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Recordkeepers are in a tight spot in the retirement industry.

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It is creating tension in the industry, according to Mike Contorno, principal in and head of defined contribution vendor management at NEPC, an investment consulting firm which does not operate under this business model.

“These issues have become much more prominent in discussions around provider selection and long-term strategy,” Contorno says.

This trend’s impact on day-to-day provider selection remains to be seen, but as consolidation continues and as firms seek greater scale, Contorno says revenue opportunities tied to participant assets and wealth management are becoming increasingly important factors in long-term partnership strategies.

He adds that the most tangible impact is in request-for-proposal pricing: Firms that generate significant revenue from participant assets, rollovers or wealth management services may have greater flexibility to reduce or even waive consulting fees. That is why full disclosure of all related revenue streams would allow plan sponsors a more transparent comparison of potential partners.

“Greater transparency around these revenue streams would help plan sponsors better understand the economic incentives involved and evaluate potential misalignment of interests when selecting a provider,” Contorno says.

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