Industry Insight from Fred Barstein
February 401kExchange Opportunity Index

The February 2010 401kExchange Opportunity Indices¹ continued trends started in 2009 with very few plan sponsors thinking of changing or actively searching for a new record keeper.  Instead, plan sponsors are indicating a robust demand for experienced advisors and new investments.

Though the Micro Market (<$1 million) record keeper Index moved above 3%, the Mid Market ($10-$100 million) Index was below 1%.  Over 12% of plans with an advisor are likely to change their current one. Of the 18% of plans without an advisor in the <$100 million market, 12.64% are likely to add one.  The big change in February is that 9.64% of plans are likely to change or add a fund - up 46% from an average of 6.60% in 2009 with over 16% of Mid Market plans indicating the intent to make a switch.

Like a game of musical chairs, record keepers with a seat in 401(k) Heaven are very comfortable and those in the “waiting room” are hoping the music will start up again soon.  Meanwhile, experienced advisors and entrenched investment only (IO’s) providers are racking up business at a robust rate and will continue to do so as long as the markets remain relatively calm.  Although these are good times for advisors, as the number of plans pile up, advisors have to start thinking about efficiently and effectively managing processes and people in an increasingly deflationary, transparent market.  Advisors might even think about trying to capture roll-overs or cross selling other services to the plan sponsors, which few experienced do today.

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