Which Recordkeeper Types Dominate Various Market Segments?

Insurance companies were the most common recordkeeper type for 401(k) plans, but they didn’t dominate in terms of participants or assets, according to a new report.

That report, The BrightScope/ICI Defined Contribution Plan Profile: A Close Look at 401(k) Plans, 2014, notes that insurance firms were more likely to provide recordkeeping services for smaller 401(k) plans, while asset managers, which include mutual fund companies, were the second most common recordkeepers across plans, and they were more likely to provide recordkeeping services for larger plans.

Asset Managers

In fact, according to a sample of 20,711 plans with $2.7 trillion in assets in the BrightScope Defined Contribution Plan Database, asset managers provided recordkeeping services for just 29% of plans, but for 40% of participants and 54% of plan assets, according to the report. In 2014, asset managers provided recordkeeping services for:

  • 18.3% of plans with $1 million to $10 million in plan assets;
  • 58.0% of plans with more than $500 million to $1 billion; and
  • 55.4% of plans with more than $1 billion.

As noted above, sonce insurance companies are more likely to provide recordkeeping for smaller plans, they represented a smaller share of assets and participants than plans (18.8% of assets and 26.5% of participants versus 45.6% of plans). Brokerage firms (5.4% of assets), banks (8.0%), and pure recordkeepers (14.4%) provided the remaining recordkeeping services.

Brokerage Firms

Brokerage firms, which include discount and full-service brokerage firms, tended to be more likely to provide recordkeeping services for midsize plans, providing recordkeeping for only 4.1% of plans with $1 million to $10 million in plan assets and 4.9% of plans with more than $1 billion in assets, but about 10% of plans with more than $250 million to $1 billion.

Banks, which provided recordkeeping for 6.7% of plans, tended to be more likely to do so for midsize plans. In 2014, banks’ recordkeeping activity rose to more than 10% of plans with more than $50 million to $500 million in plan assets.

Pure Recordkeepers

Pure recordkeepers (firms that only offer recordkeeping services) were more likely to provide recordkeeping services for small or large 401(k) plans, but less likely to do so for midsize plans in 2014. Overall, pure recordkeepers provided recordkeeping for 12.7% of plans, but that fell from 21.4% of plans with $1 million to $10 million in plan assets to 3.2% of plans with more than $100 million to $250 million, according to the report. However, it rose for larger 401(k) plans, to 19.2% of plans with more than $1 billion in plan assets.

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