Just over one in ten (11%) of 401(k) plan sponsors report they are very likely to replace their current recordkeeper sometime over the next 12 months, consistent with the 11% of sponsors who forecasted doing so and followed through in 2014. The likelihood of switching is highest among Mid-sized (13%), Large (20%) and Mega (18%) plans. These figures put the total estimated number of current plans likely to turn over at 66,000. These and other findings are included in the annualRetirement Planscape®, a Cogent Reports™ study by Market Strategies International.
Overall, plan fees and investment options are cited most often by sponsors as central reasons for their decision to switch plans, but among Large and Mega plans, concerns about service quality for both participants and sponsors are also paramount. To help them make the switch, smaller plan sponsors lean more heavily on financial advisors, their own independent research, and often, recordkeepers themselves, whereas larger plan sponsors are far more likely to employ the services of retirement specialists such as plan or employee benefits consultants.
¡°Once the gears of change are in motion, our data show that the factors driving the selection process vary significantly by plan size,¡± says Linda York, vice president at Cogent Reports. ¡°Among Micro plans, sponsors are looking for a good value and a partner that is easy to do business with, whereas strong recordkeeping, fiduciary support, and fee transparency are important considerations at the other end of the spectrum.¡±
Among sponsors indicating they are very likely to switch providers over the next 12 months, ten firms emerge as the overall most likely candidates for consideration:
Source: Market Strategies International: Cogent ReportsTM, Retirement Planscape®, May 2015
* Merrill Lynch/Merrill Edge is the brand specifically marketed to small businesses.
** 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.
¡°In addition to recordkeepers with coverage across all plan sizes, Principal Financial Group is clearly on the radar for Small plan sponsors,¡± says York. ¡°And among Mid-sized plans, the list of strong contenders for consideration also includes John Hancock Financial Services and T. Rowe Price.¡±
