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THE 401KEXCHANGE OPPORTUNITY INDEX¹
continued its fall in February as all markets
experienced double digit declines compared to 2006 YTD
numbers which were significantly lower than 2005 YTD.
Particularly slow is the mid-market ($10-$100 million)
which had a 56.9% decrease and is experiencing the worst
slowdown since we began tracking the Index in
2000. Only 4.73% of mid-market plan sponsors were
thinking of changing or actively searching for a new
record keeper compared to a high of 14.38% in February
2005. Overall, assets in play are 43.2% below 2006
levels.
Slow sales growth plus stock market declines will hasten
provider consolidation. (Currently, there are at least
two major providers in play with at least two major
financial service companies not in the market looking to
buy.) While one “pundit” claims that fees are too low
and that most record keepers are living on thin margins,
neither sponsors, regulators, Congress or competitors
hungry for business in lean times seem to care. In
fact, of those sponsors looking to change record
keepers, the major reasons for dissatisfaction in all
markets is fees followed not so closely by employee
education and fund performance.
In
a commoditized market where no new feature will move
market share, cost reduction and scale become essential
to stay competitive. While advisory services are
certainly not a commodity, fees are under pressure
forcing advisors to follow record keepers in gaining
scale and becoming more efficient which may be fueling
interest in groups like NRP and CapTrust. Broker of
record opportunities continue to remain robust with 85%
of the small- and micro-market plans either without an
advisor or suffering with a blind squirrel. Sponsors
are becoming more savvy and concerned, but to win a
mandate, advisors must show significant value-added in
the form of fiduciary and participant services. Results
trump marketing; value trumps price.
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 |
9.76% |
9.82% |
8.07% |
6.68% |
|
# PLANS IN PLAY |
6,404 |
6,440 |
5,297 |
4,384 |
|
Inc/Dec Prev. Yr (%) |
89.8% |
0.6% |
-17.7% |
-17.2% |
|
SMALL MARKET ($1-$10 MILLION) YTD |
|
YEAR |
2004 |
2005 |
2006 |
2007 |
|
% PLANS IN PLAY |
8.96% |
9.72% |
7.76% |
5.92% |
|
# PLANS IN PLAY |
1,442 |
1,565 |
1,248 |
952 |
|
Inc/Dec Prev. Yr (%) |
38.4% |
8.5% |
-20.2% |
-23.7% |
|
MID MARKET ($10-$100 MILLION) YTD |
|
YEAR |
2004 |
2005 |
2006 |
2007 |
|
% PLANS IN PLAY |
11.45% |
14.29% |
11.33% |
4.88% |
|
# PLANS IN PLAY |
252 |
314 |
249 |
107 |
|
Inc/Dec Prev. Yr (%) |
31.0% |
24.8% |
-20.7% |
-56.9% |
|
TOTAL MARKET (<$100 MILLION) YTD |
|
YEAR |
2004 |
2005 |
2006 |
2007 |
|
ASSETS |
12,440,499,957 |
14,536,479,598 |
11,594,292,915 |
6,589,763,394 |
|
ASSETS % INCREASE/YR |
38.3% |
16.8% |
-20.2% |
-43.2% |
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