The small and mid-market is where it’s at, demonstrating growth potential and an “intent to act,” according to a new Cogent Reports study.
Dubbed Retirement Planscape, the latest installment of the annual survey notes that 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 percent ready to launch a formal 401k plan review and three in 10 likely to switch providers in the coming year.
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 that small-mid plan sponsors are most likely to consider in the next year are:
- Fidelity Investments
- Empower Retirement
- OneAmerica
- Vanguard
- Ascensus
“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,” Sonia Sharigian, product director at Market Strategies-Morpace and author of the report, said in a statement.
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,” added 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.”
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.
