|
 Industry
Insight from Fred Barstein
401kExchange 2008 Opportunity Index
Continues to Fall in June
ALL MARKETS EXCEPT for the large
market ($100 million-$1 billion) are at or close to June’s
historic lows in the 2008 401kExchange Opportunity Index¹.
Interestingly, all markets were at their highest point in
June 2005, but this June, all markets are down from 2007
with the mid market ($10-$100 million) at its historic
nadir.
Changing record keepers is difficult and
time consuming for plan sponsors as compared to changing
advisors or funds. After a due diligence exercise, a sponsor
is as likely to renegotiate with their current record keeper
than make a switch. Record keepers are like general
contractors coordinating with unaffiliated vendors like
advisors, asset managers, and often times TPAs and trading
and custody providers. Services provided by the record
keeper include the technology that keeps track of the money,
participant statements, websites, education and customer
service most of which has been commoditized. Education has
been a failure in the DC market which is why asset
allocation funds have become so popular; customer service is
still a differentiator, but many providers are performing at
a very high level as measured by the DCP plan sponsor
studies. The quality of advisors and TPAs varies widely
which is why providers spend so much time trying to partner
with the best ones or make up for the deficiencies of the
poor ones. But changing the general contractor is less
necessary as services become more unbundled.
And while the likelihood of sponsors to
switch record keepers is at historic lows, the mood of
sponsors to meet with experienced and well armed advisors
has never been higher. With Congressional hearings, new
regulations and constant press coverage about high fees and
the lack of transparency, sponsors are more than willing to
spend an hour with an advisor that is not affiliated with
any provider and seems able to help improve their corporate
retirement plan and limit liability. Record keepers can look
optimistically at the large market which has a fairly
healthy Index at 7.06% and generally sets the trends for
other markets. Other factors that will cause the Index to
rise include record keeper consolidation and the move to
greater transparency. Until then, it’s good to be an
experienced, high quality advisor and TPA, or an asset
manager with more than one hot fund, and its more than
uncomfortable to be a marginal, large, national record
keeper as prices continue to decline and the competition
keeps raising the bar.
|
MICRO MARKET (<$1 MILLION) YTD |
|
YEAR |
2005 |
2006 |
2007 |
2008 |
|
% PLANS IN PLAY |
10.08% |
7.26% |
6.61% |
4.67% |
|
# PLANS IN PLAY |
19,849 |
14,296 |
13,002 |
9,202 |
|
Inc/Dec Prev. Yr (%) |
6.2% |
-28.0% |
-9.1% |
-29.2% |
|
SMALL MARKET ($1-$10 MILLION) YTD |
|
YEAR |
2005 |
2006 |
2007 |
2008 |
|
% PLANS IN PLAY |
9.35% |
7.38% |
5.55% |
4.16% |
|
# PLANS IN PLAY |
4,513 |
3,563 |
2,681 |
2,007 |
|
Inc/Dec Prev. Yr (%) |
-3.8% |
-21.1% |
-24.8% |
-25.1% |
|
MID MARKET ($10-$100 MILLION) YTD |
|
YEAR |
2005 |
2006 |
2007 |
2008 |
|
% PLANS IN PLAY |
12.54% |
7.97% |
6.08% |
4.07% |
|
# PLANS IN PLAY |
827 |
525 |
401 |
268 |
|
Inc/Dec Prev. Yr (%) |
23.7% |
-36.5% |
-23.6% |
-33.1% |
|
LARGE MARKET ($100 MILLION-$1 BILLION) |
|
YEAR |
2005 |
2006 |
2007 |
2008 |
|
% PLANS IN PLAY |
11.43% |
4.41% |
7.49% |
4.70% |
|
# PLANS IN PLAY |
149 |
57 |
97 |
61 |
|
Inc/Dec Prev. Yr (%) |
73.1% |
-61.4% |
70.0% |
-37.3% |
|
TOTAL MARKET (<$1 BILLION) YTD |
|
YEAR |
2005 |
2006 |
2007 |
2008 |
|
ASSETS |
$84,165,477,055 |
$44,703,967,949 |
$50,447,969,471 |
$33,224,240,068 |
|
ASSETS % INCREASE/YR |
37.3% |
-46.9% |
12.8% |
-34.1% |
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