Cogent Reports: Small and Mid-sized Plans Are Sweet Spot in 401(k) Market

July 24, 2018

In the highly competitive 401(k) market, it’s tempting for plan providers to aim for mega plan conversions that bring substantial assets and thousands of participant accounts in one shot. However, new data suggest that plan providers would be better off focusing sales efforts on small and mid-sized plans—those with $5 million to just under $100 million in assets. Plan sponsors in the Small-Mid segment report the greatest intent to act, with 39% ready to launch a formal 401(k) plan review and three in ten (29%) likely to switch providers in the coming year. These and other findings are from Retirement Planscape®, an annual Cogent Reports™ study by Market Strategies International-Morpace.

When asked to pinpoint the reasons why they’re likely to switch providers, Small-Mid plan sponsors cite issues with fees, choice of investments, and participant service most often. Yet the factors that these plan sponsors seek in a new plan provider include the more personal aspects of trustworthiness (being a company plan sponsors trust), acting in the best interest of participants, and a perception of being easy to do business with.

According to the report, the top firms Small-Mid plan sponsors are most likely to consider in the next year are:

  1. Fidelity Investments
  2. Empower Retirement
  3. OneAmerica
  4. Vanguard
  5. Ascensus

Source: Market Strategies International. Cogent Reports™. Retirement Planscape®. May 2018.

“This year, a number of firms appear to have improved their brand perceptions in the important areas of being easy to do business with, choice and flexibility in investment options, and value for the money,” said Sonia Sharigian, product director at Market Strategies-Morpace and author of the report. Outside of the top five firms listed, 11 providers achieve year-over-year increases in consideration from Small-Mid plans: Charles Schwab, Principal, Prudential, Bank of America Merrill Lynch, ADP, Ameritas, John Hancock, Alliance Benefit Group, MassMutual, Nationwide and BB&T.

“The majority of provider reviews and searches stem from human error such as processing and compliance mistakes and overall poor client service,” explained Linda York, senior vice president at Market Strategies-Morpace. “Yet the impetus for provider changes can also be the result of successful business growth or organizational changes such as mergers and acquisitions. In order to maximize their chances of winning new business, plan providers need to demonstrate an understanding of each plan sponsor’s challenge and tailor their sales efforts to meet the needs of each individual situation.”

About Retirement Planscape®

Cogent Reports conducted an online survey of a representative cross section of 1,421 401(k) plan sponsors from February 13 to March 10, 2018. Plan sponsor survey participants were required to have shared or sole responsibility for plan design, administration or selection and evaluation of plan providers, or for evaluating and/or selecting investment managers/investment options for 401(k) plans. In determining the sampling frame for this study, Cogent Reports relied upon the Standard & Poor’s Money Market Directories (MMD) and ALM’s Judy Diamond Associates databases. To ensure the population for this research is representative of the universe of 401(k) plan sponsors, quotas were set during the data collection phase around key firmographic variables including total plan assets, number of plan participants, industry and geography. Minimal weighting was applied to adjust for purposeful deviations from the actual marketplace distribution. The data have a margin of error of ±2.60% at the 95% confidence level. Market Strategies International will supply the exact wording of any survey question upon request.


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