Data & Research January 22, 2010

Affluent Investors Have More Money in IRAs than Employer Plans

For the first time ever, affluent investors now report having more dollars allocated to individual retirement accounts (IRAs) than to employer-sponsored retirement plans (ESRPs), according to Cogent Research.
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Cogent’s recent Investor Brandscape report looked at 4,000 affluent and high-net-worth investors (having at least $100,000 in investable assets, excluding real estate and ESRPs) in the U.S. Nearly 31% of all affluent investor assets are now held in some form of IRA account compared to 25% in ESRPs. Furthermore, about a quarter of investors have assets in retirement plans of former employers, signaling that providers still stand to gain from IRA rollover opportunities, Cogent said.

The study found that Fidelity Investments has been ousted as the top fund distributor partly because of the trend of affluent investors moving assets from retirement plans to IRAs (see “Morgan Stanley Smith Barney Ranks as Top Fund Distributor to HNWs”).

Overall, ESRP account ownership has decreased significantly across generations, according to Cogent. While the majority of affluent investors (59%) reported owning an ESRP, that’s down from 70% in 2006. However, the average allocation among owners has remained relatively flat.

Cogent attributes the decline to both the gaining of the generational cohorts and the fact that significantly fewer Boomers are employed full-time outside the home. The economy could also play a role, as it has forced job changes among younger investors.

Data & Research January 22, 2010

Morgan Stanley Smith Barney Ranks as Top Fund Distributor to HNWs

Morgan Stanley Smith Barney was the highest-ranked wirehouse among affluent and high-net-worth (HNW) investors, according to Cogent Research’s list of top fund distributors.
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Cogent’s 2010 Investor Brandscape report ranked the top five fund distributors as Charles Schwab, Fidelity Investments, Morgan Stanley Smith Barney, Edward Jones, and Merrill Lynch. UBS came in at number seven.

Fidelity was bumped from its spot as both the top distributor and mutual fund provider. Cogent said Fidelity has been hurt by lower awareness and favorability ratings and a trend of affluent investors putting more assets in IRAs than in employer-sponsored retirement plans (see “Affluent Investors Have More Money in IRAs than Employer Plans“).

The fund provider rankings included Vanguard, Fidelity, American Funds, T. Rowe Price, and TIAA-CREF in the top five.

Cogent said while The Vanguard Group has improved its relationship with investors over the past year as a fund provider, Fidelity has seen a decline in loyalty. Vanguard performed the best among its rivals on drivers of loyalty such as financial stability and range of products, as well as fund performance.

In contrast, Fidelity no longer ranks among the top five mutual fund companies on performance. Ratings for the firm on both mid-term and long-term performance declined considerably over the past year, according to Cogent.

Cogent’s report is based on a survey of 4,000 affluent and high-net-worth investors (having $100,000 or more in investable assets, excluding ESRPs and real estate) in the U.S. The distributor and fund provider rankings are based on Cogent’s proprietary CoRe Score, which combines brand equity, customer loyalty, market penetration, client mix, and share of wallet.

More information about purchasing the report is available at www.cogentresearch.com.

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