Advisers in the 401(k) industry will likely know of both Invesco and SunTrust—two providers serving large numbers of defined contribution (DC) retirement plans and institutional clients primarily with investment products and retirement plan recordkeeping, respectively.

The two firms concentrate on different markets—Invesco focused more on large plan clients and SunTrust focused more on the middle market. This gives Mark Jones, currently SunTrust’s director of employee benefits solutions, some important insights into the current sales and service trends making their way down market.  

“I’ve been in the 401(k) business for my entire adult career really, starting at Invesco in the early 1980s,” Jones explains. “I was the 80th employee there, and now they have thousands of employees, so it’s grown into an entirely different company. Back then, we were still building the DC business that we’re all familiar with today.”

Jones likens the effort of creating early 401(k) products at Invesco to “working from the spare parts.”

“Back then we were really thinking of retirement plans from the standpoint of a mutual fund company,” Jones adds. “Over 20 years the business grew and matured significantly, before we sold it to Merrill Lynch in about 2007. Then I spent two years helping to transition the business.” (SunTrust company statistics here.)

Jones retired for a few years after the transition period, he explains, but SunTrust subsequently asked him to “come out of retirement and help them grow the business. So I’ve got a lot of history in the 401(k) realm and a nice second act going on here. I was tired of being retired, you could say.”

NEXT: Some things change, some stay the same

Jones says there has been tremendous change in his time in the industry—especially in the last five or 10 years.

“This has put a real premium on skilled operations people,” Jones says. “One of my former colleagues who ran operations for me at Invesco, and she’s since spent time with ING and Fidelity and T. Rowe Price, has gone on to become a successful independent consultant. She tells me all the time how much people are still struggling with the technology and finding the right model as a retirement plan recordkeeper.”

Jones, like others, predicts industry consolidation will continue as clients of smaller and smaller size look for the types of plan sponsor and participant support services more frequently delivered to large and mega-sized plans.

“I think the consolidation is clearly going to start to ramp up even more—acquisitions right and left,” he predicts. “The big are going to get bigger, and that’s a reason why I enjoy working for SunTrust. We have the scale and we’re ready to seize a niche—providing a higher level of service to a smaller plan. That’s an area of service that I think we will see getting lost, to some degree, in the big consolidations.”

Jones suggests another trend to consider is “what’s going on with third-party administrators [TPAs] on the small end of the market.”

“All of those firms, frankly, were started by people at or very near retirement age,” Jones says, “and they’re struggling to some extent because their businesses are being whittled away by larger providers. And this is happening at the same time that they want to monetize and retire—that’s another piece fueling the likely surge in acquisitions. Our industry has by no means stopped evolving.”

NEXT: Be careful with branding  

Speaking with PLANADVISER, Jones frequently mentioned the important role consultants and advisers are playing in the ongoing development of the 401(k) industry, both in terms of client service trends and how retirement plan providers do their work on the back end.

“There are some consultants out there who have some tremendous insights into what is going on and where the game is heading,” Jones suggests. “They’re looking at aligning sales processes and making it all really efficient on the delivery side. Others are more known for designing new sales and service models that are really compelling for the front office.”

In terms of his personal approach to piloting sales and branding efforts in the current market environment, Jones says he has something of an advantage in that SunTrust “likes being in the middle space. We’re nationally chartered, of course, but we still have that identity as a true regional bank—our footprint goes from Baltimore to Miami, essentially. We really play into that marketplace and we really target serving a more modest size company—and to bring all the resources to bear that bigger companies would get.”

Jones says any provider in the 401(k) space today, whether an advisory firm or a mutual fund company, must “be careful with their branding.”

“It takes resources to build and maintain the brand,” Jones says. “Something else I’ll say is that we’ve really tried, at SunTrust, to embody the purpose-driven attitude that clients today are looking for. Clients think about our role as helping their own people light the way to financial security, and we take that tag line seriously.”

NEXT: Quarterbacking opportunity abounds 

Jones says the focus of his earlier work with Invesco was focused on large clients, so there were always four or five HR and finance staffers at each client meeting whose sole job it was to focus on the 401(k) plan.

“That’s fundamentally a different relationship and a different market from serving a client with one or two HR directors and not much else,” Jones explains. “The clients we serve at SunTrust, being in the middle market, really expect us to come in and help quarterback things for the retirement plan.”

There is a lot of complacency that’s out there, Jones adds, “because nothing bad has happened yet for a given prospect, so we are also focused on educating them about the things that can happen if and when the DOL comes knocking. When we take over a new account, getting the plan in shape is our first priority. We can sell on the fact that as a bank, we are enormously regulated, and we have an army of people to help us think about risks, and we can really quarterback this process for our clients.”

From that perspective, Jones agrees with arguments that increasing regulatory pressure for 401(k) plan advisers and providers could be a good thing. “The sponsors are focusing more every day on the regulatory exposure they face and they’re looking for strong partners, all up and down the market, to help take care of that,” he says. “That’s one of the biggest things that struck me, going from the big plan sponsor to the small plan sponsor—just realizing how much help these guys want down in the lower market.”

Jones concludes that the increasing prevalence of state-run retirement plans for private sector workers may also end up being a boon to private providers: “We’re watching it closely, of course, but it’s hard to say still what the ultimate impact will be. In my 30 years in the industry I’ve seen these things develop and unfold time and again, and often it ends up being in a way that was not at all anticipated beforehand. So that’s how I’m thinking about all of the regulatory pressure out there.”

“I can tell you that people who work for smaller companies are looking for a better opportunity for their employees,” he concludes “An interesting line of argument is that it could be good for everyone in the provider space if all these new people start to save and get interested in long-term investing. There’s more opportunity to manage that money and help people improve their outcomes.”