Industry Insight from Fred Barstein
September Opportunity Index Good for Experienced Advisors

As Charles Dickens once penned, “It was the best of times, it was the worst of times…it was the spring of hope, it was the winter of despair.”  Coming into the start of the selling season, the September 2009 401kExchange Opportunity Index¹ for record keepers declined to its lowest level of the year dipping below 2% for all markets.  Meanwhile almost 13% of all plans are looking to change their advisor, which is the highest level of the year.  More plans than ever are using an advisor, and of those without one almost 12% are thinking of adding one.  Newer DC Investment Only firms continue to see great opportunities, as advisors and sponsors who are still upset with the performance of their existing funds look for alternatives.

National record keepers who are not firmly entrenched in their market segment and have high cost structures not spread across a rich book must either grow or go with growth most likely coming through acquisitions.  Even with the extremely robust opportunities for experienced advisors, they should not become complacent especially when it comes to pricing.  Though it is not recommended to sell on price alone, plan sponsors are very concerned about costs particularly with all of the regulatory activity and press about fees.  Advisors looking to charge new plans the same as they have charged in the past, above all in the Mid & Large Markets (over $10 million), could be in for a rude awakening.  In a fluid market like this one, a new breed of smart and nimble advisors who are willing to take less, while maintaining profitability is emerging.  Though there remains much confusion in the DC market over retail and institutional fees and activities, the strictly institutional advisors should consider proactively protecting their book of business and coming up with a different pricing paradigm for new business.

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