Welcome to this week’s edition of 401(k) Real Talk, where Fred Barstein, contributing editor for Wealth Management’s RPA channel, reviews all of last week’s industry news and selects the five most important/interesting stories.
Worth Reading:
Read the full raw transcript below:Â
Greetings & a warm welcome to this week’s edition of 401k Real Talk. This is Fred Barstein contributing editor at WealthManagement’s RPA omnichannel and CEO at TRAU, TPSU & 401kTV – I review all of this week’s stories and select the most important and interesting ones providing open honest and candid discussion you will not get anyway else. So let’s get real! Â
FIRST STORY
Though the April job growth at 178,000 beat expectations, there is still concern about the economy which led the Fed to keep interest rates steady with unease about the war. Healthcare led with 76,000 jobs while most other segments lagged.
Though the unemployment rate dropped a tick, an estimated 400,000 people exited the workforce. According to the University of Michigan, consumer sentiment is low with concern about the possibility of stagflation – low growth and high inflation.
Focus on improving retirement plans remains high among plan sponsors now attentive on improving outcomes but HR and benefit staff attrition continues as well as cost concerns even though DC plans are much less expensive than most other benefits.
Next story:
An Executive Order announced the launch of a Trump IRA intended to expand coverage to lower paid workers without access to a retirement plan at work.
Beginning next year and leveraging the Federal Thrift Savings Plan with an open marketplace using low cost ETFs or mutual funds that track US equities, the government will provide a $1000 match.
The April 30th Executive Order follows the successful launch of Trump Accounts for children born to US citizens in 2025-2028 which has over 4 million accounts.
The good news is that the current administration is focused on expanding retirement coverage. The reality is that voluntary plans like the ill-fated myRA accounts terminated in 2018 get very little traction and Obama’s mandatory auto IRA proposal did not pass Congress. Only government mandates have a real impact which in turn increases private plan formation.
NEXT STORY
Along with announcing a partnership with UBS, Human Interest declared that they would be substantially increasing their sales force in 2026 and 2027 to rival both ADP and Paychex.
Human Interest at over 40,000 plans claims to be growing at over 1,000 plans per month plus relationships with hundreds of payroll providers. They have recently announced price and service guarantees along with an IRA concierge for advisors.
As new plan formation explodes due to government mandates, there is a need for fintech providers like Human Interest, Vestwell, Betterment and 401Go which can make money on even the smallest plan through new tech, AI and streamlined processes. PE firms seem to agree funding many of these firms with traditional record keepers and broker dealers partnering with them.
Next story:
As advisory plan fees decline, more firms, especially larger ones, look to providers for financial support which, according to Institutional Investment Consultant Multnomah Managing Partner Erik Daley, can lead to significant conflicts of interest with most plan sponsors unaware.
Daley claims that a prudent fiduciary due diligent process can mask the issues which he claims are structural, not ethical, as many firms or their parent receive indirect payments that can influence their recommendations.
Daley recommends that plans ask their consultant or advisor whether they or their parent organization receives revenue beyond the retainer. The issues could be exacerbated, claims Daley, if the advisor group is PE owned.
The issue came up recently when the $13.8 bn Chicago teachers fund voiced concerns about the consultant they had selected through an RFP when that firm was acquired by a PE backed organization and decided to restart the process.
FINALLY
As the defined contribution industry emerges from the shadows of the financial services sector no longer a niche market, the technology that supports the over 100 million participants must keep pace.Â
The backbone or spine of the DC industry is the underling record keeping technology with FIS Global Retirement which supports Omni and Relius the clear leader with 650 clients supporting 68 million participants.Â
Read my recent WealthManagement.com/RPA column about FIS’ launch of a new cloud-based record keeping system due out in July which could help unleash the potential of DC plans.
FINISH
So those were the most important stories from the past week. I listed a few others I thought were worth reading covering:
ICI 2026 Factbook highlights the growth of retirement plans now at $49.1T
Blue Owl raises $3B after positive earnings reportÂ
How AI fuels ERISA litigation and
Morningstar projects how auto features have and will affect retirement plansÂ
Please let me know if I missed anything or if you would like to comment. Otherwise I look forward to speaking to you next week on 401k Real Talk.Â
