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WHEN THE BEST
you can say about a year is that at least it is over,
the news cannot be good. The 401kExchange
Opportunity Index¹ is at or close to its lowest
level in all markets. Plan sponsors just do not see
many compelling reasons to switch record keepers because
of:
-
Investment flexibility with most platforms
-
Fewer bad providers left in the market
-
Higher levels of overall satisfaction with
incumbents
-
No new service or feature that drives change
-
Ease of renegotiating fees with their current
provider
With fewer record keeper mergers and acquisitions in
2007 and a volatile stock market, sponsors have “gone to
ground.”
The 401kExchange Opportunity Index¹ is intended
to be used as a benchmark, so record keepers with higher
growth rates should view their year as successful.
There is a self-reporting sales index that showed higher
growth in 2007 but that index includes mostly larger
providers with great brands and distribution networks
which may skew the results. While record keeper change
is slowing to a crawl, advisor-of-record change is
robust further increasing the power of experienced
retirement advisors. Without the push or influence of
an advisor, providers must rely on the sponsor to act,
which is not likely these days. Similarly, investment
only providers are seeing more business but their access
to platforms may be severely limited by record keepers
with proprietary asset allocation funds.
Looking ahead to 2008, we do not foresee greater sponsor
movement which means we should experience:
·
More record keeper consolidation than in 2007,
·
Increased power of experienced advisors, and
·
More investment only activity
¹
Percentage of plans that indicate they are currently
searching or thinking of changing providers
|
MICRO MARKET (<$1 MILLION) YTD |
|
YEAR |
2004 |
2005 |
2006 |
2007 |
|
% PLANS IN PLAY |
10.39% |
9.66% |
7.37% |
5.97% |
|
# PLANS IN PLAY |
40,906 |
38,041 |
29,018 |
23,502 |
|
Inc/Dec Prev. Yr (%) |
40.3% |
-7.0% |
-23.7% |
-19.0% |
|
SMALL MARKET ($1-$10 MILLION) YTD |
|
YEAR |
2004 |
2005 |
2006 |
2007 |
|
% PLANS IN PLAY |
10.05% |
9.46% |
7.21% |
5.02% |
|
# PLANS IN PLAY |
9,699 |
9,131 |
6,959 |
4,847 |
|
Inc/Dec Prev. Yr (%) |
20.7% |
-5.9% |
-23.8% |
-30.3% |
|
MID MARKET ($10-$100 MILLION) YTD |
|
YEAR |
2004 |
2005 |
2006 |
2007 |
|
% PLANS IN PLAY |
9.89% |
11.90% |
7.37% |
5.31% |
|
# PLANS IN PLAY |
1,305 |
1,569 |
971 |
700 |
|
Inc/Dec Prev. Yr (%) |
18.1% |
20.3% |
-38.1% |
-28.0% |
|
LARGE MARKET ($100 MILLION-$1 BILLION) |
|
YEAR |
2004 |
2005 |
2006 |
2007 |
|
% PLANS IN PLAY |
8.23% |
9.50% |
5.26% |
5.16% |
|
# PLANS IN PLAY |
214 |
247 |
137 |
134 |
|
Inc/Dec Prev. Yr (%) |
22.9% |
15.4% |
-44.6% |
-2.0% |
|
TOTAL MARKET (<$1 BILLION) YTD |
|
YEAR |
2004 |
2005 |
2006 |
2007 |
|
ASSETS |
$135,823,600,621 |
$150,912,346,812 |
$93,442,525,111 |
$77,995,940,494 |
|
ASSETS % INCREASE/
YR |
22.2% |
11.1% |
-38.1% |
-16.5% |
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