Feb 07, 2012
--- Retirement
plan sponsors who conduct marketplace reviews with finals presentations are 55%
more likely to remain with their current provider today than they were as recently
as four years ago. ---
According to survey data from Anova Consulting Corp., for
the sales situations in 2011, 28% of mid-large market searches with between
$20MM and $500MM in plan assets resulted in the plan sponsor remaining with the
incumbent recordkeeper, compared to 18% in 2007. This figure does not include
non-competitive re-bid situations, which are an increasingly commonplace
alternative to a full search/RFP process for plan sponsors who are not
necessarily dissatisfied with their provider, but conduct periodic due
diligence reviews for fiduciary reasons.
"With the difficult economic environment of the past few
years, most companies are more focused on their core businesses than with
evaluating their 401(k) plans," said Chris Cumming, senior vice president at
Great-West Retirement Services. "Consequently, there’s been a slowdown in RFIs
and RFPs, which leads to fewer finals situations, and even then sponsors have
been more likely to remain with the incumbent."
According to the plan sponsors, retirement plan advisers and
consultants interviewed, one driving force behind this trend is the increasing
commoditization of 401(k) product and service offerings in the mid-large
market.
"As fee spreads compress and open investment architecture,
state-of-the-art technology and customizable participant communications are
offered by more competitors, sponsors are increasingly unwilling to undergo the
uncertainty and additional effort of a conversion," said Richard Schroder,
president of Anova Consulting Group. "Results from the plan sponsor research
we’ve performed over the past decade show a drop-off in provider changes due to
core product offering differences—client service issues are now a key catalyst
for provider changes."
"At Putnam, we're seeing sponsors look to improve
service delivery, or take advantage of innovation that didn't exist three-five
years ago," said Edmund F. Murphy II, managing director and head of Defined
Contribution at Putman Investments. "There is clearly a growing market demand
for providers to deliver maximum value to plan sponsors and an enhanced
participant experience that leads to higher savings and better retirement
preparedness."