Small retirement plans are sweet on bundled service providers

John Hancock Retirement Plan Services takes the cake among plan sponsors as a favored defined-contribution investment manager. It’s a small change for the massive retirement services provider, which crept up to first place this year, after being in second in 2011, according to Cogent Research’s survey of 1,567 employers of a range of sizes. Fidelity Investments followed in second, jumping from eighth in 2011, while ING Groep NV slipped to third place from first. It’s no coincidence that the top three DC investment managers happen to be bundled service providers, noted Linda York, syndicated research director at Cogent. “Plan sponsors who are using John Hancock are really happy with them overall,” she said. “It translates into them doing well at record keeping and at investment management.” Among the top 10 providers — which includes a couple of ties, so the actual number is 12 — eight provide a full suite of retirement plan services, including The Vanguard Group Inc., Prudential Financial Inc. and Principal Global Investors. Lord Abbett & Co. LLC, Pacific Investment Management Co. LLC, Eaton Vance, and Janus Capital Management offer investment management services only. Most of the participants in the survey were also in charge of day-to-day business at their respective firms or handled benefits there, so they were generally less aware of the investment menu itself, Ms. York said. As a result, the firms that provided a range of services had a higher visibility. “If we surveyed the CFOs responsible for the overall 401(k), we might get some difference in the responses,” Ms. York said. “These folks are decision makers, and the results show it’s really hard for a pure DC-investment-only provider to get any sort of mind share. Full service providers are already there and have a deep, engrained presence.” As far as Fidelity’s meteoric rise to second place from eighth over the course of a year, Ms. York said that this was due to the firm’s “concerted effort to court the smaller-plan market.” Indeed, 435 of the surveyed plans were in the micro category, with less than $5 million in assets, and another 403 were “small,” with between $5 million and $20 million in assets. More weight had been given to these smaller plans when the results were tabulated because in the overall 401(k) market, there are more small plans than there are large ones. “Fidelity is making good headway in the small-plan space,” Ms. York noted.