The Changing Retirement Plan Landscape for Providers: Prepare or Exit Stage Left

As bad as I believe it is for plan sponsors, I believe that many retirement plan providers are not prepared for the coming changes in 2012. Many retirement plan providers have been ready for years, but I think there is quite a few that are not and that is a problem on many levels.

Obviously, every retirement plan provider has to be in compliance. It hard to be a third party administrator (TPA) or an ERISA attorney or financial advisor and touting how you can keep your client’s plans in compliance when you are not in compliance. However, I am thinking from a business standpoint.

As many of you know, I am a big fan of business history and why certain companies succeed and others fail. My belief is that one of the reasons why companies thrive or die can sometimes be based on changes in the marketplace.  In 1993, Blockbuster Video was a darling of Wall Street and was trying to merge with Viacom. Blockbuster never saw the changes going on with the Internet and streaming videos, allowing a small upstart called Netflix to help destroy their business. Eventually, Blockbuster will only survive as a brand name only for streaming videos and DVD rental kiosks, sort of the way Polaroid or The Sharper Image’s names only survive today. Ask the folks at Borders Books and look at the folks at Barnes & Noble, who are probably only in business today because of the Nook.

Changes in industry have winners and losers. The winners and losers are only determined as to who decide to allow the changes to add a competitive advantage to their business while the ones who died sat and did nothing.  The paralegal who had taught me most of what I know when I started in this business in 1998 really said it succinctly. She said when the Tax Reform Act of 1986 came out, many plan providers such as TPAs and ERISA attorney simply left the marketplace because they couldn’t handle the change and that is what changes do in the retirement plan industry. There will be winners and there will be those that will exit stage left.

Marge was right, only time will tell who will thrive and who will die.

If you are a plan provider and you haven’t decided to what to do with the coming changes, you still have time. Change with the times; don’t let the times change you.  

If you are a retirement plan provider that doesn’t have a plan to survive these changes, I suggest you develop one. If you need help how to proceed or just wanted to say hello, please feel free to contact me and I will leave the light on for you.

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