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part of the defined contribution market is where the low-cost providers really have the advantage.
I think there are niches within that market that make sense for firms to target. An example would be, again, in the high-net-worth market; if you can develop bundled products that provide good service and good communication.
I think there is an opportunity, a significant business opportunity, for firms that ultimately want to receive the wealth that comes in IRA rollovers and spinouts out of defined contribution plans. Target those and develop bundled products that emphasize superior service and communication and thereby target the baby boomer retirements in the year 2010 that will retire with $2 million in their 401(k) plan.
MR. KNUPP: I think it's going to be difficult for traditional defined benefit managers to enter into the defined contribution plan market because it isn't simply an investment market. It's a market that demands along with investment products, information and educational capabilities; it demands client service capabilities, voice-recognition units; it demands in most cases record-keeping capabilities to be folded in. It's a very difficult market to enter.
If defined benefit plan managers decide they want to do this, the best way to enter that field would be to set up mutual funds or become part of an alliance or possibly work through consulting firms that have lots of business advising clients in that area.
MS. DEBATIN: If an investment management firm today hasn't either become part of an alliance or developed some kind of commingled product or mutual fund, they may be starting pretty late.
One of the problems, of course, is that the relationship the investment manager has with a corporation is in treasury, and most of the relationships on the 401(k) side are in human resources. So it isn't a given that if you have a client out there for whom you manage pension assets that you will automatically have an entre into the 401(k) assets.
I have a great concern on the DC side because I don't think that we have yet seen the tip of the iceberg on problems that may come out from litigation.
MR. SCHWARTZ: I wanted to jump on a point that June had made in terms of the 401(k) market. I agree that as we start to hit the first wave of retirees whose retirement has at least been majority funded through 401(k) plans and they find the asset levels are insufficient to sustain a given level of lifestyle, we'll start to see the litigation mount in terms of who ultimately had the responsibility for that. Although I think we know what the law would say in terms of who is ultimately responsible for that, I think it will be put to the test, and we'll see more issues arising there.
Back to the question you originally posed in terms of a defined benefit manager seeking opportunity in the defined contribution segment of the marketplace. I think it's difficult if you don't have a foothold now in the marketplace either through turn-key solution to providing those kinds of services or an alliance that you've struck in the marketplace.
P&I: Dave, your thoughts? Is it possible?
MR. EAGER: Sure. I guess if I were a DB manager with index funds I'd be in there with both feet, and I don't see that yet. To us, index funds are probably a very logical product in the DC area. I scratch my head and wonder why the providers haven't done a better job of penetrating that marketplace.
The index managers generally, I think, either haven't seen the opportunity or they haven't figured it out.
One thing we're seeing is a significant shift to the finance side for the investment decisions from the human resource side. On stable-value products, it's 8-1 finance vs. human resource in picking products. In the large market, that would move down.
In the smaller market, I'm hearing managers say "We've had a relationship for three or four years with the 401(k) plan. We've never had to go make a presentation. All of a sudden now we have to make a presentation to a committee just as we do on the DB side. We have