Reader Poll: Recordkeeping Fees, Consolidation – It Depends

A recent survey of large plan sponsors suggests that, after years of declining, recordkeeper fees plateaued in 2016 – but what have NAPA Net readers seen with the plans they work with?

A distinct plurality – nearly half (47.8%) of this week’s respondents – say that recordkeeping fees have generally gone down, though a quarter (26%) say they really haven’t noticed any difference. On the other hand, as one reader explained, “Tough to know when you have multiple ways of charging these fees or burying them. Many recordkeepers do not directly charge these fees, but instead include them as part of investment expense.” Another reader noted that while recordkeeping fees were level to down, “…additional RK revenue sources have been added; managed accounts, participant advice, etc.” Just under 9% said those fees had gone down a lot, and the rest said it was “a bit of a mix.”

The NEPC survey employer sampling cited above was really tilted toward larger (>$1 billion in plan assets), and so readers were asked if they had seen any divergence in the recordkeeping fee trends based on plan size. A strong plurality (39%) went with “it depends on the recordkeeper and the plan” – and beyond that the results were somewhat contradictory (perhaps reflecting the real impact of “it depends”). While 17% said that fees for large plans were flat, but declining for smaller plans, nearly as many (13%), while agreeing that fees for large plans were flat, said that fees were rising for smaller plans. The rest were basically unable to see any generalizable trend(s). One more point raised: It depends on what one means by “small” and “large.”

We noted that the NEPC report’s authors believe there’s a good chance fees will be lower again next year, based on a few different factors, including sponsors who have been considering share class and contracting changes but have not yet made them and significant numbers of vendor searches in progress that have not been captured. Asked to weigh in on that premise, just over 4 in 10 (41%) of this week’s respondents once again noted that it depended on the recordkeeper and the plan. However, 18% saw flat fees for large plans, with declining fees for smaller plans, while roughly 14% thought recordkeeper fees would fall for both larger and small plans. About 9% thought fees would be flat for both larger and smaller programs, and the same number saw flat fees for larger plans, but rising for smaller plans. Five percent saw recordkeeping fees increasing for both large and small plans, and the rest weren’t able to identify a discernable trend.

Reader Comments

We did, as you might expect, get a number of reader comments on this week’s reader poll. Here’s a sampling:

“I do think fees will start to increase again, as recordkeepers will have to continue to offer more bells and whistles (technology-wise) to keep up, or ahead of, their competitors.”

“The recordkeeping cost will continue to decline but ancillary services such as IRA rollover, managed accounts, proprietary funds, general accounts, participant advice services, etc. will be added to increase RK revenue to offset profitability – like airlines and bag fees (just less disclosed)”.

“It takes scale to be profitable in this business in order to invest in your tech platform and human capital. I believe it will be difficult for fees to drop any further and maintain profitability. While new entrants may emerge … absent a tremendous inflow of upfront capital, it will be difficult to build brand recognition, build a top-notch RK system and still maintain that human-touch element and partnership that’s still important in this day and age. Therefore, the big players will continue to get bigger through growth, product innovation, & (primarily) acquisition; and smaller firms will have trouble servicing all market segments.”

“As plans grow… fees go down. Grow plans… do not only focus on fees.”

“I sense the race to the bottom has stopped. It will be interesting to see how the two largest players will serve as fiduciaries to participants. I truly believe they do not understand the can of worms they opened up. The FINRA rules are very stringent and I struggle to see how the average phone rep will work through this.”

“Fee compression is a huge issue, companies will provide less service intern having unhappy clients. This is an issue across the industry in every sector, not just recordkeeping.”

“Although recordkeeper and admin costs may be going down, we are seeing participant admin costs increasing: such as loan costs, distribution, etc.”

“It is likely recordkeeping fees overall have finally bottomed out, and we are seeing more promotion of alternative revenue generators (e.g. managed accounts, higher-priced advice) that generally do not show up on consultant spreadsheets as the official ‘revenue requirement.’ I would not rule out revenue requirements actually rising, especially down market, as more of the older, higher-priced contracts fall off the books or become renegotiated, limiting the potential for subsidizing pricing on new sales.”

“We have built an RK tool that looks at 10 RK’s and it seems the same two always rise to the top.”

Consolidate ‘Ed’?

Finally, since it seems that about every 10 years or so, some pundit or other predicts that consolidation in the recordkeeping industry will winnow it down to the point where only a handful will remain – and surely, sooner or later, that could happen (the consolidation continues to occur, but new entrants continue to emerge), we asked readers to weigh in on what they think the state of recordkeeping will be. A clear plurality (39%) said there will be fewer, larger recordkeepers, but more than one in five (22%) thought that while consolidation will continue, new entrants will emerge as well, and 17% opted for, “Net/net, we’ll be in pretty much the same shape we are in today.” And yet, 13% think there will only be a handful of large recordkeepers left. The rest had no opinion.

Time will tell.

Thanks to everyone who participated in this week’s NAPA Net reader poll!

Oh, and if you haven’t yet weighed in on the topics for the NAPA 401(k) Summit agenda – well, time’s a wasting. Come check it out at

Post a Comment

Your email is never published nor shared. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>

Send this to a friend