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 Industry
Insight from Fred Barstein
Opportunity Index Starts Out Slowly in 2008
THE
2008 401KEXCHANGE
Opportunity Index¹
started out at its lowest levels across all markets in
recent history. YTD the Micro Market (<$1 million) is off
20% from 2007 while the Small ($1-$10 million) and Mid
Markets ($10-$100 million) are down by 31%. The Micro and
Mid Markets were 50% and 75% respectively below recorded
highs in 2005 while the Small Market was off 53% from its
2004 high. While more and more sponsors are looking to meet
with experienced advisors that can help improve their plan,
limit fiduciary liability or lower costs, sponsors just do
not want to change record keepers.
These
trends spell consolidation for both advisors and record
keepers.
There will be more power and assets in the hands of fewer
advisors. With little relief in sight, record keepers not
already in 401(k) heaven need to grow plans, not rely on a
rising stock market. Real growth can come from new sales or
acquisitions and, given the current environment, most new
sales will be instigated by advisors, not sponsors. Record
keepers and Investment Only firms alike will be best served
by getting close to these well positioned, experienced
retirement advisors by helping them build, grow and manage
their practices as record keeping, investments and
technology become more commoditized.
¹
Percentage of plans that indicate they are currently
searching or thinking of changing providers
|
MICRO MARKET (<$1 MILLION) YTD |
|
YEAR |
2005 |
2006 |
2007 |
2008 |
|
% PLANS IN PLAY |
9.84% |
8.40% |
6.37% |
5.07% |
|
# PLANS IN PLAY |
3,227 |
2,754 |
2,090 |
1,663 |
|
Inc/Dec Prev. Yr (%) |
1.4% |
-14.6% |
-24.1% |
-20.4% |
|
SMALL MARKET ($1-$10 MILLION) YTD |
|
YEAR |
2005 |
2006 |
2007 |
2008 |
|
% PLANS IN PLAY |
8.97% |
8.01% |
6.18% |
4.27% |
|
# PLANS IN PLAY |
721 |
644 |
497 |
344 |
|
Inc/Dec Prev. Yr (%) |
-1.1% |
-10.7% |
-22.8% |
-30.9% |
|
MID MARKET ($10-$100 MILLION) YTD |
|
YEAR |
2005 |
2006 |
2007 |
2008 |
|
% PLANS IN PLAY |
14.15% |
10.30% |
5.03% |
3.48% |
|
# PLANS IN PLAY |
156 |
113 |
55 |
38 |
|
Inc/Dec Prev. Yr (%) |
5.0% |
-27.2% |
-51.1% |
-30.9% |
|
TOTAL MARKET (<$100 MILLION) YTD |
|
YEAR |
2005 |
2006 |
2007 |
2008 |
|
ASSETS |
$7,063,279,703 |
$5,555,893,053 |
$3,375,784,435 |
$2,381,763,181 |
|
ASSETS % INCREASE/YR |
2.9% |
-21.3% |
-39.2% |
-29.4% |
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