Industry Insight from Fred Barstein
September 2010 401kExchange Opportunity Index

For the 1^st time in a while, the September 2010 401kExchange Opportunity Indices¹  showed real signs of recovery for Defined Contribution (DC) record keepers, especially in the Mid Market ($10-$100 million) where a robust 4.46% of plans in play up from 1.78% last September.  All markets are relatively flat YTD except the Large Market ($100 million - $1 billion) which is up 20.6%.  Most robust was sponsor interest in changing or adding funds, which was up 13% in September compared to August and 32% as compared to 2009 YTD.  The search for advisors continues apace with 2009, but is not as strong as past months.

The last time that plan sponsors started dramatically increasing search activity for record keepers was in September 2003, driven by pent up demand, a recovering market, reason for optimism, the start of the selling season, and the mutual fund scandals.  Currently there is certainly pent up demand and we are in the selling season, but business owners are not optimistic, there is no unique event propelling activity, and the remaining record keepers are providing better service.  So while it is natural to see increased activity for record keepers, we do not expect demand to near double digits as it did from September 2003 - December 2005.  Well funded larger record keepers who can offer advisors help in building, growing, and managing their business while proving that they can move the needle on participant success will do very well, as will niche providers who stick to their knitting.  The relative slow down in advisor activity should not concern the very experienced ones with robust books of businesses who are more affected by stock market fluctuations.  The DCIO (Investment Only) business is very strong, but we are starting to see a separation between the “haves” and the “have nots” with the window closing for new aspirants.

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

Return to Newsletter