Though January is just another month on the calendar, it is filled with hope - and sometimes, with trepidation. So in keeping with that spirit, here are some thoughts on what is likely to happen this year.


Advisers. The emergence of the "elite 5,000" DC advisers - those with 10 plans, $30 million and three years in the DC industry - marched on at a surprisingly quickened pace in 2010. As plan sponsors become more aware of the differences, more of them than ever will be looking to change their advisers.

With more plans going fee-based, look for more advisers to embrace the "hybrid" model, with both a fee and commissioned structure.

Pricing will continue to deflate, so DC advisers must continue to grow their plans under management and better manage their resources. Growth will come not just from more DC plans but from cross-selling wealth management, health care and other employee benefits, and rollovers, as well as from partnering with other firms.


Plan sponsors. The theme of the "Tao of 401(k)" will continue for sponsors as they struggle to thrive and survive in a tougher economic environment - they want no cost, no work and no liability. Advisers that can help deliver these results while helping participants to be more successful in retirement - and compiling the data to prove it - will be in demand.

More larger and even mega-sized plans that have traditionally hired institutional consultants will hire financial advisers that are independent, with roots in the retail market.


Providers (recordkeepers, asset managers and broker-dealers). Look for more consolidation among recordkeepers as the cost to compete and maintain increases depending on the assets and participants under management. Innovation comes from recordkeepers who will be looking to partner with academia to conceive and develop ideas, particularly in the realm of behavioral finance.

Both recordkeepers and DC investment only firms will struggle to revamp the archaic and expensive wholesaler system, but little if anything will get done. Someday, the entire system will get simplified with recordkeepers, advisers, TPAs and money managers getting paid separately for what they do. But until then, revenue sharing will continue, with money passed between the parties behind closed doors.

While asset allocation and (especially) target-date funds will continue to grow, there will be a steady movement toward institutional DB-like funds, more customized mass market products (risk plus age), adviser-directed glide paths and managed accounts.

More money managers will fight to get a piece of the DC market, but that window is closing fast. As participants look to make up for lost time, there will be a move to riskier equity funds and away from fixed income and bond funds.

With the July 2011 deadline for Section 408(b)(2) compliance, broker-dealers must decide whether they will allow their advisers to be fiduciaries or not. This will be a rude awakening for many who didn't realize or care what their registered representatives were doing.


Government. On the one hand, regulators and Congress are pushing for more disclosure and fiduciary liability for all parties, making the system more transparent if not more complicated, and bringing IRAs into the fiduciary discussion - while on the other hand giving plan sponsors an escape hatch with the proposed mandated employer-directed IRAs, which would eliminate most costs and liability (as well as advisers).

While the Obama administration lost a lot of control in the recent election, no doubt the march toward more government intervention in our industry will continue to be very strong.

Will 2011 be the year that the DC industry focuses on outcomes, not features? It's ambitious and won't be accomplished overnight. But without that goal in sight, where are we headed?


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

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