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    401k Wire

October 13, 2004

   
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Market Insight from Fred Barstein
 

Fewer Choices in 401(k) Service Providers

As I prepared the 401(k) Service Provider List* for the October 2004 issue of Employee Benefit News (which, by the way, incorrectly listed “average plan size” as the “number of participants”), I was struck by how few full-service national 401(k) providers are left.  Scouring through internal and industry lists, we could only find 81 providers that offer full service, either themselves, or through partners nationally (see list below).  Meanwhile, there have been over 70 consolidation events since 2000 including exits, sales, partnering, outsourcing and mergers (see list below).  Granted that many of these events were by the same companies, it was nevertheless a sobering exercise.

*The Service Provider List, which is brand new and available on our website,  includes brief information about all providers such as Markets Served, Distribution Methods, Key Contacts, and Assets & Plans Under Management.

Depending on the size of the prospect, how you want to be compensated, and the type of investments offered, there will only be 10-15 viable providers.  For very large or very small plans, or special needs plans, the choices are even more limited.  Based on profitability data and pressure on fees, this number will shrink further.  No question that provider consolidation was healthy, eliminating many that had untenable business models, extremely poor service, or took advantage of unknowing sponsors abetted by blind squirrel advisors, but perhaps we are starting to cut too close to the bone.  And, according to industry pundits, there will be few if any new competitors.

The result of less competition is higher costs and less innovation.  We have yet to see it happen, but it will happen if new competitors do not push the old guard.  At an industry conference, I asked a panel of experts that included senior executives from ADP, Fascorp, Bisys and Hewitt what types of companies might enter the 401(k) market.  The answers ranged from IBM or PeopleSoft to broker dealers that control distribution.  Though no one believes that a new record keeping system with any scale will be built anytime soon, companies like Ameritrade, E*Trade and TD Waterhouse that have brand recognition and technology to market to retiring baby boomers and can make money managing $15,000 accounts, could become new competitors in the age of rollovers.  Incumbents like Schwab and Fidelity might not be hurt but “no-brand” providers struggling to retain rollover assets will suffer.  These new competitors will become even more viable when ETF’s become available in DC plans.

No doubt that we are in the midst of a buyer’s market but we may start moving towards a seller’s market soon unless the top tier providers, currently feasting on vulnerable competitors, start seeing new competition.

National 401(k) Service Providers

 

ABN AMRO Trust

Marshall & Ilsley Trust

ADP

MassMutual

AIM

Mellon HR

Alliance Benefit Group

Merrill Lynch

AllianceBernstein

Met Life

American Express

Metavante

American Funds

MFS Financial Services

Ameritas Life

Milliman USA

Amvescap

Morgan Stanley

AXA Equitable Life

Mutual of Omaha Companies

Bank of America

NatCity

BankOne

Nationwide

BB&T

Newport Group

Bisys Group

NYLife

Ceridian

Ohio National

Charles Schwab Corporate Services

OneAmerica (formerly AUL)

CitiStreet (Large Market)

Oppenheimer

CitiStreet (Small-MidMarket)

Paychex

Comerica Bank

Pentegra

CPI Qualified Plan Consultants

Plan Administrators Inc.

CUNA

PNC Advisors

DailyAccess.Com (DAC)

Principal

Diversified Investment Advisors

Prudential Life Insurance Co

ExpertPlan

Putnam (Mercer HR)

Federated Retirement Solutions

RSM McGladrey

Fidelity Advisors

Scudder

Fidelity Investments

Securian

Fidelity RIA Group

Standard Insurance Company

First Mercantile

SunTrust Bank

Franklin Tempelton

T Rowe Price

Goldk

The 401(k) Company

Great West

The Vanguard Group

Hartford

Transamerica

Hewitt Associates LLC

Travelers

ING

U.S. Bank

Invesmart

Unified Trust

J.P. Morgan

Union Bank of California

JW Seligman

Union Central

Lincoln Financial Group

Wachovia

Lord Abott

Wells Fargo

Manulife

 

 

401(k) SERVICE PROVIDER CONSOLIDATION

PROVIDER

ACTION

SUCCESSOR

DATE

Southtrust

Sold

Wachovia

Pending

Putnam

Carve out

Mercer HR

2004

American Express

Outsourced ($5-$50mm)

Great West

2004

BancOne

Sold

JP Morgan

2004

Bank of NY

Sold

Wachovia

2004

CNA Trust

Sold

Union Bank of California

2004

AG Edwards

Sold

CPI

2004

Harris Bank

Sold

Wells Fargo

2004

John Hancock

Sold

Manulife

2004

Strong

Sold

Wells Fargo

2004

Pioneer

Exited

 

2003

Safeco

Exited

 

2003

401k Company

Exiting small market

 

2003

GE

Outsourced

Bisys

2003

Delaware

Outsourced small plans

Bisys

2003

Putnam

Outsourced small plans

Expert Plan

2003

US Bank

Outsourced small plans

Bisys

2003

American Century

Sold

JP Morgan

2003

Cigna

Sold

Prudential

2003

Emjay/Wells Fargo

Sold

Great West

2003

Enterprise/MONY

Sold

AXA

2003

Federated Insurance

Sold

Great West

2003

Fleet

Sold

Bank of America

2003

mPower

Sold

Morningstar

2003

Northern Trust

Sold

Hewitt

2003

Pan American

Sold

Securian

2003

PFPC

Sold

Wachovia

2003

Scudder

Sold

ADP

2003

UMB

Sold Retirement Business

M&I

2003

American Skandia

Exited

 

2002

Emplanet

Exited

 

2002

Guardian

Exited

 

2002

Nippon Life

Exited

 

2002

State Street Research

Exited

 

2002

Trustar

Exited

 

2002

Persumma

Merged

MassMutual

2002

Bank of NY

Outsourced

PFPC

2002

CBIZ

Outsourced

Bisys

2002

Merchantile Bank

Outsourced

Bisys

2002

National City Bank

Outsourced

Hewitt

2002

SunTrust

Outsourced <$3mm

Nationwide

2002

Administrative Management Group

Sold

Lincoln Financial

2002

Key Bank

Sold

Principal

2002

Provident Mutual

Sold

Nationwide

2002

Fleet

Outsourced

INVESCO

2001

LaSalle Bank

Outsourced

Chicago Title & Trust

2001

Morgan Stanley

Outsourced

ADP/Fidelity

2001

PaineWebber

Outsourced

MFS

2001

Wachovia

Outsourced large plans

Invesco

2001

Allmerica

Sold

Securian

2001

Reliastar

Sold

Aetna

2001

Teamvest

Sold

Newport Group

2001

Unifi (PWC)

Sold

Mellon HR

2001

UPI

Sold

Bisys

2001

Wachovia

Sold

First Union

2001

MetLife

Sold large plans

Hewitt

2001

John Hancock

Sold Retirement Business

UPI

2001

Huntington Bank

Exited

 

2000

Prudential

Outsourced <$3mm

Bisys

2000

T Rowe Price

Outsourced small plans

Trustar

2000

Merrill Lynch

Sold <$3mm

Bisys

2000

Chase Manhattan Bank

Outsourced

Fidelity

1999

CitiBank (Copeland/Smith Barney)

Merged

CitiStreet

1999

MetLife

Merged

Gen Am & New England

2002

State Street 

Merged

CitiStreet

1999

American Century

Outsourced/Exited Small Market

ADP

2000

Bank of America

Outsourced

ADP/Aegon

2000

Aetna

Sold

ING

 

Emjay

Sold

Wells Fargo

 

PFPC

Sold

PNC Bank

 

Transamerica

Sold

Aegon

 

 

     
     

SPECIAL SESSION FOR FINANCIAL ADVISORS AT PENSIONS & INVESTMENTS 7TH ANNUAL WEST COAST CONFERENCE – MINGLE WITH LARGE PLAN SPOSNORS:

Facilitated by Fred Barstein, 401k Exchange and Ted Benna, 401(k) Association/Malvern Benefits

 

Unique gathering of Retirement Advisors and Larger Plan Sponsors

Conference Rate: $895; 401kExchange Discount: $695; Special Day Rate: $250
Call 516.765.9005 x 21 and mention 401kExchange

 

Arming the Advisor Market

 

How-to become a better equipped advisor to deal with current issues and challenges affecting the mid-large retirement plan market and your business today and tomorrow.

 

Providing solutions and value-added service offerings that will distinguish you from the pack to increase and generate new business.

  • Creating a service contract/agreement for your clients and what to include

  • How to assist/ assure that your clients (plan sponsors) are meeting their fiduciary responsibility

  • Providing a fiduciary checklist

  • 404(c) liability/exposure

  • Co-Fiduciary liability issues for the advisor

  • Assisting and preparing or reviewing and fine-tuning an Investment Policy Statement for your clients

  • Prospecting techniques and services available to build your business

 

Fees & Expenses: How Industry pressure driving transparency and full disclosure is affecting advisor compensation

  • Fee based vs. commission based fee structures and how they are perceived by plan sponsors

  • Are certain 12b-1 fee arrangements prohibited under ERISA

  • Is the Commission-based model played-out and becoming a dying breed due to regulatory and disclosure issues? 

  • Meeting sponsors wants and needs: open architecture, unbiased investment advisory services and a shared co-fiduciary role

  • How to reduce total plan costs while adding better over-all services to the plan

 

     
     

View 401kExchange's previous Newsletter (October 6, 2004)

September Begins Best Selling Season in Recent 401(k) History
As the retirement and brokerage industries goes through their most challenging times in recent history, and perhaps because of it, Plan Sponsors continue to show increasing interest in shopping their 401(k) plan.

     

back to top

     

 

 

EBRI: Two Year Participation Rate Decline Levels Off
Otherwise, the latest EBRI report reveals that not much has changed in the past two years.

Workers are Interested in More than 401ks
The majority of workers express an interest in non-retirement financial products offered at the office.

     

back to top

     
     

  Prospect Pipeline LEADS
Over $80 Million in 401(k) Business Opportunities!

Leads available for the week of October 11th contain immediate opportunities with Plan Sponsor prospects that are either dissatisfied or actively looking with an Advisor for a plan price / value audit!  For lead details, contact 877-777-401k ext.3402 or vhenderson@401kExchange.com.

Lead # Area Code State Assets
1 310 CA $45,000,000
2 202 DC $380,000
3 208 ID $500,000
4 317 IN $350,000
5 617 MA $8,000,000
6 320 MN $400,000
7 417 MO $5,000,000
8 315 NY $3,000,000
9 585 NY $1,000,000
10 513 OH $1,000,000
11 717 PA $6,500,000
12 717 PA $9,000,000
13 214 TX $600,000

 

     
     

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