Cogent: Small, Mid-sized Plans Are the Sweet Spot in the 401(k) Market

Big plans may have more assets (and larger fees), but new data suggests that there’s more promise in focusing sales efforts on small and mid-sized plans.

Those conclusions – from the 2018 Retirement Planscape, an annual Cogent Reports study by Market Strategies International-Morpace – said that plan sponsors in the Small-Mid segment (plans with $5 million to $100 million in assets) report the greatest intent to act, with 39% ready to launch a formal 401(k) plan review and 29% likely to switch providers in the coming year.

Asked to pinpoint the reasons why they’re likely to switch providers, Small-Mid plan sponsors cite issues with fees, choice of investments and participant service most often.

On the other hand, the factors that these plan sponsors seek in a new plan provider include the more personal aspects of trustworthiness (being a company plan sponsors trust), acting in the best interest of participants and a perception of being easy to do business with.

The report’s authors note that while the majority of provider reviews and searches stem from human error, such as processing and compliance mistakes and overall poor client service, the impetus for provider changes can also be the result of successful business growth or organizational changes like mergers and acquisitions. They note that in order to maximize their chances of winning new business, “plan providers need to demonstrate an understanding of each plan sponsor’s challenge and tailor their sales efforts to meet the needs of each individual situation.”

Cogent Reports conducted an online survey of a representative cross section of 1,421 401(k) plan sponsors from Feb. 13 to March 10, 2018. Plan sponsor survey participants were required to have shared or sole responsibility for plan design, administration or selection and evaluation of plan providers, or for evaluating and/or selecting investment managers/investment options for 401(k) plans.

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