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 Industry
Insight from Fred Barstein
April 2008 401kExchange Opportunity Index Continues
Slide
DEFYING THE CHALLENGE “how low can you go,” the
April 2008 401kExchange Opportunity Index¹ continues to slide indicating that
fewer plan sponsors are likely to change record keepers this year. Now at
historic lows, YTD figures are hovering at or below 4%
making the real number even smaller. Plan sponsors just
do not see the benefit of switching record keepers for a
number of reasons while at the same time they are more
willing to meet with an experienced retirement advisor than
ever or change investments with many more options available
especially for larger plans.
Yet Wall Street analysts seem to favor
companies with robust retirement and 401(k) businesses in
particular. On a recent panel, one such analyst responding
to the question of why, indicated that money managers and
insurance companies in particular are keen to capture assets
accumulated in plans by people who are not sure how to spend
in retirement and not outlive their nest egg. And while
retirement income is all the rage, the same analyst opined
that only a very few financial service companies have the
balance sheet to be able to stand behind the guarantees,
mostly insurance companies.
Taking a cue from Wall Street, advisors
and providers alike should be looking to leverage their
preferred position within 401(k) plans to gather other
assets and serve other employee benefit needs. Perhaps ING’s
purchase of CitiStreet at what is reported to be a large
multiple is an indication of their confidence that ING
Direct can indeed capture significant assets from the
estimated 12 million CitiStreet participants. We wonder
whether the Smith Barney advisors who sold many of the
CitiStreet plans share their confidence.
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 |
10.00% |
7.50% |
6.64% |
4.71% |
|
# PLANS IN PLAY |
16,406 |
12,296 |
10,898 |
7,729 |
|
Inc/Dec Prev. Yr (%) |
2.1% |
-25.0% |
-11.4% |
-29.1% |
|
SMALL MARKET ($1-$10 MILLION) YTD |
|
YEAR |
2005 |
2006 |
2007 |
2008 |
|
% PLANS IN PLAY |
9.27% |
7.42% |
5.69% |
4.05% |
|
# PLANS IN PLAY |
3,731 |
2,985 |
2,288 |
1,631 |
|
Inc/Dec Prev. Yr (%) |
-8.1% |
-20.0% |
-23.3% |
-28.7% |
|
MID MARKET ($10-$100 MILLION) YTD |
|
YEAR |
2005 |
2006 |
2007 |
2008 |
|
% PLANS IN PLAY |
12.76% |
9.44% |
6.10% |
4.10% |
|
# PLANS IN PLAY |
701 |
519 |
335 |
225 |
|
Inc/Dec Prev. Yr (%) |
27.1% |
-26.0% |
-35.3% |
-32.9% |
|
LARGE MARKET ($100 MILLION-$1 BILLION) |
|
YEAR |
2005 |
2006 |
2007 |
2008 |
|
% PLANS IN PLAY |
10.88% |
4.15% |
6.90% |
3.47% |
|
# PLANS IN PLAY |
118 |
45 |
75 |
38 |
|
Inc/Dec Prev. Yr (%) |
33.7% |
-61.9% |
66.3% |
-49.7% |
|
TOTAL MARKET (<$1 BILLION) YTD |
|
YEAR |
2005 |
2006 |
2007 |
2008 |
|
ASSETS |
$68,617,548,177 |
$38,831,731,955 |
$40,316,398,336 |
$23,670,894,883 |
|
ASSETS % INCREASE/YR |
21.7% |
-43.4% |
3.8% |
-41.3% |
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