. Please consult your tax and/or legal advisor before implementing any tax and/or legal related strategies mentioned in this publication as IFP does not provide tax and/or legal advice. Opinions expressed are subject to change without notice and do not take into account the particular investment objectives, financial situation, or needs of individual investors. Prepared by 3rd party.