According to research conducted by Annova Consulting Group with mid-large plan sponsors ($20-$500 million) after a finals exercise in 2012, 31% decided to stay with their incumbent — up from 18% five years ago and 28% last year. Over the past five years, the percentage of plans that remain with their current record keepers has increased 10% each year.
Annova cited commoditization and the difficulty of providers distinguishing themselves during the sales process as reasons why more plans are not moving. They also found that a small fee reduction has little impact. For most plans and their advisors, there is no inherent benefit in changing record keepers unless there are compelling reasons like very poor service, high fees or the record keeper’s inability to service a plan that has greatly increased its assets and participants.
All this portends greater consolidation among the remaining providers, as well as many of them trying to provide services to multiple market segments as plans mature — like John Hancock’s recent mid-market launch, for example. The Annova study is evidence that in a take-away market, client retention becomes even more important as the cost of winning new business increases.
