Most experts are predicting massive consolidation among DC record keepers - with the big push just about to begin, especially with four national record keepers representing more than 100,000 defined contribution plans likely to change ownership in the next few months.

The businesses of many large, national record keepers are not sustainable, especially with low plan turnover and deflationary price pressure driven by new disclosure regulations and the proliferation of cheap and easy-to-use fee benchmarking software.

The factors in favor of consolidation mount as the parent corporations of many of these providers are under extreme pressure to raise cash. Meanwhile, DC businesses are still highly regarded, which is what is happening with The Hartford.

Even without consolidation, some providers will wallow in the market, unable to reinvest aggressively in their products, services, distribution and support of advisers.

So how can you identify which providers are likely to sell their businesses or will not be able to remain viable? While we can all do the math and look at the number of participants and assets under management, there may be other factors that make the equation a bit more complicated.

Certainly having a brand for a plan sponsor, if not participant, helps. As does a large and skilled sales force. Robust and current technology surrounded by good process allows record keepers to continue to lower costs. Even more insightful is looking at the tenure, experience and talent level of senior management because, if they are coming and going on a regular basis, there is almost no chance to develop and sustain a viable business model - never mind a highly functional team. The most naive thing you can do is ask the record keeper if they are committed and expect an honest answer.

One way to determine whether a record keeper is committed or even going in the right direction is to watch their wholesalers, who are like the giraffes in the DC jungle. At African watering holes, all the animals stay near the giraffes when they are drinking because they have the best view of when trouble is coming and are easily spooked.

Wholesalers arguably have the best perspective because they are in the field speaking to advisers and sponsors and also have an insider's view of the home office. If something is going bad, whether it's sales, products, investments, service, politics or even finances, wholesalers will know it quickly - especially the good ones.

Their greatest asset is their network of advisers. So, if something is going wrong with their current employer, the wholesaler gets less aggressive until they are able to find a new home or watering hole.

Even though the wholesaler may not be able to be totally honest, they will give you signs. When one or two good ones move, it's not necessarily an indication but when the good wholesalers move en masse, it's a sure sign of trouble.

On the other hand, when a provider is hiring really good wholesalers, it's a sign of their commitment and the health of their business. Stay close to your wholesaler to avoid being in the position of having plans with an exiting record keeper being picked off by your predatory competitors. Remember, it's a jungle out there.

Barstein is founder and executive director of The Retirement Advisor University in collaboration with UCLA Anderson School of Management Executive Education. Reach him at

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