Administration August 18, 2011

TPAs Have 30% Influence of Total 401(k) Assets

August 18, 2011 (PLANSPONSOR.com) – A recent study conducted by Cerulli shows the TPA marketplace has a 30% influence on 401(k) assets.  
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The survey analysts see this percentage increasing in the future and their influence expanding into the 403(b) market.

The 30% of assets that TPAs have “influence” over represents nearly $850 billion in 401(k) assets, compared to the broader 401(k) market at $2.9 trillion as of year-end 2010. When 403(b) assets are included, TPAs influence $968 billion in total assets.

Tom Modestino, head of Cerulli’s retirement practice said in a press release: “Our survey reveals that the majority of TPA firms (71%) are servicing 401(k) plans. TPAs are especially prolific in the small- and mid-sized plan markets (plans with 401(k) assets between $1 million and $50 million). Currently, 403(b) plans represent only about 10% of TPAs’ product mix. However, recent legislative changes, especially on ERISA-based plans, present more opportunities for TPAs to scale their 401(k) expertise to meet the legislative needs of this market.”  

The survey also found the financial adviser landscape of those serving DC plans is shifting rapidly. Asset control and influence is becoming more concentrated in the hands of true specialists, with RIAs showing signs of breaking away from the pack.  

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Many recordkeepers recognize the growing importance of TPAs to their overall growth plans. They are enhancing or shifting their business models to better accommodate a significant rise in their TPA distribution and to strike a better balance with shifts in adviser channels. 

  

For asset managers, TPAs are increasingly becoming an important part of a DCIO strategy since their services now include investment selection, and they provide an avenue to open architecture for small- to mid-sized plans. 

Administration August 18, 2011

Nearly Half of DC Plan Sponsors to Offer Inflation Protection Strategies

August 18, 2011 (PLANSPONSOR.com) – The Mercer US Defined Contribution Investment Survey, which polled 233 defined contribution (DC) retirement plan sponsors, found nearly half either offer or plan to soon offer some type of inflation protection strategy to their participants.  
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Among the sponsors currently offering these strategies, a stand-alone Treasury Inflation Protection Securities (TIPS) is the most widely used option (24%) versus combining multiple asset classes (12%). Another 10% of sponsors intend to offer some type of strategy within the next year.  

Other key findings from the survey include: 

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  • Fifty-eight percent of respondents have no intention of transitioning from mutual funds to other investment vehicles such as collective trusts and/or separate accounts.  For those sponsors who will be transitioning, 34% cited lower investment fees as the key rationale for the move. 
  • Of those respondents that offer fixed payout options, the majority of sponsors (80%) offer participants the option to purchase an annuity at retirement outside the plan. The payout of income is typically provided via a stand-alone investment option (59%). 
  • While 50% of plans offer investment advice and/or managed accounts, usage among participants is very low. For investment advice, 68% of sponsors indicated usage is 10% or less and 71% of sponsors indicated that managed account usage is also 10% or less. 

Click here to learn more about the Mercer Defined Contribution Investment Survey and download a summary of key findings. 

 

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