Industry Insight from Fred Barstein
Mid Market 2009 Ratings - Plans with $10 - $100 Million

Led by NY Life which returned to the top rated position in 2009, more than half of the top 10 rated providers in 2008 repeated in 2009.  M&I Institutional Trust Services, Wells Fargo, Vanguard, Fidelity, and Wachovia all returned, while John Hancock (see profile), American Funds, Schwab, and Putnam are new to the investment service category.  For record keeping & administration, ING (see profile) - formerly CitiStreet, Schwab, Fidelity, Prudential, and Principal broke through in 2009.  It’s worth noting how well Hancock performed, albeit at the lower end of the market, raising the question of whether a group annuity / unbundled TPA model can gain substantial traction with Mid Market advisors.  ING appears to have successfully integrated CitiStreet and the massive changes at Putnam seem to have made an impact as well.

Overall ratings are at an all time low with a 40% drop in both categories compared to 2009.  Even though 2009 was a stellar year for the stock market and participants enjoyed a significant boost in their accounts, they are down significantly from their all time highs.  Perhaps sponsors believe that providers should have protected their participants better, especially those whose 2010 target dates performed so miserably.  One would think that the high levels of dissatisfaction would open the doors to new entrants, but the cost and barriers to entry are so high that even the niche players will have trouble competing with the larger incumbents.  Perhaps small market providers like Hancock and Great West will take the opportunity, but they will discover quickly that the margins are not as great as in the smaller markets.

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