Industry Insight from Fred Barstein
June 2010 401kExchange Opportunity Index

The steady, and in some markets steep decline in a sponsors’ likeliness to change record keepers continued in the June 2010 401kExchange Opportunity Indices¹.  On the other hand, the demand for advisors rose to its highest level yet at 12.7%; demand for adding new funds kept apace at 7.61%, up 15% from the 2009 average.  The only good news for record keepers was in the Large Market ($100 million-$1 billion) which is up almost 50% YTD from 2009.  Meanwhile, the Mid Market ($10-$100 million) is lagging with less than 1% of plans likely to change record keepers in May, down almost 20% YTD from last year, with the Small Market ($1-$10 million) fairing only slightly better.  Not only are sponsors looking to change advisors at the greatest rate ever seen in the market, but more plans than ever are using an advisor and over 10% of plans without an advisor are likely to add one.

The decline in plan sponsor appetite to change record keepers has dropped at a steady rate, not in spikes, which makes it likely that we will not see a dramatic increase anytime soon.  In the meantime many of the larger, more established record keepers are having record years and some research groups are portending greater overall demand for record keeper switch.  Savvier sponsors believe that switching advisors, or adding one, is the only decision that they need to make.  Only if that experienced DC advisor believes that changing record keepers will help the problem or improve results will they make the painful and time consuming change.  Though short sighted, some record keepers may be more attracted to the blind squirrel who is more likely to listen to their record keeper wholesaler.  Experienced DC advisors with a good business and a strategic understanding of the market are in the driver’s seat right now, and the few record keepers that are making money will eventually consolidate the weaker ones; fund companies are simply along for the ride.

¹ Percentage of plans that indicate they are currently searching or thinking of changing record keepers, funds or advisors

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