Industry Insight from Fred Barstein
Fees & Investment Performance Drive Sponsor Dissatisfaction

in First Half of 2009

With what should come as a surprise to no one, fund performance has become the second most cited reason for dissatisfaction by plan sponsors interviewed in the first half of 2009.  The results are based on 573 plan sponsors interviews taken by 401kExchange that  indicated they were thinking of changing record keepers or actively searching for a new one.  Fees continue to be the biggest concern as with previous years, but there was a noted jump in 2009.  And even though employee education was noted as the third biggest reason for dissatisfaction, mid market ($10-$100 million) sponsors are less concerned than their brethren in the small ($1-$10 million) and micro (<$1 million) markets.  Overall, micro market sponsors seemed to have more to complain about, especially with the focus on fees.  While record keeping, administration, customer service, and investments options were once the staples and differentiators in the 401(k) market, they are mostly viewed now as a commodity because a greater percentage of providers are getting it right.

Sponsors are telling the industry that they are focused on results which are driven more by fees, performance, and to a lesser degree education, rather than effort which are the plumbing of the plans.  Providers who can claim that they are doing better preparing participants for retirement and have the data to prove it will be able to cause sponsors to make a change.  Those providers that keep touting better plumbing will have as much chance of causing prospects to switch as a utility company has, unless there is a blackout or flood.

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