Industry Insight from Fred Barstein
April 401kExchange Opportunity Index

The April 2010 401kExchange Opportunity Indices¹ continued their trend of low record keeper turn-over, with some signs of life in the Mid Market ($10-$100 million) and continued interest by plan sponsors in changing or adding funds and advisors.  Almost 4% of Mid Market plans indicated a willingness to change record keepers.  While this is way off the high of 12.4% in 2004, it is significantly up from recent numbers of 1.69% in the 1^st quarter of 2010 and 2.25% in April 2009.  The Micro Market (<$1 million) record keeper index is up 6% YTD over 2009, but still is only at 2.47%.  Even lower yet was the Small Market ($1-$10 million) in April which was 1.55%, down 11% YTD compared to 2009.  Meanwhile over 11% of plans are thinking of adding or searching for a new advisor consistent with 2009 numbers and over 8% are thinking of adding or changing funds, up from 6.6% in 2009.  Over 82% of plans are reporting that they use an independent financial advisor, up from 69% in April 2008 – over 12% of plans without an advisor are thinking of adding one.

Despite the weak numbers, some record keepers are reporting strong sales in the 1^st quarter of 2010, especially the larger providers with big sales forces, those that serve more than just corporate defined contribution (DC) plans, and niche players.  But the current DC market is a zero sum take-over game where one provider’s gain is another’s loss.  So if John Hancock [view profile] for example, is having a good year, it has to be at the expense of somebody else.  Even if record keeper turnover picks up as predicted by SPARK, it will only mean further and faster consolidation.  Perhaps the slower turnover is deluding providers who are “swimming naked” into believing that they not only have a chance of surviving, but actually thriving.  Denial is not a river in Egypt and naked swimmers will eventually be exposed.

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