The Evolving Role of TPAs in the Small- and Mid-Sized Retirement Plan Markets
Cerulli Associates has just released a report, "Evolving Role of TPAs in the Small- and Mid-Sized Retirement Plan Markets," that provides analysis of third-party administrators (TPAs) in the defined contribution (DC) marketplace that are focused on the small- to mid-sized plan segments ($1 million to $50 million in assets).
Key findings noted in the study are:
The "asset influence" of TPAs has risen over the past two years. In 2010, nearly 30% of 401k assets were associated with some form of TPA.
The majority of TPAs keep a tight rein on client loss with an average loss rate of less than 1% of their business base.
As a result of increased regulatory burdens, the 403(b) segment is a strong market for TPAs with highly consultative methods and strong administration services.
"Dabbler DC advisors" are on the decline, as asset control concentrates toward specialists, who are increasingly coming from the RIA channel.
TPAs are strategically aligning with, or adding, RIAs to their business models.
Cerulli identifies a new category of TPA called "Standard Plus," which resemble an Elite TPA, but are focused on the small- to mid-sized plan segment.
The report identifies the total number of TPAs, and sizes the assets they influence. A segmentation model breaks down these firms into six categories, helping firms to pinpoint opportunities.
Cerulli identifies five ways this report can help firms:
Understand the various TPA segments as well as which firms present the largest opportunity for asset managers and other firms in the DC space.
Size the portion of DC assets over which TPAs have influence.
Identify the types of advisors that are best positioned for success in the DC space.
Examine the impact of consolidation among TPAs.
Analyze the service models and fee structures of TPAs serving the small- and mid-sized plans.
Data comes from Cerulli's annual survey of TPAs which is targeted at the small- to mid-sized plan segments. You can learn more at Cerulli.com.
