'It was the best of times, it was the worst of times,"...Charles Dickens
For financial advisors who specialize in 401k takeovers, it is the "best of times". In a recently completed survey by 401kExchange Inc., the number of plan providers who are "thinking about changing or actively searching" for a new plan provider...is at an all-time high.
Of course, the flip side of the coin is also true. For advisors with plans currently in place, HEADS UP!. As Satchel Paige said, "Don't look back...they may be gaining on you!"
Year-to-date through April 30th, 13,248 plan sponsors in the under $1 million market said they were thinking or looking about changing providers. That's a 75% increase from just two years ago. Similarly, for plans in the $1-10 million market, there has been a 36% increase in provider activity. Even with mid-size plans of $10-100 million there's a lot of looking...an 88% increase was noted in the survey.
Why is this happening now? It seems that in the years immediately following 9/11, 2002 and 2003, companies were completely preoccupied with making ends meet, avoiding layoffs, etc. Moreover, since all investments appeared to be doing poorly, companies were reluctant to change fund managers in mid-stream. Today, these same companies, most particularly the human resources departments, are again focusing on their retirement plans. The strong market of 2003 has emboldened them to actively survey the landscape. At the same time, the mutual fund scandals and greater government scrutiny has put the spotlight on the retirement plan stage.
There is one more significant trend that appears to be happening...a move to increased 'transparency.' As plan sponsors become more sophisticated, and retirement services becomes more commoditized, the use of an open bidding process becomes much more prevalent. The move to RFPs, away from the cozy, one-on-one approach of making deals on the golf course, is largely due to mounting concerns of plan sponsors about fiduciary responsibility and disclosure. The RFP process creates a 'paper trail', indicating that a sponsor has done the appropriate due diligence with regard to analyses of costs, access to outside funds, participant advice, etc.
"It was the best of times, it was the worst of times; it was the age of wisdom, it was the age of foolishness,"...Charles Dickens
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