white paper
Five Ways Providers Monetize Recordkeeping

Each year, our firm completes our review of retirement plan costs, benchmarking them against our peer ranges. In 2018, we continued to see prices decline and participants benefiting from the compression. For clients, we now routinely see their fees at $100 per participant or less for more attractive engagements. That means for recordkeeping, custody, call center, web trading, employee education, and frequently legal and technical support, large financial service organizations are getting $100 a year for each account holder they serve.

While some of the compression can be attributed to vendor consolidation and scale, why would billion-dollar financial services organizations continue to invest in recordkeeping capabilities where profits have traditionally been so thin? The answer is: they believe there is an opportunity to generate additional revenue beyond the recordkeeping fees for servicing retirement plans. Generally, we believe there are five areas where recordkeeping vendors have tried to monetize their relationship with retirement plans:

• Proprietary investment management
• Managed accounts
• IRA rollovers
• Cross-selling retail financial products
• Annuitization

All five of the solutions carry the possibility for the recordkeeper to earn additional higher-margin revenue not part of a standard recordkeeping engagement. In this paper, we take a closer look at each of these five approaches.