The defined contribution market, which includes 401(k) and 403(b) plans, has traditionally not appealed to wealth advisors or RIAs. Most seasoned retirement plan advisors have also tended to avoid small to micro plans. The main reason is that plan-level revenue is typically tied to a percentage of assets, and fees have steadily declined given that payroll providers and fintech companies offer these services at minimal cost.
Why the Interest?
So why are RIAs showing renewed interest now? The number of 401(k) plans is projected to soar from 750,000 in 2023 to over 1 million by 2029.1 Notably, the percentage of micro plans (based on the number of plans)—defined as those with less than $5 million in assets—is expected to rise from 89% to 92% during this period. As a result, we believe many RIA clients who own or manage businesses will likely require support in establishing new plans or improving existing ones, particularly as payroll providers and fintechs offer only limited service in this space.
Underlying the growth in plan formation is the wave of state mandates that are sweeping the country, as more states are requiring that employers offer a retirement plan at work.2 Most of these state-sponsored plans are auto-IRAs, which require minimal effort and liability from employers. However, because these plans offer limited value in terms of investment options and support, many employers are considering traditional 401(k) or 403(b) plans instead.
Another factor is the SECURE 2.0 Act of 2022, which introduced tax incentives for organizations with fewer than 100 employees, encouraging small businesses to establish retirement plans. Additionally, pooled employer plans (PEPs) now make it easier for advisors and plan sponsors to outsource much of the administrative work. This builds on the foundation set by SECURE 1.0 (the SECURE Act of 2019), which first allowed financial service companies to serve as pooled plan providers.
New Competition, New Tools and Opportunities
While payroll providers such as ADP and Paychex which currently service just under one-third of all defined contribution plans, primarily through their payroll clients—are expected to continue growing, fintech firms such as Vestwell, Guideline, Human Interest, Betterment and 401Go are also rapidly gaining market share, with some reaching billion-dollar valuations. Despite this growth, we believe many organizations are likely to continue relying on their trusted advisors, such as CPAs and RIAs, for guidance and support.
For RIAs, it can be difficult to turn down a client’s request for help. Even when plan-level revenue is minimal, liability is high, and most RIAs lack ERISA expertise or experienced staff. Not every service that an RIA offers is highly profitable; some are primarily provided to strengthen client relationships and retain business.
A significant portion of America’s wealth is not immediately visible. Morgan Stanley’s former CEO, James Gorman, said in 2023 that the workplace would become the greatest source of assets3 for advisors over the next decade, with the firm reporting $300 billion in workplace-derived assets from 2020 to 2024.4
The number of mass-affluent households—defined as those with $250,000 – $1,000,000 in investible assets—is on the rise, with many breadwinners holding assets in DC plans. Moreover, an estimated 18% of workers aged 25 to 34 earn more than $100,000 and are known as HENRYs, or “high earners, not rich yet.”5 Building relationships with HENRYs through the workplace may result in valuable, long-term clients.
In addition, increasing adoption of managed accounts and artificial intelligence for scalable advice is enabling RIAs to efficiently service less affluent clients.
Enter the Retirement Plan Advisors (RPAs)
Tools such as PEPs are helping RPAs service micro plans more efficiently.
IRA rollovers from DC plans are projected to rise from over $858 billion in 2025 to $1.15 trillion in 2030, according to LIMRA.6 The average rollover is expected to increase to $220,000, and rollovers tend to be even larger when advisors already have an established relationship with the client.6
According to Cerulli, approximately 11,200 experienced RPAs have more assets under management (AUM) in DC plans than in wealth management. Many in the next tier—about 55,000 advisors with 15 - 49% of their AUM in DC plans—also possess the staff and expertise to effectively manage these plans. However, most RIAs lack this specialized knowledge and are likely to outsource investment fiduciary responsibilities, such as the 3(21) or 3(38) roles, either through their home offices or to third-party providers.
Onboarding, service and administration of retirement plans can be challenging. PEPs may offer a solution, especially office-based clients, but are ultimately just tools. The primary concern for RIAs is to preserve their relationships with wealth management clients while minimizing their own workload and time commitment. Another effective approach is to collaborate with a local third-party administrator (TPA) that partners with major record-keepers, though it’s important to note that there are thousands of TPAs, and their quality can vary significantly.
Conclusion: A Vital Market for RIAs
Overlooking a market valued at $12.2 trillion, encompassing more than 800,000 plans and nearly 90 million active participants—and continuing to grow rapidly—may not be the best strategy for RIAs seeking to maintain relationships and expand their business, even if they do not wish to become specialist RPAs. The key, in our view, is to identify effective solutions that support current clients while minimizing costs, time and staffing needs. This may include partnering with a trusted specialist RPA.
