Recordkeeper consolidation may be coming, but don’t squeeze the participant!
The idea that a recordkeeper should “monetize” participants is appalling.
George and Abigail Revoir of AMRev Consulting, writing in the November 4th 2020 edition of RPA Convergence opine on recordkeeper consolidation and the ever widening gap between mega and midsize providers. No question there is revenue pressure in our business, but one comment in their otherwise satisfactory analysis of this trend stopped us in our tracks. The end game, says the Revoirs, is to “monetize the participants.”
Monetize the participants? How appalling! What plan sponsor wants to hear that in a “finals” presentation! “Mr. Plan Sponsor, we offer X, Y and Z services, but what we’re really after is access to your employees to upsell them non-plan related products and services.” Which CFO is OK providing 100% of employees’ personally identifiable information to an organization that will use it to “monetize” her employees?
Be assured, it is quite possible to profitably serve plan sponsors and their participants with accurate, responsive and innovate recordkeeping without having to view participants as piggy banks. NWPS has been doing it for 26 years and we are certainly not the only ones.
And let’s not forget the current discussion over who really owns the participant data needed to cross-sell those high margin products anyway. Many a service provider has found themselves on the wrong side of a lawsuit for data-based cross selling. (In fact, if you are a plan sponsor you may want to insist that your employee data is used exclusively to provide required plan services.)
Participants are the life blood of a retirement plan. Nearly every major innovation made in our industry (e.g. TDFs, auto enrollment, auto increase, auto portability, IPSs, financial wellness – the list goes on), is designed to help the participant save for retirement. Thoughtfully deployed, these innovations also equate to additional revenue for a given recordkeeper. Serving the participant is not a zero-sum game. Indeed, our firm services participants not by counting the number of calls our reps take or how fast they can move on to the next caller. Rather we reward associates for taking the time to answer both asked and unasked questions from participants. This leads to higher client satisfaction and a story to be told for our next opportunity. No cross selling needed.
Retirement Plan Advisors should indeed care about the profitability and staying power of the service providers they work with. They should also view the cross-selling efforts of large, bundled recordkeepers as a threat to their own business. But the notion that the only way recordkeepers will survive is by squeezing participants is just plain wrong. On the contrary, both RPAs and their plan sponsor clients value honest, unbiased service to their participants. The exclusive benefit rule in IRC section 401(a) guides us here: “…a fiduciary shall discharge his duties with respect to a plan solely in the interests of the participants…” We don’t see the word “monetize” in all of ERISA.