As many as 66,000 401(k) plans might be switching record keepers this year, with the likelihood of a transfer increasing along with the size of the plan.
That’s according to the annual Retirement Planscape, a Cogent Reports study from Market Strategies International. The study found that 11 percent of 401(k) plan sponsors said they were very likely to replace their current recordkeeper at some point in the next 12 months.
And the larger the plan, the more likely there will be a switch, with 13 percent of mid-sized plans, 20 percent of large plans and 18 percent of “mega” plans declaring their intention.
So why are they on the hunt for new record keepers? Fees and investment options, mostly, although large and mega plans are also concerned with service quality for both sponsors and participants.
Larger plans are more prone to using retirement specialists, such as plan or employee benefits consultants, whereas smaller plans are more often relying on financial advisors, research that they do themselves, and the record keepers they hire.
Among the names being considered by sponsors looking to switch, 10 firms emerged as the top candidates being considered.
And while most of those top 10 firms are strong across all plan sizes, Cogent Reports said, some are weaker in certain segments. In addition, there are firms under consideration that didn’t make the top 10 because their strengths are focused within a certain size of plan.
The top 10 firms being considered are these:
1. Fidelity Investments
2. Charles Schwab
3. Bank of America Merrill Lynch
4. Vanguard
5. Wells Fargo
6. Merrill Lynch/Merrill Edge (this brand is specifically marketed to small businesses)
7. ADP Retirement Services
8. Prudential Retirement
9. New York Life (New York Life Retirement Plan Services continues to operate under its own brand, although the firm’s recordkeeping business was acquired by John Hancock Financial Services in December 2014)
10. American Funds
In addition, within certain size constraints, three other firms were often cited: “Principal Financial Group is clearly on the radar for small plan sponsors,” Linda York, vice president at Cogent Reports, said in a statement. She added, “And among mid-sized plans, the list of strong contenders for consideration also includes John Hancock Financial Services and T. Rowe Price.”
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