New Challengers Take Aim At Leaders In 401(k) Market

By a News Reporter-Staff News Editor at Investment Weekly News -- Three firms-American Funds, Empower Retirement and Voya-are giving Fidelity Investments and Vanguard a run for their money in the 401(k) market. While Fidelity and Vanguard have historically dominated the recordkeeping market in both the number of plans they're managing and the percentage of new plans they're winning, the three challenger brands are gaining ground by increasing their consideration potential for new business. These and other findings are from Retirement Planscape®, an annual Cogent Reports™ study by Market Strategies International.

With only 15% of 401(k) plan sponsors even contemplating a change in providers in the next 12 months, recordkeeping firms are fighting an uphill battle in the effort to grow their assets under administration. Fidelity and Vanguard have enjoyed a comfortable lead over their key competitors for some time, but in a notable change this year, American Funds, Empower Retirement and Voya join Fidelity and Vanguard in plan sponsors' consideration sets. Voya and American Funds are closing in on the leaders in the Micro plan segment (plans with less than $5 million in assets), while Empower Retirement rivals Fidelity and Vanguard for consideration in the mid-sized (plans with $20 million to less than $100 million in assets) and large segments (plans with $100 million to less than $500 million in assets).

Fidelity and Vanguard effectively tailor their outreach and service model whether the target segment has less than one million or several billion dollars in assets. Very few providers have the same scale or capacity to compete at the same level and win in each segment successfully.

"While the other firms are not as well known, they've been building their brand presence over the years," said Linda York, senior vice president at Market Strategies and coauthor of the report. "American Funds and Voya have successfully leveraged their advisor networks to reach the smaller plans, while Empower has made significant investments in its technology infrastructure to appeal to the larger end of the market. They are great examples of firms successfully challenging the two historical leaders by focusing on what they do best and executing a marketing strategy that plays to their strengths in their chosen segment."

Compounding the issue for plan providers is the difficulty in effectively messaging to different plan size segments. The research found that, when considering plan providers, the micro plan sponsors look for value and companies they trust while small to medium plans seek superior choice and flexibility with investment options. Meanwhile large and mega plans hone in on best-in-class participant service and support.

"The 401(k) market is not one-size-fits-all," noted Julia Johnston-Ketterer, senior director at Market Strategies and coauthor of the report. "Therefore, it's imperative for lesser-known brands to monitor the competitive landscape and identify untapped needs in the market to further develop their brands.'' About Retirement Planscape Cogent Reports conducted an online survey of a representative cross section of 1,422 401(k) plan sponsors from March 22 to April 17, 2017. 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. In determining the sampling frame for this study, Cogent Reports relied upon the Standard & Poor's Money Market Directories (MMD) and ALM's Judy Diamond Associates databases. To ensure the population for this research is representative of the universe of 401(k) plan sponsors, quotas were set during the data collection phase around key firmographic variables including total plan assets, number of plan participants, industry and geography. Minimal weighting was applied to adjust for purposeful deviations from the actual marketplace distribution. The data have a margin of error of ±2.60% at the 95% confidence level. Market Strategies International will supply the exact wording of any survey question upon request. About Market Strategies International Market Strategies International is a research and consulting partner with deep expertise in financial services, trusted by the world's most successful wealth, banking, payments and insurance organizations to help them thrive. We blend primary research with data from our syndicated, benchmarking and self-funded studies to provide clients with exceptional research insight that helps solve their challenges. Our research specialties include brand, communications, CX, product development and segmentation. Our syndicated products, known as Cogent Reports, help clients understand the market environment, explore industry trends and monitor their brand within the competitive landscape. Founded in 1989, Market Strategies is one of the largest market research firms in the world. Read Market Strategies' blog at FreshMR, and follow us on Facebook, Twitter and LinkedIn. View source version on businesswire.com: http://www.businesswire.com/news/home/20170731005072/en/

Keywords for this news article include: Investment and Finance, Market Strategies International.

Our reports deliver fact-based news of research and discoveries from around the world. Copyright 2017, NewsRx LLC