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.
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.
- 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.
- 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.
- 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?”
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.
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.”
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
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