Industry Insight from Fred Barstein
May 2010 401kExchange Opportunity Index

Demand for Good Advisors and Funds Soaring

The May 2010 401kExchange Opportunity Indices¹ shows a robust demand for good advisors and funds, but the appetite of plan sponsors to change record keepers remains anemic.  Experienced advisors, especially the Elite 5000 DC Advisors (10 plans, +$30 million and 3 years experience), are growing their businesses at a robust rate as are entrenched or innovative IO’s (Investment Only) providers.  12.32% of plans surveyed in May indicated that they were thinking of changing or actively looking for a new advisor, up 10.1% from 2009.  A record high 84% of plans indicated that they are using a financial advisor, up 16% from May 2008, with 10% of plans not using an advisor thinking of adding one.  Similarly, 7.96% of plans were likely to add or change funds, up 21.1% from 2009.  Meanwhile only 1.85% of DC plans with under $100 million were likely to change record keepers, down 25.1% from 2009.  Distribution, though very fragmented, is key; and the recent downturn has sponsors willing to open up their menu to new or alternative investments. 

Record keepers are living in a different universe than advisors and IO’s, which many still deny or have yet to come to grips with.  The lack of interest by sponsors and advisors in changing record keepers is not a trend – it is the new norm.  Record keepers unwillingness to accept this new reality is evidenced by their method of segmenting the DC market by plan size rather than by advisor.  Advisors, not sponsors, are making the decision on which record keeper to use.  These advisors should be segmented by the markets they serve, their level of experience, their broker dealer type (or lack thereof), their business model, and the type of support they need.

 

 

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