Cogent Reports: Small and Mid-sized Plans Are Sweet Spot in 401(k) Market

CAMBRIDGE, Mass.--()--In the highly competitive 401(k) market, it’s tempting for plan providers to aim for mega plan conversions that bring substantial assets and thousands of participant accounts in one shot. However, new data suggest that plan providers would be better off focusing sales efforts on small and mid-sized plans—those with $5 million to just under $100 million in assets. Plan sponsors in the Small-Mid segment report the greatest intent to act, with 39% ready to launch a formal 401(k) plan review and three in ten (29%) likely to switch providers in the coming year. These and other findings are from Retirement Planscape®, an annual Cogent Reports™ study by Market Strategies International-Morpace.

When asked to pinpoint the reasons why they’re likely to switch providers, Small-Mid plan sponsors cite issues with fees, choice of investments, and participant service most often. Yet the factors that these plan sponsors seek in a new plan provider include the more personal aspects of trustworthiness (being a company plan sponsors trust), acting in the best interest of participants, and a perception of being easy to do business with.

According to the report, the top firms Small-Mid plan sponsors are most likely to consider in the next year are:

  1. Fidelity Investments
  2. Empower Retirement
  3. OneAmerica
  4. Vanguard
  5. Ascensus

Source: Market Strategies International. Cogent Reports™. Retirement Planscape®. May 2018.

“This year, a number of firms appear to have improved their brand perceptions in the important areas of being easy to do business with, choice and flexibility in investment options, and value for the money,” said Sonia Sharigian, product director at Market Strategies-Morpace and author of the report. Outside of the top five firms listed, 11 providers achieve year-over-year increases in consideration from Small-Mid plans: Charles Schwab, Principal, Prudential, Bank of America Merrill Lynch, ADP, Ameritas, John Hancock, Alliance Benefit Group, MassMutual, Nationwide and BB&T.

“The majority of provider reviews and searches stem from human error such as processing and compliance mistakes and overall poor client service,” explained Linda York, senior vice president at Market Strategies-Morpace. “Yet the impetus for provider changes can also be the result of successful business growth or organizational changes such as mergers and acquisitions. In order to maximize their chances of winning new business, plan providers need to demonstrate an understanding of each plan sponsor’s challenge and tailor their sales efforts to meet the needs of each individual situation.”

About Retirement Planscape®

Cogent Reports conducted an online survey of a representative cross section of 1,421 401(k) plan sponsors from February 13 to March 10, 2018. Plan sponsor survey participants were required to have shared or sole responsibility for plan design, administration or selection and evaluation of plan providers, or for evaluating and/or selecting investment managers/investment options for 401(k) plans. In determining the sampling frame for this study, Cogent Reports relied upon the Standard & Poor’s Money Market Directories (MMD) and ALM’s Judy Diamond Associates databases. To ensure the population for this research is representative of the universe of 401(k) plan sponsors, quotas were set during the data collection phase around key firmographic variables including total plan assets, number of plan participants, industry and geography. Minimal weighting was applied to adjust for purposeful deviations from the actual marketplace distribution. The data have a margin of error of ±2.60% at the 95% confidence level. Market Strategies International will supply the exact wording of any survey question upon request.

About Market Strategies International-Morpace

Leading market research firms Market Strategies International and Morpace bring clients closer to their customers through exceptional insights, which includes deep expertise in financial services, specifically among wealth, banking, payments and insurance organizations. The firms specialize in brand, customer experience, product development and segmentation research, and are known for blending primary research with data from syndicated, benchmarking and self-funded studies to help clients succeed. The syndicated products, known as Cogent Reports, help clients understand the market environment, explore industry trends and monitor their brand within the competitive landscape. Market Strategies and Morpace have earned the trust of many of the world’s top brands across the automotive, consumer & retail, energy, financial services, health, technology and telecommunications industries. They are combining into one firm, as part of an acquisition of both firms by STG, and will be rebranded under a new name to be announced later in 2018. With more than 450 research professionals, the collective firm is now the 15th largest market research firm in the US and top 25 globally.


Market Strategies International-Morpace
Sarah Keller, 734.779.6847

Release Summary

New data suggest that 401(k) plan providers would do better by focusing sales efforts on small and mid-sized plans.


Market Strategies International-Morpace
Sarah Keller, 734.779.6847