Defined contribution record-keeping assets surged to a record $5.06 trillion for the 12 months ended Sept. 30, as tracked by Pensions & Investments' annual survey of the largest record keepers.
The latest results represent a 13.7% increase from the year-earlier $4.45 trillion. The number of participants in the latest survey grew to 85.6 million, up from 84.1 million. The latest survey covers 52 record keepers vs. 56 in the previous survey.
Among the very largest companies, there was little change: The eight companies with the most record-keeping assets all posted gains for the survey period, but remained at the same rank as a year earlier.
Among the rest of the top 25, however, there were some big changes in the rankings due to a merger, acquisitions, gains of new clients and organic growth.
Fidelity Investments, Boston, continued its dominance with record-keeping assets of $1.27 trillion a figure that exceeded the combined totals of the next three largest competitors.
Fidelity's 16.73 million participants among record-keeping clients also surpassed the combined participant totals of the next three largest competitors. Fidelity's assets grew 17.1% over the previous year's survey, and the number of participants grew 5.7%.
As for the other largest record keepers, by assets:
nTIAA-CREF, New York, was in second place with $387.9 billion, up 10.8% from $350.1 billion a year earlier;
nAon Hewitt, Lincolnshire, Ill., remained in third with $361.1 billion, up 16.1%. (Unlike the other companies' data, Aon Hewitt's figures for both surveys are based on year-end data.);
nVanguard Group Inc., Malvern, Pa., placed fourth with $339.1 billion, advancing 12.1%;
nING U.S. Retirement Services, Windsor, Conn, held onto fifth place with $325.4 billion, up 8.3%;
nGreat-West Retirement Services, Greenwood Village, Colo., recorded $206.4 billion for sixth place, rising 19%;
nWells Fargo Institutional Retirement and Trust, Charlotte, N.C., held onto seventh place with $192.5 billion, up 13.4%; and
nJ.P. Morgan Retirement Plan Services, New York, remained in eighth place with $163.4 billion, up 14.4%.
Among the remainder of the top 25, only one name was in the same place as a year earlier: Prudential Retirement, a unit of Prudential Financial Inc., Newark, N.J. ranked 13th in both surveys.
Bank of America Merrill Lynch advanced to ninth place from 10th, as its record-keeping assets rose 16.6% to $147.9 billion. It remained in eighth place in the participant rankings with 3.34 million, essentially flat from the previous survey even though the number of sponsor-clients dropped 5% to 38,449.
The asset growth was due to a combination of market forces, a greater use by clients of auto enrollment and auto escalation, and some new clients, said David Tyrie, Boston-based managing director and head of retirement and personal wealth solutions at Bank of America Merrill Lynch.
During the year ended Dec. 31, according to company data, Bank of America Merrill Lynch had a 16% increase in the number of clients offering auto enrollment, a 26% increase in clients providing auto escalation and a 20% increase in clients offering both features.
One of the new clients is Zoetis Inc., an animal health-care company based in Florham Park, N.J. Zoetis was spun off from pharmaceutical giant Pfizer Inc. last year. Tina Schwartz, director of global benefits for Zoetis, said her company conducted an RFP before choosing Bank of America Merrill Lynch for the new $730 million 401(k) plan that opened in July.
Bank of America Merrill Lynch operates in all DC markets, ranging from plans with $1 billion or more in assets to startup companies. Although it provides its record-keeping platform directly to midsize and larger plans, it outsources services to small DC plans via its Advisor Alliance, a group of 13 other record keepers, Mr. Tyrie said.
There's a higher turnover for record keeping among small plans than for other plans, and the overall decline in clients at Bank of America Merrill Lynch during the survey period was due primarily to the loss of smaller plans, those with DC assets of $5 million or less, Mr. Tyrie said. Employers offering these plans could have chosen a new record keeper, dropped their DC plan or gone out of business, he added.
In the latest P&I survey, Bank of America Merrill Lynch placed seventh in the sponsor rankings; Paychex Inc., Rochester, N.Y., remained the leader with 63,000 clients. (Paychex's emphasis on smaller DC plans is illustrated by that fact that it ranked 27th in number of participants with 740,000 and 31st in record-keeping assets with $20.1 billion).
Xerox HR Solutions, Secaucus, N.J., vaulted to 10th place with $145.1 billion in assets vs. the previous survey's 14th place showing with $96 billion in assets — a gain of 51.1%. The number of participants grew 9.3% to 2.68 million, as Xerox moved to 10th from 11th in total participants.
Michael Sigmund, senior vice president and managing director, attributed the improvement to winning some “very large” clients — he declined to name them — as part of Xerox's strategy of catering to the largest DC plans.
Xerox had 184 clients as of Sept. 30, and its $788 million average account balance per sponsor ranks second to Aon Hewitt's $1.37 billion average account balance per client, according to the P&I survey.
Mr. Sigmund said his company tries to capitalize on providing large plans with multiple services — defined benefit administration, health and welfare services and DC administration. The average DC plan for which Xerox is a record keeper has 30,000 to 35,000 participants, he said.
Moves into 14th place
Massachusetts Mutual Life Insurance Co., Springfield, Mass. moved into 14th place in the asset category with $108.2 billion. On Jan. 1, 2013, it closed its purchase of the record-keeping business of Hartford Financial Services Corp. In the P&I survey for the period ended Sept. 30, 2012, MassMutual placed 21st with $50.7 billion in record-keeping assets. Hartford was 20th with $56.2 billion.
In the latest survey, MassMutual's 2.52 million participants put the company in 12th place in that ranking. In the previous survey, the combined total for the two companies was 2.74 million.
It was the largest acquisition ever for MassMutual, based on the purchase price ($355 million) and assets acquired ($51.8 billion). The transaction doubled the size of the MassMutual retirement services staff, as 1,200 Hartford employees joined the company, said Elaine Sarsynski, executive vice president of MassMutual's retirement services division and chairman of MassMutual International LLC.
The Hartford acquisition represented a combination of two different cultures as well as two different markets — MassMutual's emphasis on large and midsize DC markets and Hartford's focus on smaller corporate and government plans.
After MassMutual announced its intention to acquire the Hartford record-keeping business, Ms. Sarsynski said competitors began trying to convince clients to switch. She said MassMutual has “put a tourniquet” on the defections but in the higher-turnover environment among smaller plans, the merged company lost some clients. In addition, she said MassMutual “did some pruning” to make sure contracts were “properly priced.”
Transamerica Retirement Solutions, Harrison, N.Y., with $98.5 billion, moved into 15th place. The company is the product of a merger, which closed Jan. 1, 2013, of Diversified and Transamerica Retirement Systems. The former companies and the merged one are owned by the Dutch financial services company Aegon NV.
In the previous P&I survey, Diversified was 18th with $61 billion in record-keeping assets and Transamerica Retirement Systems was 32nd with $18.7 billion.
The merged company has 2.6 million participants, putting it in 11th place. In the previous survey, the two companies had a combined 2.36 million participants.
Ascensus Inc., Dresher, Pa., produced big gains in assets, participants and clients for the latest P&I survey thanks primarily to its January 2013 acquisition of ExpertPlan, East Windsor, N.J., a record keeper specializing in small and micro DC plans. “ExpertPlan added 14,000 plans, 150,000 participants and $5.4 billion in assets under administration,” said Bob Guillocheau, president & CEO of Ascensus. “The rest of the growth is organic.”
Ascensus reported $50.8 billion in record-keeping assets for the latest P&I survey — up 38% from $36.8 billion in the previous survey - moving to 21st place from 25th.
The company leaped to fourth place from 12th in the number of sponsor clients with 44,235, up 61.5% from 27,302. The number of participants rose to 1.77 million, up 19.6% from 1.48 million, for an 18th place ranking. n
This article originally appeared in the March 3, 2014 print issue as, "Assets skyrocket to record $5.06 trillion".