M&A Activity, Healthy Business Growth are Now Top Triggers for Switching 401(k) Recordkeepers
25 June 2024 - 3:00PM
A new Cogent Syndicated report from Escalent reveals that mergers
and acquisitions (M&A) and healthy business growth have emerged
as top catalysts for recent plan provider changes among 401(k) plan
sponsors who have switched recordkeepers in the past two years,
accentuating some of the newer challenges in today’s marketplace.
In a sharp divergence from last year, when
overall service quality for participants was the most dominant
trigger for switching plan providers, recordkeepers now must heed
multiple factors: overall service quality for plan sponsors,
organizational mergers and acquisitions, and growth in the number
of employees and/or plan assets. These are among the key findings
from Escalent’s 2024 Retirement Planscape® report.
“Incumbent plan providers may be tempted to
believe that corporate growth is purely positive given the
potential for increased plan assets and participants, but they must
be vigilant,” said Sonia Davis, lead report author and senior
product director at Cogent Syndicated. “Healthy growth and M&A
activity can prompt plan sponsors to reevaluate and enhance their
retirement plan benefit offerings in the spirit of being equitable
to all parties.”
In fact, average plan provider tenure is
trending lower among Large-Mega plans, which are defined as plans
holding at least $100 million in assets—a sign challenger firms are
starting to have greater success unseating incumbents within this
cohort. The average recordkeeper tenure is 7.5 years among
Large-Mega plans, down from 8.4 years in 2022.
Meanwhile, for the first time in the history of
this study, cybersecurity threats/data breaches eclipse
underperformance of plan investment options as plan sponsors’
biggest fear with respect to managing their organization’s 401(k)
plan. Cybersecurity concerns are up significantly from 40% in 2022
to 47% in 2024. In turn, anxieties around underperformance have
softened to an extent, from 57% in 2022 to 45% this year.
“Cybersecurity threats previously served as a
top concern among Large-Mega plans but now serve as the most
dominant fear across all plan-size cohorts. Providers must be very
explicit in showcasing their data security and cyber-risk
management practices,” said Davis. “As mergers, acquisitions and
cybersecurity concerns take center stage, it is imperative for
recordkeepers to clearly communicate their offerings. By
maintaining high-quality service and security standards,
recordkeepers will be poised to win new opportunities and maintain
relationships with their existing clients.”
About Retirement
Planscape®Cogent Syndicated, a division
of Escalent, conducted an online survey of a representative cross
section of 1,391 401(k) plan sponsors from February 14 to March 12,
2024. 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 relied upon
recent Form 5500 filings as maintained by ALM’s Judy Diamond
Associates. 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 ±2.63% at the 95% confidence level.
Escalent will supply the exact wording of any survey question upon
request.
About EscalentEscalent is an award-winning data
analytics and advisory firm specializing in industries facing
disruption and business transformation. As catalysts of progress
for more than 40 years, we accelerate growth by creating a seamless
flow between primary, secondary, syndicated, and internal business
data, providing consulting and advisory services from insights
through implementation. We are 2,000 team members strong, following
the acquisition of C Space and Hall & Partners in April 2023.
Escalent is headquartered in Livonia, Michigan, with locations
across the US and in Australia, Canada, China, India, Ireland, the
Philippines, Singapore, South Africa, UAE, and the UK. Visit
escalent.co to see how we are helping shape the brands that are
reshaping the world.
A photo accompanying this announcement is available at
https://www.globenewswire.com/NewsRoom/AttachmentNg/040c5971-c0e2-4c99-b374-eae7fd203b4d
CONTACT: Kim Eberhardt
248.417.2460
keberhardt@identitypr.com