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Rating:Sparking Growth Not Rated 3.0 Email Routing List Email & Route  Print Print
Thursday, June 17, 1999

Sparking Growth

Reported by Tony Pennino

A 13.5% growth in assets of all 401(k) plans across the country in the next five years -- that is what Robert Wuelfing of R.G. Wuelfing & Associates predicted at the Annual SPARK Conference in Washington, D.C. this week. This would bring the total assets in 401(k) plans to $2.3 trillion by 2004.

Wuelfing had other statistics that would intrigue defined contribution professionals. For instance, not surprisingly, mutual fund companies are the predominant type of vendor to serve defined contribution plans at approximately 45%. Banks and insurance companies are around 20% each, and other kinds of managers have around 15% share of the market.

Plan Size Total Participants (millions) Number of Sponsors
Under 100 6.1 244,000
100-1000 6.6 31,000
Over 1000 15.2 3,900
Total 27.9 278,900
*Data provided by RG Wuelfing & Associates.

Wuelfing also took time during his presentation to note the percentage of manager turnovers in each of those market segments.

Investment Manager Turnover Rates
The official took the opportunity to project annual rate of turnover in each of the market segments. The data's source is RG Wuelfing & Associates and Spectrem Group:
  • SMALL MARKET -- 9%
  • MEDIUM MARKET -- 12%
  • LARGE MARKET -- 10%

Wuelfing's statistics, though, seemed to indicate that there was general contentment with service providers in the marketplace. According to the speaker, 28% of defined contribution plans use some kind of defined benefit service from the same provider. He also noted that 28% of sponsors review their recordkeepers annually, but that 87% of companies are pleased with their current provider.

Further, Wuelfing listed the top selection criteria sponsors follow when picking a manager:
  • quality of service
  • cost/fees
  • timing of service delivery
  • flexibility to customize
  • reputation
  • scope of participant communications
  • compliance services
  • and advanced features
Finally, Wuelfing disclosed his estimations of how assets are being distributed in the different investment options found in 401(k) plans.

Asset Distribution Trends:
1) 43% -- Equities.
2) 19% -- Company Stock.
3) 16% -- GIC/Stable Value.
4) 12% -- Balanced/Life Cycle.
5) 7% -- Bonds.
6) 2% -- Other.
7) 3% -- Money Market.

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