Market Overview

Cogent Reports: Small and Mid-sized Plans Are Sweet Spot in 401(k) Market

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In the highly competitive 401(k) market, it's tempting for plan
providers to aim for mega plan conversions that bring substantial assets
and thousands of participant accounts in one shot. However, new data
suggest that plan providers would be better off focusing sales efforts
on small and mid-sized plans—those with $5 million to just under $100
million in assets. Plan sponsors in the Small-Mid segment report the
greatest intent to act, with 39% ready to launch a formal 401(k) plan
review and three in ten (29%) likely to switch providers in the coming
year. These and other findings are from Retirement
Planscape®
, an annual Cogent
Reports™
study by Market Strategies International-Morpace.

When asked to pinpoint the reasons why they're likely to switch
providers, Small-Mid plan sponsors cite issues with fees, choice of
investments, and participant service most often. Yet the factors that
these plan sponsors seek in a new plan provider include the more
personal aspects of trustworthiness (being a company plan sponsors
trust), acting in the best interest of participants, and a perception of
being easy to do business with.

According to the report, the top firms Small-Mid plan sponsors are most
likely to consider in the next year are:

  1. Fidelity Investments
  2. Empower Retirement
  3. OneAmerica
  4. Vanguard
  5. Ascensus

Source: Market Strategies International. Cogent Reports™. Retirement
Planscape®. May 2018.

"This year, a number of firms appear to have improved their brand
perceptions in the important areas of being easy to do business with,
choice and flexibility in investment options, and value for the money,"
said Sonia Sharigian, product director at Market Strategies-Morpace and
author of the report. Outside of the top five firms listed, 11 providers
achieve year-over-year increases in consideration from Small-Mid plans:
Charles Schwab, Principal, Prudential, Bank of America Merrill Lynch,
ADP, Ameritas, John Hancock, Alliance Benefit Group, MassMutual,
Nationwide and BB&T.

"The majority of provider reviews and searches stem from human error
such as processing and compliance mistakes and overall poor client
service," explained Linda York, senior vice president at Market
Strategies-Morpace. "Yet the impetus for provider changes can also be
the result of successful business growth or organizational changes such
as mergers and acquisitions. In order to maximize their chances of
winning new business, plan providers need to demonstrate an
understanding of each plan sponsor's challenge and tailor their sales
efforts to meet the needs of each individual situation."

About Retirement Planscape®

Cogent Reports conducted an online survey of a representative cross
section of 1,421 401(k) plan sponsors from February 13 to March 10,
2018. Plan sponsor survey participants were required to have shared or
sole responsibility for plan design, administration or selection and
evaluation of plan providers, or for evaluating and/or selecting
investment managers/investment options for 401(k) plans. In determining
the sampling frame for this study, Cogent Reports relied upon the
Standard & Poor's Money Market Directories (MMD) and ALM's Judy Diamond
Associates databases. To ensure the population for this research is
representative of the universe of 401(k) plan sponsors, quotas were set
during the data collection phase around key firmographic variables
including total plan assets, number of plan participants, industry and
geography. Minimal weighting was applied to adjust for purposeful
deviations from the actual marketplace distribution. The data have a
margin of error of ±2.60% at the 95% confidence level. Market Strategies
International will supply the exact wording of any survey question upon
request.

About Market Strategies International-Morpace

Leading market research firms Market
Strategies International
and Morpace
bring clients closer to their customers through exceptional insights,
which includes deep expertise in financial services, specifically among
wealth, banking, payments and insurance organizations. The firms
specialize in brand, customer experience, product development and
segmentation research, and are known for blending primary research with
data from syndicated, benchmarking and self-funded studies to help
clients succeed. The syndicated products, known as Cogent Reports, help
clients understand the market environment, explore industry trends and
monitor their brand within the competitive landscape. Market Strategies
and Morpace have earned the trust of many of the world's top brands
across the automotive, consumer & retail, energy, financial services,
health, technology and telecommunications industries. They are combining
into one firm, as part of an acquisition of both firms by STG, and will
be rebranded under a new name to be announced later in 2018. With more
than 450 research professionals, the collective firm is now the 15th
largest market research firm in the US and top 25 globally.

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