Plan Providers Emphasize Need for Nimble Tech, Greater Scale

Retirement plan recordkeepers describe plans to dramatically ramp up scale and double down on new technologies that support efficient growth and client service.

By John Manganaro | May 19, 2017
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Chad Parks, founder and CEO of Ubiquity Retirement and Savings, is not the kind of business leader that likes to keep his company’s goals and aspirations hidden, nor does he shy away from acknowledging challenges the firm and its competition face.

Speaking recently with PLANADVISER, Parks offered a frank and refreshing take on the defined contribution (DC) plan recordkeeping marketplace, with a particular focus on the issues facing providers, like Ubiquity, specializing in serving small- and micro-plans. For Ubiquity, the current outlook is optimistic, Parks says, but there is also an understanding that fundamental challenges are on the horizon.  

At a very high level all recordkeepers are facing real pressure from fee compression, he observes, and the perception, which he calls unfounded, of the increasing “commoditization” of all manner of recordkeeping services. Related to both of these points is the demand to constantly improve and reassess technology offerings and other touch-points for plan sponsor clients, who are being driven by concerns about their own fiduciary liability to demand more than ever from their recordkeepers—and at lower price points.

Parks says he is proud that his firm has been able to continue to grow through these challenging conditions. 

“A lot of people will tell you that there is no way for the providers to continue to make money, long term, serving this space,” Parks says, “and so they do not even attempt to work with small plans. Our counterargument is, that’s almost right, but you have to be able to scale up on the provide side and get to that large and sustainable number of small plans. It’s not a get-rich-quick business, from that perspective. You make a little bit of money on a lot of plans—that’s the strategy.”

Parks adds that, even with the strong barriers to entry in the DC recordkeeping space, there is now more competition than ever. “We welcome that,” Parks says. “The new entrants know, like we do, that there is a market here that deserves top quality service. Other people are recognizing that and it’s a good thing, because no single provider can solve the retirement readiness problem.”

NEXT: Big plans and big challenges