DC record keeper assets climb to all-time high

Defined contribution record keepers reported an all-time high of $4.45 trillion in assets, while Fidelity Investments broke the $1 trillion level, according to the latest Pensions & Investments survey.

Record-keeping assets rose 10% from $4 trillion in the previous P&I survey even though the number of participants barely budged — 84.1 million vs. 82.65 million. There were 56 firms in the latest survey compared with 54 in the previous survey.

Fidelity Investments, Boston, kept expanding its lead over the rest of the pack. The firm's $1.08 trillion in assets as of Sept. 30, represented a nearly 14% increase from nine months earlier.

In second place was TIAA-CREF, New York, which posted assets under record keeping of $350.1 billion, up 9.3% from the previous survey. Third-place Aon Hewitt, Lincolnshire, Ill., which reported its assets as of Dec. 31, 2012, had $311 billion in assets, up 1% from the year-end 2011 survey.

The top three firms held the same rankings as in the previous survey. After them, however, there were multiple changes:

• Vanguard Group Inc., Malvern, Pa., moved to fourth from fifth, trading places with ING U.S. Retirement Services, Windsor, Conn.;


• Great-West Retirement Services, Greenwood Village, Colo., climbed to sixth place from seventh, swapping places with Wells Fargo Institutional Retirement and Trust, Minneapolis;


• T. Rowe Price Group Inc., Baltimore, advanced to ninth place from 10th, as Bank of America Merrill Lynch, New York, dropped a notch;


• Prudential Retirement, Hartford, Conn., slipped to 13th place, as Schwab Retirement Plan Services Inc., San Francisco, moved up one slot to 12th; and


• Xerox, Dallas, rose to 14th place, switching places with No. 15 Nationwide Financial Services Inc., Columbus, Ohio.

All of the top 15 firms posted asset gains.

The record-keeping industry's two biggest changes — one acquisition and one merger — weren't counted in the latest survey because P&I used a Sept. 30 cutoff instead of the Dec. 31 date of the previous survey.

At year-end, Massachusetts Mutual Life Insurance Co., Springfield, Mass., closed its acquisition of the record-keeping business of Hartford Financial Services Group, Hartford, Conn.

In the latest P&I survey, MassMutual ranked 21st in record-keeping assets with $50.7 billion; Hartford Financial placed 20th with $56.2 billion. The combined assets would have been good for 12th place.

In participant rankings, Hartford Financial had 1.48 million participants, good for 19th place. MassMutual ranked 23rd, with 1.26 million participants. Together, they would have ranked 10th.

Another big consolidation involved Diversified and Transamerica Retirement Services, both owned by the Dutch financial services giant Aegon NV. They were combined under the new name Transamerica Retirement Solutions effective Jan. 1, 2013, based at the Diversified headquarters in Harrison, N.Y.

In P&I's survey, Diversified placed 18th in assets with $61 billion, while Trans-america ranked 32nd with $18.7 billion. Together, they would have placed 17th.

Diversified served 1.7 million participants, ranking 16th, while Transamerica's clients has 658,234 participants, ranking 29th. Together, they would be in 12th place.

Fidelity remained the runaway leader in the number of participants with 15.82 million, up 3.9% from the previous survey. Aon Hewitt rose to second from third with 5.43 million, while ING slipped to third with 5.13 million, and Great-West remained in fourth place with 4.58 million and TIAA-CREF held onto fifth, with 3.92 million.

Fidelity's surge past the $1 trillion mark was a mixture of market gains, organic growth, more contributions from existing participants and new clients, said Donna Norwood, senior vice president for defined contribution products.

The gains were “pretty much across the board” for different plan sizes, said Ms. Norwood, adding that Fidelity is seeing opportunities in the tax-exempt plan marketplace as sponsors seek to consolidate record keepers.

In addition to market gains, a big source of asset growth for second-place TIAA-CREF was the continuing consolidation of record keepers by 403(b), 401(a) and 457(b) plans, said David Ray, the Dallas-based vice president for national sales.

“The vast majority of our clients prefer a sole record keeper,” said Mr. Ray, adding 80% of the searches that TIAA-CREF saw last year involved plans seeking single record keepers.

Internal Revenue Service regulations, most of which took effect in 2009, require greater fiduciary responsibilities for 403(b) plans and government retirement plans. Plan executives have responded by consolidating record keepers and investment options to ease compliance with those rules. Consolidation of record keepers will be the biggest source of growth this year, Mr. Ray predicted.

Aon Hewitt, which ranked third in assets, had the distinction of having the highest average assets per sponsor — $1.19 billion — because the company concentrates on the largest DC plans. But it is also trying to build a presence in the asset market starting in the $100 million to $200 million range up to $750 million, said Alison Borland, vice president for retirement research.

Although Ms. Borland announced Aon Hewitt's intention last year, she said this year that Aon Hewitt is “starting slowly but continues to ramp up.” The largest plans still remain the firm's biggest focus, she said.

Vanguard Group's $302.4 billion in assets, up 10.6% from the previous survey, was aided by a strategic push into smaller DC markets — plans with up to $20 million in assets — that started in late 2011, explained Chris McIsaac, managing director and head of the institutional investment group. Vanguard added “nearly $1 billion” in assets and 27,000 participants in this market, he said.

Mr. McIsaac said the company's sales effort also was helped by a decision in May 2012 to remove requirements that sponsors hiring Vanguard as record keeper also use Vanguard target-date funds, index funds, money market funds and balanced funds if such options were part of the investment lineup. “We realized those demands were out of place with the marketplace,” he said.

Although he didn't quantify the impact, Mr. McIsaac said the policy led to more sales and more discussions with potential clients as well as participating in more searches by sponsors.

ING U.S. Retirement posted a 5.2% asset gain to $300.6 billion, even though the number of sponsors declined by 3% to 47,988 and the number of participants slipped by 2.8% to 5.13 million.

Assets rose thanks to market gains as well as “double-digit inflows” from existing plans and from attracting new clients, said Maliz Beams, CEO of ING U.S. Retirement. She didn't elaborate.

Mergers and acquisition activity among corporate clients and record-keeper consolidation among government clients contributed to the drop in sponsors and participants, she said. “We are across all industries,” said Ms. Beams, adding she expects mergers, acquisitions and consolidations to continue for the next three or four years.

Ms. Beams said a key source of growth will be ING's effort to provide clients with strategies for retirement readiness — helping participants make sure they don't outlive their savings. “Our focus is on value, not volume,” she said.

Great-West Retirement's sixth place ranking in assets at $173.4 billion — up 15.1% from the previous survey — was aided by market appreciation and a record gain in new 401(k) business, up 14% from 2011, said President Charles Nelson. The best gains last year were among plans with $50 million or less in assets, he said.

Mr. Nelson said he is counting on his firm's approach to retirement readiness to attract new business and keep existing clients. “In the marketplace, the biggest single point is retirement readiness,” he said. “How employees can be on track to retire.”