Industry Insight from Fred Barstein
2009 Mid Year 401kExchange Market Share Report

Based on almost 20,000 surveys with 401(k) plan sponsors in the 1^st half of 2009, it appears that ING is the big winner in market share gains of the top 10 providers in each market segment due primarily to their acquisition of CitiStreet.  The combined companies are a force to be reckoned with, especially if the integration of personnel and distribution systems goes as planned.  Hartford showed double digit growth in the Micro Market (<$1 million) despite the problems with their parent, although they cooled off in the Small Market ($1-$10 million) and did not grow their market share in the Mid Market ($10-$100 million).  Similarly, Great West posted double digit gains in the Micro Market, but did grow their share in any other segment.  In a flight to safety, Fidelity showed very well in the Small Market driven by their advisor sales group and had some more modest gains in the other markets.  T Rowe led all Mid Market providers with a 36.57% increase followed by ING, Wachovia*, Prudential, and Vanguard all enjoying double digit gains.

While some of the larger providers’ sales are relatively strong, very few if any are posting sales increases over 2008 in their 401(k) business.  It is no coincidence that many big winners in the 1^st half of 2009 are growing through acquisitions.  This makes it that much more important for large providers to strategically acquire small providers to satisfy their parent’s appetite for growth.  Small and mid level providers attached to larger financial services companies have been reluctant to sell because they are afraid to lose their foothold in the increasingly important 401(k) market.  It seems like only a matter of time before the pressure to buy combined with the increasing costs to grow will result in significant consolidation.

* If combined, Wachovia and Well Fargo would show significant increases which will be reflected in the year end analysis. 

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