An 401(k) industry survey in which one of the “Big Three” (Fidelity, Vanguard, T. Rowe Price) doesn’t come out on top?
Empower Retirement, a mashup of Great West Life and J.P. Morgan Retirement Plan Services’ large-market recordkeeping business (now integrated with Putnam), took the No. 1 spot for “the provider that 401(k) plan sponsors attribute most with providing good value for the money.”
It’s the second industry-wide recognition for the retirement upstart in as many months, having been named “Retirement Leader of the Year” at the 23rd annual Mutual Fund Industry Awards, held in New York City in late April.
Citing an environment in which 401(k) fee scrutiny is more rigorous than ever, a new Cogent Reports survey found that more than four in 10 (43 percent) plan sponsors that are aware of Empower believe the firm provides good value, up from 27 percent a year ago.
“Plan sponsors are more focused on fees than ever before,” noted Julia Johnston-Ketterer, senior director at Market Strategies and co-author of the annual report, in a statement. “In fact, for the first time the aspect of reducing plan costs outranks all other priorities upon which plan sponsors are directing their attention.”
Moreover, the report, produced by Marketing Strategies International, found that plan administration fees are the most common reason for switching recordkeepers, and likewise are an important driver of satisfaction and loyalty when client expectations are fulfilled. Importantly, it noted that the aspect of providing good value for the money is the “leading enhancer to brand consideration this year,” reinforcing the point that plan sponsors are seeking value from a provider beyond what hits the bottom line of their company’s or their participants’ quarterly statements.
“The aspect of value is not just about being the cheapest,” added Linda York, senior vice president of the Financial Services division at Market Strategies. “It’s more about justifying the fees that you charge and demonstrating the benefits of the service you provide in a way that’s meaningful to your target audience.”
The full report examined brand perceptions overall as well as by plan size segment, noting any pertinent differences. Empower, for example, has substantially improved its brand recognition in the smaller end of the market and is really resonating among these smaller plans with its commitment to the industry and efforts to serve DC plans of all types and sizes.
“Yet Fidelity Investments and Vanguard still rule the roost in the larger end of the market,” York continued, “benefiting from their well-earned reputation for being easy to do business with along with providing the greatest value for the money.”
Providers Most Associated With “Good Value for the Money” Among All Plan Sponsors
- Empower Retirement
- Ascensus
- Fidelity Investments
- Betterment
- OneAmerica
- Vanguard
- Paychex
- American Funds
- ADP Retirement Services
- Wells Fargo
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.
