2007
Recordkeeping Survey – Provider Choice

Insights from PLANSPONSOR's 2007 Recordkeeping Survey

Advisers generally have their favorite recordkeeping providers, choosing to work with a select handful of them—and, despite continued waves of consolidation, there remain plenty of good ones from which to choose.Consolidation isn’t a trend restricted to weak providers in the space, of course, and the rationale for stepping back from the frequently arduous task of participant recordkeeping can be as individual and varied as the industry itself. Between keeping up with what providers—whether major recordkeeping firms or third-party administrators (TPAs)—are still playing in which market(s), and who is offering what services, keeping it all straight can be a full-time job.

Pay Structures

PLANSPONSOR’s annual Recordkeeping Survey illustrates the variety of adviser business models working in the retirement plan market today. Just 8% of recordkeepers work solely with their own advisers, while others (43%) work solely with independent advisers (defined in the survey as those outside the recordkeeping firm). Significantly, the largest group—about half (49%) of the 114 recordkeepers in this year’s survey—work with both groups.

This diversity is seen also in the various types of fee schedules recordkeepers say they make available to advisers outside their firm. Most recordkeepers surveyed (78 of the 114) offer a variety of fee structures to third parties. Ongoing trail compensation was the most commonly cited (68 of the recordkeepers), followed by fee for service, or registered investment adviser (RIA) fees (offered by 63 recordkeepers), and, lastly, upfront commissions, available at 56 of the surveyed recordkeeping firms. Forty-eight providers responded that they offer all three types of adviser compensation to third parties.

It appears that being able to accommodate various fee schedules allows recordkeepers access to the most advisers; as some recordkeepers also mentioned, advisers can gain additional access to fees through revenue-sharing arrangements, percentage of referrals, or services fees, in addition to those types of fees mentioned above, or, alternatively, negotiate for payment directly by the plan sponsor. Further, many advisers may vary their compensation depending on their clients’ individual wishes, meaning the ability to negotiate various schedules with a single recordkeeper is most likely of interest.

However, a few recordkeepers specifically mentioned they offer advisers the opportunity to select level, or equalized, commissions: a fee structure that may become more attractive to advisers looking to offer investment advice to participants as a fiduciary adviser under the Pension Protection Act. In those situations, the adviser’s fee must not vary based on the investments recommended (a result supported by the level comp approach), or that advice must be predicated on a computer model certified by an eligible investment expert who has no material relationship with the adviser (See "Good Advice," Spring 2007).

Adviser Services

Advisers can leverage an expanding array of resources available to them through recordkeepers; in fact, the majority of those responding to PLANSPONSOR’s survey offer multiple support services to advisers. The most common support was offered in the area of compliance—78.5% of recordkeepers say they assist with that responsibility, including support around 404(c) and the Pension Protection Act (PPA). A close second was training specific to defined contribution plans, offered by nearly three-quarters of those making support services available to advisers.

Additionally, advisers can get help in the area of investment-monitoring products from about two-thirds of recordkeepers in our survey, and a little less than half of those offering support to advisers did so in the areas of lead generation and plan benchmarking (46.4% and 44.0%, respectively). Other support services mentioned by recordkeepers include expertise in plan design, wholesaler support, education and enrollment support, customized communication services, and training on defined benefit and total retirement outsourcing (TRO).

Plan Size

Advisers still have plenty of choice in selecting a recordkeeper for their clients. In fact, the recordkeepers that responded to the survey were most likely to offer plans in the small segment ($5 million to $25 million), with all but five providers of the 114 saying they accept new plans in that market segment.

Although nearly all providers will accept new plans in those plan sizes, there was significant variance in how many plans they have in those segments, showing that some firms have developed a leadership position in certain markets.

The most limited selections were in the jumbo (more than $500 million) and large ($100 million to $500 million) plan market (44 and 31 providers not offering services to those markets, respectively), areas in which an adviser is generally not so active. There was some aspirational gap in market reach; despite the fact that 37 providers say they’ll accept jumbo plans, a mere 11 currently have one or more of that size on their books.

Eighty-seven percent of record-keepers have no minimum participant size for new plans and 79% have no minimum asset size. Those with a minimum asset requirement imposed ranged from $10,000 to $5 million, while minimum participant counts ranged from a low of two (ostensibly to avoid the single-employee plan designs) to as many as 3,000.

Plan Design

Plan design options are a critical component of ensuring a good fit between the plan and the provider, and advisers must weed out recordkeepers by ensuring they can fit the service bill.

Although the Roth 401(k) feature has been slow to be adopted by plan sponsors, nearly all the recordkeepers now provide this option. This capability stands to enjoy increased interest as a result of the PPA’s lifting of the sunset provision that would have caused the Roth 401(k) provision to lapse.

Lifecycle funds are a dominant force on plan menus, and all but a handful of providers offer such funds, whether proprietary or nonproprietary (nonproprietary offerings were more common in this particular survey, since many of these recordkeepers are not also money managers). Managed accounts and collective trusts were the next most popular investment type, offered by 75 and 62 recordkeepers, respectively. Exchange-traded funds, or ETFs, were available on just 43 of the recordkeeping platforms in the survey.

Methodology

These charts are taken from sister publication PLANSPONSOR’s ninth annual Defined Contribution Recordkeeping Survey. For that survey, a questionnaire was distributed to approximately 300 providers of full-service and unbundled recordkeeping for defined contribution plans, of which 114 complete responses were received.

The questionnaire, which asked for approximately 144 different data points pertaining to each provider’s product and service capabilities, was available for providers to complete online between March and late April, 2006. All data is as of 12/31/2006.

The tables that follow provide a glimpse of the total information available. To purchase an Excel spreadsheet containing the full data set of responses from all 114 providers, please contact Michelle Judkins at mjudkins@plansponsor.com. Cost: $2,000.

Top Ten Recordkeepers 

By percentage of DC plans using independent financial advisers (outside the firm) - % of plans

1. John Hancock Retirement Plan Services - 100%
2. The Retirement Advantage, Inc. - 100%
3. EPIC Advisors, Inc. - 95%
4. Invesmart , Inc. (acquired by The Standard in 2006) - 90%
5. Unified Trust Company, NA - 86%
6. The Standard - 85%
7. McCready and Keene, Inc. - 50%
8. Great-West Retirement Services - 46%
9. First Mercantile - 44%
10. The Newport Group - 42%

By percentage of DC plans using wirehouse financial advisers (outside the firm) - % of plans

1. BISYS Retirement Services - 80%
2. DailyAccess Corporation - 60%
3. McCready and Keene, Inc. - 50%
4. The Newport Group - 39%
5. First Mercantile - 37%
6. New York Life Investment Management - 33%
7. MassMutual Financial Group - 30%
8. ADP Retirement Services - 22%
9. Invesmart, Inc.(acquired by The Standard in 2006); T he Standard; BPA-Harbridge - 5% (three-way tie)

By total RK assets - in $mm

1. Fidelity Investments - $808,588
2. TIAA-CREF - $307,000
3. Hewitt Associates - $236,000
4. Vanguard - $228.452
5. CitiStreet LLC - $217,623
6. Great-West Retirement Services - $108,647
7. JPMorgan Retirement Plan Services - $96,586
8. The Retirement Group at Merrill Lynch - $95,900
9. T.Rowe Price Group - $91,211
10. Principal Financial Group - $81,862

By % increase in RK assets, 2005-2006 - % increase

1. Sentinel Benefits Group - 90.60%
2. The Newport Group - 78.60%
3. Wachovia Retirement Services - 65.50%
4. Fifth Third Bank - 61.30% (tie for 4th)
5. DR Pension Services, LLC - 61.30% (tie for 4th)
6. SunGard Omni - 58.10%
7. OppenheimerFunds - 45.20%
8. New York Life - 42.70%
9. ExpertPlan - 41.40%
10. Great-West Retirement Services - 40.00%

Top Ten Recordkeepers  

By number of recordkeeping plans # of plans

1. ING - 44,184
2. Principal Financial Group - 43,553
3. Paychex, Inc. - 43,000
4. AIG VALIC - 38,097
5. John Hancock Retirement Plan Services - 37,078
6. TIAA-CREF - 34,597
7. Nationwide Financial - 33,906
8. ADP Retirement Services - 29,946
9. Fidelity Investments - 29,506
10. Lincoln Financial Group - 28,063

By total recordkeeping participants - # of participants

1. Fidelity Investments - 13,481,629
2. CitiStreet - 6,997,987
3. Hewitt Associates - 4,800,000
4. Great-West Retirement Services - 3,386,355
5. TIAA-CREF - 3,200,000
6. Vanguard - 3,015,548
7. Principal Financial Group - 2,869,768
8. Merrill Lynch - 2,598,731
9. ING - 2,566,528
10. Nationwide Financial - 2,474,267

By recordkeeping assets in 401(k) plans - billions

1. Fidelity Investments - $722
2. Hewitt Associates - $236
3. Vanguard - $199
4. CitiStreet LLC - $110
5. Merrill Lynch - $87
6. T. Rowe Price Group - $78
7. Principal Financial Group - $68
8. Prudential Retirement - $56
9. Affiliated Computer Services - $54
10. Wachovia Retirement Services - $51

By recordkeeping assets in 403(b) plans - billions

1. TIAA-CREF - $216
2. Fidelity Investments - $64.4
3. AIG VALIC - $46.7
4. ING - $26.3
5. Lincoln Financial Group - $21.9
6. Vanguard - $12.4
7. CitiStreet LLC - $12.3
8. Prudential Retirement - $7.8
9. Great-West Retirement Services - $7.5
10. GuideStone Financial Resources - $6.9

Top Ten Recordkeepers  

By recordkeeping assets in 457 plans - billions

1. Nationwide Financial - $37.6
2. Great-West Retirement Services - $34.9
3. ING - $17.2
4. ICMA-RC - $17.2
5. CitiStreet LLC - $13.1
6. The Hartford - $8.9
7. AIG VALIC - $5.4
8. T. Rowe Price Group - $4.6
9. Fidelity Investments - $3.4
10. Prudential Retirement - $3.3

By recordkeeping assets per plan - millions

1. Affiliated Computer Services - $440
2. Hewitt Associates - $369
3. JPMorgan Retirement Plan Services - $272
4. The 401(k) Company - $212
5. Vanguard - $91
6. Merrill Lynch - $59.5
7. Mercer HR Services - $48
8. SunGard Omni - $47.8
9. Charles Schwab - $46.9
10. T. Rowe Price Group - $43

By new plans won in 2006 - # Plans

1. Paychex, Inc. - 11,000
2. American Funds - 6,245
3. John Hancock - 5,602
4. ADP Retirement Services - 4,305
5. The Hartford - 3,378
6. Principal Financial Group - 3,060
7. Nationwide Financial - 2,992
8. Great-West Retirement Services - 2,820
9. BISYS Retirement Services - 2,110
10. Transamerica Retirement Services - 1,809