After three days in Las Vegas, I returned home excited about the trajectory of the retirement plan industry. It was great to have a chance to connect with clients and colleagues in person and feel the energy of more than 1,400 retirement plan advisors all in one place. These kinds of events are a powerful way to understand the challenges we all face, share best practices and gather unbiased insights that can help us proactively enhance how we can serve all plan participants. 

I also had the honor of speaking on two panels to share my point of view on the trends that are impacting the industry—and to hear directly from advisors about the questions and concerns that are front of mind for them. As I reflect on everything I heard, four key trends stand out:

1. Plan fiduciaries face unique challenges and risks when considering changes to their defined contribution plans

   Defined Contribution (DC) plan fiduciaries evaluating changes to their plan’s design, investment lineups, recordkeepers, and other participant services can face a complicated process. Investment committees are comprised of individuals from different parts and levels of the organization, with differing perspectives and benefits philosophies that must be reconciled. Moreover, investment committee members and their advisor partners need to consider plan changes in the context of the characteristics of their participant base, regulatory requirements, and the looming risk of litigation.

   These plan fiduciary dynamics underscore the need for plans to establish, and periodically revisit, effective plan governance policies, including their plan documents and investment policy statements, to ensure clear roles and responsibilities and a prudent process is followed for evaluating plan lineup and design changes. It also underscores the value that a qualified retirement plan advisor can play in helping the committee navigate their responsibilities and fulfill their fiduciary duties to operate in the best interest of their plan participants.

2. Interest in offering alternative investments in retirement plans is increasing

   Participants in DC plans have historically only been able to access traditional investment options. Alternative investments, like private equity and private credit strategies have been notably absent stemming from concerns about their lack of transparency, liquidity constraints, potential volatility, and high costs. 

   However, the democratization of private market investments may begin to spill over to the DC market. New product structures are allowing investors at lower wealth levels to access private market investment strategies that were previously unattainable. While there are still risks and opportunities for including alternatives in DC plans, interest and potential use of this powerful asset class is poised to expand. Alternative managers seeking exposure to the DC market will likely favor the collective investment trust (CIT) vehicle structure. Professionally managed, multi-asset-class investment solutions, such as DC managed accounts, are a natural medium through which to distribute private market investments to the DC market.

3. There is a distinct need for more retirement plan advisors

   Regulatory change is driving a surge in small DC plan formation while the SECURE 2.0 Act has introduced federal incentives for small businesses to establish retirement plans, including enhanced tax credits and simplified administrative requirements. Yet, as the number of plans is increasing, the number of financial advisors who specialize in retirement plans remains relatively small. 

   With increasing numbers of DC plans and active participants, the opportunities for qualified advisors with the fiduciary knowledge and tools needed to serve retirement plan investors is only going to grow—especially among those who can help participants with a clear desire to build retirement savings and their overall wealth.

4. The convergence of retirement and wealth is accelerating

   Advisory firms continue to pursue synergies between their retirement and wealth management businesses. As the U.S retirement system continues to shift to a DC-centric structure, the share of investor wealth accumulated through DC plans is increasing. As DC plan participants accumulate greater wealth and their financial lives become more complex, many will stand to benefit from a more comprehensive wealth management relationship. Additionally, many wealth firms are more interested in providing additional advisory services, such as retirement plan advisory, to their wealth management clients who are business owners.

   Retirement plan advisors are advantageously positioned to foster relationships with retirement investors during their working years. By leveraging data-driven insights, retirement plan advisors can more effectively engage participants who aren't yet wealth management candidates at key inflection points in their financial lives with more germane messaging that encourages participants to take the next best action. Additionally, data-driven engagement strategies can help advisory firms connect plan participants with the right financial product or advice solution at the right time, ultimately benefiting both end-investors and advisory firms.

At Broadridge, we work with numerous advisors to help them navigate these trends. Our full spectrum of Retirement and Workplace Solutions can help you address complexity, manage risk, harness the power of data and scale effectively to supercharge your success.

See how we can help you more effectively manage client relationships and grow market share.