According to survey data from Anova Consulting Corp., for the sales situations in 2011, 28% of mid-large market searches with between $20MM and $500MM in plan assets resulted in the plan sponsor remaining with the incumbent recordkeeper, compared to 18% in 2007. This figure does not include non-competitive re-bid situations, which are an increasingly commonplace alternative to a full search/RFP process for plan sponsors who are not necessarily dissatisfied with their provider, but conduct periodic due diligence reviews for fiduciary reasons.
“With the difficult economic environment of the past few years, most companies are more focused on their core businesses than with evaluating their 401(k) plans,” said Chris Cumming, senior vice president at Great-West Retirement Services. “Consequently, there’s been a slowdown in RFIs and RFPs, which leads to fewer finals situations, and even then sponsors have been more likely to remain with the incumbent.”
According to the plan sponsors, retirement plan advisers and consultants interviewed, one driving force behind this trend is the increasing commoditization of 401(k) product and service offerings in the mid-large market.
“As fee spreads compress and open investment architecture, state-of-the-art technology and customizable participant communications are offered by more competitors, sponsors are increasingly unwilling to undergo the uncertainty and additional effort of a conversion,” said Richard Schroder, president of Anova Consulting Group. “Results from the plan sponsor research we’ve performed over the past decade show a drop-off in provider changes due to core product offering differences—client service issues are now a key catalyst for provider changes.