The retirement plan marketplace is undergoing significant changes, with plan sponsors increasingly addressing a broad array of investment and spending issues beyond pure retirement saving. In an effort to address these issues entangled with retirement savings (and perhaps for more nefarious reasons) financial services organizations seem eager to expand the retirement field of play giving rise to the concept of "retailification.”

What is "Retailification"?

"Retailification" refers to the practice of using institutional relationships as an introduction to market retail financial products and services to retirement plan participants. This practice introduces several risks and conflicts that plan sponsors must manage.
While “retailification” had largely been limited to recordkeepers and financial services firms, retirement consultants and fiduciaries, driven by private equity and external shareholders, have supercharged their own conflicted retailification.

Key Risks and Conflicts

Most common in the effort to leverage trust for revenue, consultants have begun engaging in the following practices:

• Proprietary Investment Management: Consulting firms are prioritizing their proprietary products over other non-proprietary instruments.
• Managed Accounts: Advisers are now marketing Adviser Managed Accounts, where the consultant receives a portion of the fees paid by participants, creating potential conflicts of interest in evaluating the need, value, and effectiveness of these types of services
• Proprietary IRA Rollovers: Advisers are actively soliciting IRA distributions from institutional retirement plans into proprietary IRA accounts, sometimes with the help of the recordkeeper
• Cross-Selling Retail Financial Products: Access to participant-level data allows conflicted consultants to targeted sales of additional products unrelated to retirement while increasing the availability of PII thereby raising concerns about with regard to cybersecurity.
• Annuitization: The financial services industry seeks to integrate consultants into retirement income products, potentially compromising their independence in evaluating the need for these types of in-plan solutions.

Managing and Mitigating Conflicts

To effectively manage these conflicts, plan sponsors should:

• Demand Transparency: Review and understand disclosure statements.
• Implement Strong Governance: Establish robust governance practices.
• Conduct Regular Reviews: Audit services and products regularly.
• Demand Independent Oversight: Ensure independent monitoring of new services.

Download the Full Guide

For a deeper dive into the "retailification" of retirement plans and strategies to manage associated risks, download our comprehensive guide. This resource provides valuable insights and practical advice to help plan sponsors navigate this evolving landscape.

Multnomah Group is a registered investment adviser, registered with the Securities and Exchange Commission. Any information contained herein or on Multnomah Group’s website is provided for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies.   Investments involve risk and, unless otherwise stated, are not guaranteed.  Multnomah Group does not provide legal or tax advice.  Any views expressed herein are those of the author(s) and not necessarily those of Multnomah Group or Multnomah Group’s clients.