Whomever said advertising doesn’t pay is probably out of business. As with the Budweiser Clydesdales and wisecracking geckos, Ignites Retirement Research finds that the driver behind the most widely used fund firms for 401(k) plan participants is their “brand.”
Fidelity, Vanguard, American Funds and T. Rowe Price are the four most frequently used mutual fund families by investors in defined contribution (DC) retirement plans and, respectively, the fund families rated best for brand excellence by plan participants.
Beyond the top four the correlation is not as exact but the firms rated by participants in the top 10 for brand are all in the top 12 most-frequently used firms as cited by participants in DC retirement programs such as 401(k) and 403(b) plans, the research finds.
Blackrock, Schwab, Janus, Wells Fargo, PIMCO and Franklin Templeton round out the list.
The evidence suggests that a stronger brand can help a fund firm get used more often by plan participants, Ignites Retirement Research concludes.
The survey found that Fidelity Investments is the most heavily used mutual fund firm in DC plans and ranked first for brand, with 46 percent of plan participants holding Fidelity funds and 27 percent considering its brand excellent. Vanguard is second is usage (used by 33 percent of participants) and brand (cited by 17 percent of investors). American Funds is third in use (16 percent) and brand (8 percent); and T. Rowe Price is fourth in use (15 percent) and brand (7 percent).
“While mutual fund firms tend to prioritize employers and financial advisors for their DC plan-related marketing, they shouldn’t overlook the opportunity to build their brand directly among investors in these plans,” says Rita Raagas De Ramos, U.S. Research Manager at Ignites Retirement Research.
Asset management firms don’t want to lose touch with end-investors and erode their ability to communicate their value proposition, Ignites Retirement Research concludes. That’s especially important now, as the Department of Labor’s new fiduciary rule is poised to disrupt many relationships in the retirement plan industry.
The survey also asked plan participants about cost and investment performance, and again investors rated Fidelity, Vanguard, American Funds and T. Rowe Price among the top five in those categories.
“While these are four high-quality firms, they aren’t necessarily the best in cost and returns,” explains De Ramos. “Clearly, a strong brand among investors means that the perception of performance and cost can outpace a firm’s actual performance and cost.”
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
