While the value of assets for the 10 largest defined contribution plan record keepers took a hit from the falling markets, the top 10 nonetheless retained their stranglehold on the business.
For the 12 months ended March 31, the 10 largest record keepers accounted for $1.93 trillion, or 71% of assets under record keeping in Pensions & Investments' survey universe. That compares with $2.16 trillion, or 70%, just three years ago.
Growth in market share has been driven by consolidation, as last year ING Groep NV bought CitiStreet LLC, and Wells Fargo & Co. merged with Wachovia Corp.
Executives at the largest record keepers also credit much of their growth to DC plan officials increasingly looking for well-capitalized brand names in this stormy market environment.
“There's been a real flight to quality over the past year,” said Jamie Cornell, senior vice president and chief marketing officer at Prudential Financial Inc., Newark. “The biggest players in this space will continue to do well.”
Fidelity Investments, Boston, grabbed the top spot, as ranked by assets under record keeping, with $635.6 billion. TIAA-CREF, New York, ranked second at $264.8 billion, while ING U.S. Retirement Services, Hartford, Conn., finished in third place to $237 billion largely because of the CitiStreet acquisition. Hewitt Associates Inc., Lincolnshire, Ill., and Vanguard Group, Malvern, Pa., with assets of $192.2 billion and $187.5 billion, respectively, ranked fourth and fifth.
That order, with the exception of ING, is the same as in 2006, the last time P&I surveyed record keepers.
Joe Ready, director of institutional retirement and trust at Wells Fargo in Charlotte, N.C., which ranked sixth with $91 billion, said acquisitions account for roughly 30% of Wells Fargo's growth in record keeping. In addition to last year's Wachovia deal, the company last month acquired Comerica Bank's record-keeping business, which had $3.4 billion in assets as of Dec. 31. “Other providers are finding they don't have the scale to compete,” Mr. Ready said. “We're also seeing plan sponsors that are worried about whether or not their providers are going to stick around.”
Gregory Burrows, senior vice president of retirement and investor services at The Principal Financial Group, Des Moines, Iowa, which ranked 10th with $69.6 billion, sees more growth over the next year coming from snatching competitors' clients. “Many plan sponsors have put evaluating and changing plan providers on hold while they deal with other challenges,” he said, “but we're starting to see more and more requests for proposals.”