As workplace retirement plans continue to grow—defined contribution plans hit $12.5 trillion in assets at the end of 2024’s third quarter, according to the Investment Company Institute—recordkeepers are dealing with both consolidation and fee compression.

Starting with litigation from the early to mid-2000s and continuing with fee disclosure regulation that came into effect in 2012, recordkeepers have been facing downward fee pressure while navigating new concerns such as cybersecurity. Essentially, industry sources say, they have to do more with less money. As a result, recordkeepers have looked to other sources of revenue, including individual retirement account rollovers, proprietary investment options in client plan menus and even wealth management services.

But as many recordkeeping firms turn toward participants as clients, advisers are also looking to serve participants and potentially manage their wealth directly or via partnerships with recordkeepers. The adviser-recordkeeper relationship, therefore, which has been characterized as “co-opetition,” is still evolving, as the industry grapples with the feasibility and practicality of both recordkeepers and advisers working with participants.

Space for Both Players

Sean Kelly, an adviser and vice president for Heffernan Financial Services, says there is certainly room for both parties, but the recordkeepers and advisers have to check in regularly to clarify their roles. That could include a demarcation line based on an asset threshold, such as a recordkeeper providing services to participants with fewer than a certain asset amount and the adviser providing services to those with more than that threshold.

The specific asset threshold would depend on the adviser: A younger and growing adviser could have a $50,000 threshold for wealth management services, while an adviser with a larger book or more expertise with components such as tax planning could have a threshold closer to $150,000, Kelly says. He adds that his firm will never turn a participant away and always try to help, but it would be comfortable partnering with a recordkeeper to set an asset level so both parties can provide a service at scale.

“The recordkeepers are great partners that have created an enormous amount of financial wellness resources and the like to help participants,” Kelly says, pointing to budgeting tools and instructional videos. “If it’s a proactive, aggressive sale from the recordkeeper to the participant, trying to capture that business, then that’s a different story. … That’s not necessarily in the best interest of the participant.”

Bonnie Treichel, founder of and chief solutions officer at Endeavor Retirement, says that while high-net-worth clients may have a relationship with a financial adviser outside of their retirement plan, the average participant’s sole source of financial advice is their retirement plan.

“There is plenty of opportunity,” Treichel says.

An Evolving Relationship

There are two ways to engage a participant: education and advice. Sometimes an adviser provides education, and the advice is offered through a managed account or technology-driven solution, so both the recordkeeper and adviser can exist in the relationship. Alternatively, a recordkeeper can provide educational web-based tools to engage with the participant, and the adviser can provide advice for a certain group or demographic, such as those that reach a certain asset threshold or are nearing retirement.

Amy Montford, vice president of individual retirement solutions at Principal Financial Group, says that to provide financial security for the millions of participants that Principal serves, its work has to be done in concert with advisers. But as the recordkeeper’s services evolve to meet the needs of participants, so does its relationship with advisers.

“It’s not a one-size-fits-all,” Montford says. “A true partnership requires us to understand: What capabilities [do advisers] have? What capabilities do we have? How do we best bring them together to really deliver and serve the plan participants?”

For example, Montford says there may be relationships in which Principal provides the phone-based education services and digital tools, while advisers provide on-site education services.

The Challenge

Because recordkeepers both partner with and compete with advisers, there is the potential to strain the relationship between the participant, recordkeeper and adviser.

Treichel says questions can arise about who has authority to possess participant data and the ability to access the participant by leveraging that data. She explains that while the recordkeeper generally has all participant data, the adviser typically gets access to that data as well. But do the recordkeeper and the adviser both have authority from the plan sponsor on their service agreement to use the data to then cross-sell additional participant services? It is an important question amid fee compression, since that is additional revenue with which firms want to make up their margins.

This is both an old problem and a new problem, Treichel adds. Some of the larger recordkeepers were previously known to go directly to plan sponsors and cut out the advisers. Then there was a great effort to change that narrative to one that included the plan adviser as the “quarterback.” But there are only so many sources of money, and so if both players are trying to get at the same revenues—the participants with large balances—it creates a push-pull relationship, she says.

“Some recordkeepers will do it really well and keep the adviser in the middle, and others probably will not,” Treichel says. “There are plenty of revenue opportunities to go around, and the recordkeepers that will be most successful probably will have those good relationships with both the adviser and the plan participant.”

Advisers agree that a harmonious relationship is key.

“We look at recordkeepers—even with all the additional services—as partners,” Kelly says. “Certain recordkeepers are better partners than others and more willing to partner with an adviser than blaze their own trail.”

More on this topic:

	What Recordkeepers Want From Advisers
	What Makes the Best Dynamic Adviser-Recordkeeper Partnerships?