While not answering the question of the percentage of plans that switch record keepers, in an interview with 401kWire (subscription only access), Ron Bush of Brightwork Partners noted that in his firm’s recent advisor survey, 35% of plans which changed advisors also changed record keepers within 12 months.
That percentage differed by market size but not by the level of experience of the advisor. Plans with $25 million or more changed least often, at 29%, with plans in the $3-$10 million range at 42% and plans under $1 million at 32%.
Most savvy advisors have been pursuing an advisor-of-record change for almost a decade rather than trying to force a record keeper change unless there is clear reason or a strong desire by the plan sponsor. But once in, advisors have more latitude, having built a relationship. And while most experienced advisors would like to concentrate their book of business on a more limited number of providers, the AOR-change trend has made it hard to follow that strategy.
Changing record keepers is like getting a root canal for plan sponsors, and there’s little if any financial incentive for advisors. Yet the Brightwork study suggests that movement is relatively robust once the advisor change is made — although there is no historical data for comparison purposes. However, if the AOR change is at the historical levels of 10%, the overall plan movement is still in the 3% range.
