One in 10 Sponsors Looking to Replace Recordkeeper

Fees and investment lineup are the primary motivators in the decision to keep or replace a recordkeeper.

Just over one in 10 401(k) plan sponsors (11%) plan to replace their recordkeeper over the next 12 months, on par with the 11% who had the same strategy in 2014, according to Cogent Reports.

The primary reasons why they plan on making a recordkeeping change are plan fees and investment options. However, among large and mega plans, sponsors are also concerned about the level and quality of services provided to the plan and its participants. Cogent estimates that the number of sponsors that will look into replacing their recordkeepers at more than 66,000.

For help in making the switch, small plan sponsors rely on advisers, their own research and requests for proposals (RFPs) from recordkeepers. Large sponsors, on the other hand, often turn to consultants.

“Once the gears of change are in motion, our data show that the factors driving the selection process vary significantly by plan size,” says Linda York, vice president at Cogent Reports. “Among micro plans, sponsors are looking for a good value and a partner that is easy to do business with, whereas strong recordkeeping, fiduciary support and fee transparency are important considerations at the other end of the spectrum.”

The top 10 firms that the sponsors said they are most likely to consider as new recordkeepers are:

  • Fidelity Investments
  • Charles Schwab
  • Bank of America Merrill Lynch
  • Vanguard
  • Wells Fargo
  • Merrill Lynch/Merrill Edge
  • ADP Retirement Serivces
  • Prudential Retirement
  • New York Life
  •  American Funds

Cogent Reports’ findings are based on a survey of 1,416 plan sponsors conducted between March 20 and April 20, 2015. The sponsors were selected from Standard & Poor’s Money Market Directories and ALM’s Judy Diamond Associates databases.