Is It Convergence — or a Combination?

 If I had a dollar for every time I've heard the word "convergence" over the past year . . . well, I'd probably have enough to fund a managed account. Maybe two.

Retirement advisors are becoming wealth advisors. Wealth advisors are moving into retirement plans. Recordkeepers are evolving into workplace financial platforms. Everybody, it seems, wants to “own” the participant relationship.

Though, come to think of it, this isn't the first time we've heard this tune. In fact, every decade seems to produce a new prediction that the walls separating financial services are finally coming down.

This time, though, the argument feels different.

My buddy Fred Barstein has been one of the industry's most vocal advocates, arguing that convergence between retirement and wealth management isn't something on the horizon — it's already reshaping the business.

And to be fair, the evidence has become considerably stronger of late.

Consider the recordkeeping business. A recent McKinsey report estimates that recordkeepers generated roughly $45 billion in retail wealth revenue in 2023, compared with only about $13 billion from traditional recordkeeping. That's not a subtle shift. It suggests that, for many firms, recordkeeping has become the platform while wealth has become the growth engine. 

Then again, that's not entirely new. One could argue that firms like Fidelity entered the recordkeeping business in the first place because they saw retirement plans as distribution platforms for investment products. Over time, however, many providers discovered that converting recordkeeping relationships into asset management relationships proved more difficult than expected.

That said, according to NMG Consulting, roughly 70% of retirement plan advisory firms are looking to expand beyond their traditional retirement practices, primarily into wealth management and insurance. Major firms like CAPTRUST, HUB International, OneDigital, and Creative Planning have all invested heavily in building businesses that span both worlds. Wealth firms increasingly view the workplace as their next client acquisition channel, while retirement firms increasingly see participant relationships as the logical extension of their advisory model.

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Viewed from 30,000 feet, it certainly looks like a “convergence.”

But wait a minute. Before deciding whether convergence has arrived, shouldn't we first agree on what "convergence" actually means? 

It seems to me there are at least three different kinds of convergence taking place.

1. The first is recordkeeper convergence.

This one is difficult to dispute. Large recordkeepers increasingly see themselves less as administrators and more as holistic workplace financial platforms — offering managed accounts, financial wellness, retirement income, emergency savings, banking products, HSAs, and advice. Now, whether participants fully embrace those services is another matter, but the business strategy is unmistakable. 

It’s also not exactly new as an expansion aspiration. People have been talking about this since the 1990s.

2. The second is business model convergence.

This is where firms acquire capabilities outside their historical expertise. CAPTRUST buys wealth firms. Creative Planning buys retirement firms. HUB and OneDigital assemble both under the same corporate umbrella.

Again, the evidence is compelling.

3. But the third type — professional convergence — is where I remain unconvinced.

Buying a wealth practice doesn't necessarily transform retirement consultants into wealth advisors. Buying a retirement practice doesn't automatically make wealth advisors experts in fiduciary governance, committee processes, plan design, or ERISA litigation risk. We’ve seen this tried — with mixed results — before. Though it may create — from an external perspective, anyway — what reads like a diversified financial services company. 

Which brings me to my original question — is this truly a “convergence?”

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Or is it simply a combination?

The retirement business remains institutional, process-driven, committee-oriented, and fiduciary-centered, while wealth management remains personal, behavioral, relationship-driven, and household-focused.

Those aren't merely adjacent businesses. They require different expertise, different operating models, and often different personalities.

Which brings me back to the data.

Fred points to enormous wealth opportunities: roughly $74 trillion in wealth assets, compared with about $14 trillion in defined contribution plans. Approximately $1 trillion rolls out of retirement plans each year. Wealth management fees are many times higher than retirement plan advisory fees — and the margins tend to be better as well. The economic incentive at a firm level is undeniable.

He also cites recent Fuse research showing that wealth advisors who manage retirement plans convert about 6% of participants into wealth clients. The largest firms reportedly convert closer to 17%, and more than a third say retirement plans are a more effective source of new clients than traditional prospecting.

Given the size of many retirement plans and the amount of outside wealth participants increasingly command, converting six participants out of every 100 can generate significant assets and recurring revenue.

But 6% is also...well, “just” 6%.

It means 94% of participants AREN’T becoming wealth clients. At least not yet.

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Let’s be honest; if only 6% of participants used a financial wellness program, we'd probably describe adoption as “modest,” if not “limited” — or “early days.” If only 6% elected a retirement income solution, we'd say the market was still developing. Indeed, we have.

Yet when the subject is wealth management, some have tended to interpret the same number as proof that convergence has “arrived.”

I'm not sure that conclusion follows.

To me, the Fuse research demonstrates that retirement plans have become an effective client acquisition platform for wealth advisors — and it may well have opened the door for an expansion of the participant relationship for retirement advisors — but it's not necessarily the same thing as proving that the retirement and wealth professions have “converged.”

If “convergence” means retirement consulting and wealth management have become an integrated profession with interchangeable skills, business models, and client relationships, I think the evidence is still mixed. 

Honestly — and I know some will disagree — I'm not even sure they should.

The retirement business isn't simply wealth management with smaller accounts. It has its own fiduciary framework, governance structure, regulatory obligations, and institutional perspective. Those differences exist for good reasons.

Indeed, to me right now this “convergence” feels less like an accomplished fact than an industry aspiration — one driven by powerful economics, undeniable strategic momentum, and, perhaps, just a bit of wishful thinking. And, I have to say, not a new one.

“Convergence” to me is all about “us.” 

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Maybe that's the real convergence.

Not retirement advisors becoming wealth advisors.

Not wealth advisors becoming retirement advisors.

But finally recognizing that participants never divided their financial lives into those categories in the first place. The industry created the silos.

Participants never did.

Perhaps the best evidence isn't that retirement and wealth have become the same business.

It's that both have finally discovered the same customer.

And maybe that's “convergence” enough — for now, anyway.

• Nevin E. Adams, JD

Square Pegs, Round Holes and ‘Convenient’ Conclusions

  Every so often a report comes along that says less about retirement policy than it does about the temptation to reduce complex issues to a simplistic scoreboard — that fits a particular agenda. 

Even if it amounts to jamming a square peg into a round hole.

This week’s entry comes from a report arguing that 401(k) plans without private equity and other alternative investments “significantly outperformed” pension plans that invested heavily in those alternatives. The implication, of course, is that pension plans — and perhaps the experts managing them — somehow got it wrong. More precisely, it takes to task the decision(s) by those once-vaunted defined benefit plans for having the temerity to invest in … private markets (gasp!). 

Now, there are plenty of reasons to approach the introduction of private markets to defined contribution plans with caution — and that was before the recent Labor Department proposal.[i] But any credible retirement plan professional understands that defined benefit and defined contribution plans have COMPLETELY different timeframes, objectives, and risk factors to consider. Comparing their returns[ii] without acknowledging those differences is a bit like comparing the performance of a fire department and an ambulance service based solely on fuel efficiency.

Technically measurable? Sure.

Useful? Not so much.

The report headlines with an assertion that DC plans’ “superior performance was a result of the defined contribution plans’ simpler portfolio mix, and the outperformance holds even when controlling for plan size and risk.” 

Yes, but. Defined contribution plans are accumulation vehicles. Their objective is largely straightforward: maximize participant account growth over time, subject to participant behavior and investment elections. Particularly over the past 15 years — a period dominated by one of the strongest public equity runs in modern history — that has proven to be a very favorable environment for equity-heavy portfolios. Oh, and they’re under the direction of millions of different individual savers, with widely divergent interests, needs, expertise and — attention spans.

To put it mildly, defined benefit plans operate under a different mandate entirely.

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They aren’t simply trying to maximize returns. They are trying to ensure that promised benefits can actually be paid — not just next quarter, but decades into the future. That means managing liabilities, liquidity needs, funded status volatility, cash flow demands, and demographic realities. Mature pension plans with large retiree populations often must maintain substantial allocations to fixed income and diversifying assets precisely because they have obligations that continue regardless of what the markets are doing.

And that, ironically enough, was once considered a virtue (see Goal Lines).

For years, many of the same voices now criticizing pension plan allocations celebrated the advantages of defined benefit investing: professional management, institutional discipline, diversification, long-term investing, risk pooling, and access to asset classes unavailable to most individual investors.

Pension plans were often held up as examples of how retirement investing should work — insulated from participant panic, emotional trading, and the limitations of retail investing.  To this day many industry experts promote shifts toward the DB-ification of DC plans.

Now, after a prolonged bull market in public equities, the narrative has, apparently, shifted.

Suddenly, diversification is evidence of caution. Liability management is evidence of underperformance. And 401(k) plans — once criticized for placing too much responsibility and risk on individual workers — are being celebrated for the very market exposure that once made them suspect.

Funny how market cycles can reshape philosophy.

The report’s comparison period also matters. Measuring outcomes beginning in 2009 effectively captures nearly the entirety of the post-financial crisis equity surge. In hindsight, portfolios with heavier public equity exposure were almost destined to look superior over that period.

Then again, hindsight has always been the easiest investment strategy.

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None of this is to argue that pension plans are beyond criticism, or that alternative investments always justify their fees or complexity. Reasonable people can debate those questions — and should.

But treating pension plans and 401(k)s[iii] as though they are interchangeable investment products competing for quarterly bragging rights misses the larger point.

Let’s face it — the gap in investment returns may well have something to do with the allocation to private market investments at a particular point in time. But the commonsense conclusion is that the real explanation goes so far beyond that that the comparison is … ludicrous. One can only imagine that those resharing the headline of this particular report seem only to care about the conclusion it draws, rather than the arguably shaky foundation upon which it was based.

The real issue here isn't whether the square peg or the round hole is somehow superior. It's the insistence on forcing one into the other and then declaring victory even when the fit looks awkward.

Sometimes a square peg is supposed to be square. And sometimes the problem isn't the peg at all — it's who’s holding the hammer — and why.

• Nevin E. Adams, JD

 

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[i] Which, for my money, mostly reminds us just how complicated and fraught with concerns that process is. See Talking Points: Retirement Income, Defaults and Fiduciary Duty.

[ii] Not to mention blurring the potential distinctive differences between all the defined benefit plans and all the various defined contribution plans that are being aggregated together to get those (gulp) AVERAGE results.

[iii] Not to mention the vast array of plan types being “mushed” together to derive these conclusions: “Using complete Form 5500 filings for all open U.S. private sector defined benefit plans and all defined contribution plans (over 58,000 plans, $7.7 trillion in combined assets) between 2009 and 2024, and incorporating verified return data for U.S. state and local public pension systems from the Public Plans Database…”

 

‘Living’ Proofs

In a calendar already chock full of special days and commemorative months, next week we’ll add another: Women’s Retirement Security Day.

If this one has snuck up on you — well, it’s a first. July 14 this year, the second Tuesday in July thereafter. A national day of action dedicated to raising awareness, sharing resources, and improving retirement outcomes for women.

And that’s the key — not a day of remembrance, a day for action.

For much of this country’s history, women were largely expected to derive retirement security through someone else’s employment — a husband’s pension, survivor benefits, or eventually Social Security spousal benefits. The retirement system itself was largely designed around a traditional, uninterrupted male career model: one worker, one employer, one pension, one primary breadwinner.

But many women’s lives — including my mother’s — never really fit that model.

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Mom, a schoolteacher, had a career of her own, but took a fairly significant (and unpaid) “sabbatical” so that she could stay at home with her four kids until the youngest was ready to head off to school. When she returned to work, she was covered by a state pension plan, albeit one that required from her paycheck a much more significant contribution than most defer into 401(k)s.

On top of that she saved diligently to buy back the service credits she had forgone during the years she worked in our home without a paycheck — and then set aside money in her 403(b) account (over Dad’s objections, I might add — he didn’t think they could afford it).

Indeed, generally speaking, women face many more challenges regarding retirement preparation than men. They live longer (and thus are likely to have longer retirements to fund), tend to have less saved for retirement (because of lower incomes and more workforce interruptions), and in addition to longer retirements, those longer lives mean they are also more likely to face what can be the catastrophic financial burden of long-term care expenses.

And their caregiving responsibilities often extend to aging parents, even after their own children have left the “nest.”

Women are also less likely to work for an employer that offers a retirement plan at work, and more likely to work part time — which historically has often meant being excluded from plan participation altogether. Only about 1 in 3 women use a professional financial advisor to help manage retirement savings and investments.[i]

Oh, and like my mother, they tend to outlive their spouses — often by far more than the variance in average life expectancy tables might suggest.

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Let’s face it, one of the enduring realities for many women is that the very responsibilities that strengthen families can weaken long-term financial security. Women remain more likely to interrupt careers, reduce hours, or work part time because of caregiving responsibilities — decisions that can ripple through retirement outcomes for decades.

The “magic” of compounding only works when there is something to compound.

Retirement preparedness isn’t merely about accumulating assets. It’s about preserving dignity, independence, and choice.

For everyone.

That’s what the inaugural Women’s Retirement Security Day should remind us.

Not simply that women face different retirement challenges — though they clearly do.

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But that a retirement system designed around real life needs to consider the people who actually live it.

Once again, though — this is not a day for flowers, cards, and social media posts. This is a day for action.

Let’s get to it.

• Nevin E. Adams, JD

More information is available at: https://www.usaretirement.org/get-involved/wir/womens-retirement-security-day/

[i] See 25 Facts About Women's Retirement Outlook | 25th Annual Transamerica Retirement Survey 2025.

The Pursuit(s) of ‘Happiness’

 This is the time of year when you hear a lot of talk about the “unalienable” rights of “life, liberty, and the pursuit of happiness.” And while they weren’t written with retirement plans in mind — to my ears they may describe the aspirations behind retirement better than almost anything else in American public policy. 

“Life” is, of course, central to retirement planning. It defines not only the time we have to prepare financially, physically, and emotionally for retirement — but also the length of time those preparations must sustain us.

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Granted, retirement is a relatively new and for many an as yet unexplored reality. But it’s easy to take for granted that millions of older Americans today live with a degree of financial security that previous generations often lacked. Before pensions, Social Security, and defined contribution plans, growing old frequently meant dependency — on family, charity, or continued labor. 

“Liberty” may be even more directly connected to retirement readiness. Financial insecurity restricts freedom. People who cannot afford to retire often lose the ability to decide how they spend their time, where they live, or when they stop working. A well-functioning retirement system creates options.

And aren’t “options” the essence of liberty? The ability to retire on one’s own terms, rather than because of failing health or employer decisions, is fundamentally about personal autonomy. 

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That idea has evolved over time. Not so long ago, retirement itself was once a rarity. For much of American history, people simply worked as long as they physically could. The growth of employer-sponsored retirement plans in the 20th century helped create something new: the expectation that later life could include not merely rest, but choice. Choice about work. Choice about family. Choice about purpose.

And then there is “the pursuit of happiness.” Note that it’s the PURSUIT of happiness, not a guarantee. A retirement plan cannot guarantee happiness, but it can create the financial foundation that allows people to pursue it. Indeed, one of the more overlooked aspects of retirement readiness is that money is rarely the ultimate objective. Financial assets are really a means to acquire something else: time, freedom, security, and peace of mind.

“These days, I’m often told that ‘retirement’ itself is no longer an especially compelling aspiration for younger workers…that younger workers can’t really visualize that concept — or aren’t willing to wait for it. Fair enough — the pursuit of happiness needn’t wait for “retirement” — it can, and perhaps should be, a lifelong undertaking. 

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Regardless, it remains today — as it was 250 years ago — an opportunity gifted to us by those who went before — not just those gathered in Philadelphia in 1776, but all the men and women who have sacrificed over our nation’s history to make that vision a reality. 

Because while those “rights” may be unalienable — they aren’t preserved without sacrifice, and a commitment to the future — yours, mine and ours.

• Nevin E. Adams, JD