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 Industry
Insight from Fred Barstein
October Opportunity Index Picks up in Mid Market
WITH NO SURPRISE
to anyone given current market conditions, the 2008
401kExchange Opportunity Index¹ continues to weaken.
With the exception of the Mid Market ($10-$100 million in
assets), which at 6.01%, is up from 5.36% last October and
just slightly below September 2008, all other markets are
down. The Small Market at 3.02% is down from 5.10% in
October 2007 and slightly below last month. All markets are
at historic YTD lows in October which is the height of the
selling season.
Some
advisors reading this column view these results as bad for
business which is only true if their business model depends
on making sponsors switch record keepers. For those
advisors, the market has passed them by and they should be
looking for other ways to make money. For savvy advisors,
these economic times are great for broker-of-record
opportunities as plan sponsors are more eager than ever to
hire an experienced advisor that can save them money,
counsel their participants, and limit their fiduciary
liability.
On the
other hand, weak sales in the heart of the selling season
are problematic for record keepers. With more stringent
disclosure and transparency, fewer assets under management,
higher costs exacerbated by weakening sales, record keepers
whose retirement business is small or marginal and not
strategic, especially those whose parent corporations are in
trouble, 2008 will be a watershed year. When the dust
settles on the current economic crisis, those record keepers
and investment only providers who are able to not only
weather the storm but have enough resources to take
advantage of opportunities will be in a great position to
dramatically strengthen their positions and pick up new
plans from exiting and weaker competitors.
¹
Percentage of plans that indicate they are currently
searching or thinking of changing providers
|
MICRO MARKET (<$1 MILLION) YTD |
|
YEAR |
2005 |
2006 |
2007 |
2008 |
|
% PLANS IN PLAY |
9.92% |
7.28% |
5.93% |
4.60% |
|
# PLANS IN PLAY |
32,544 |
23,896 |
19,463 |
15,083 |
|
Inc/Dec Prev. Yr (%) |
-2.0% |
-26.6% |
-18.6% |
-22.5% |
|
SMALL MARKET ($1-$10 MILLION) YTD |
|
YEAR |
2005 |
2006 |
2007 |
2008 |
|
% PLANS IN PLAY |
9.81% |
7.23% |
5.13% |
4.08% |
|
# PLANS IN PLAY |
7,892 |
5,820 |
4,125 |
3,281 |
|
Inc/Dec Prev. Yr (%) |
-0.8% |
-26.3% |
-29.1% |
-20.5% |
|
MID MARKET ($10-$100 MILLION) YTD |
|
YEAR |
2005 |
2006 |
2007 |
2008 |
|
% PLANS IN PLAY |
12.37% |
7.28% |
5.61% |
4.55% |
|
# PLANS IN PLAY |
1,359 |
800 |
617 |
500 |
|
Inc/Dec Prev. Yr (%) |
26.0% |
-41.1% |
-22.9% |
-18.9% |
|
LARGE MARKET ($100 MILLION-$1 BILLION) |
|
YEAR |
2005 |
2006 |
2007 |
2008 |
|
% PLANS IN PLAY |
10.99% |
4.61% |
5.00% |
3.80% |
|
# PLANS IN PLAY |
238 |
100 |
108 |
82 |
|
Inc/Dec Prev. Yr (%) |
11.7% |
-58.1% |
8.6% |
-24.0% |
|
TOTAL MARKET (<$1 BILLION) YTD |
|
YEAR |
2005 |
2006 |
2007 |
2008 |
|
ASSETS |
$137,819,846,454 |
$73,360,799,933 |
$65,137,470,540 |
$50,865,394,489 |
|
ASSETS % INCREASE/YR |
12.2% |
-46.8% |
-11.2% |
-21.9% |
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