One example of coaxing participants to save more comes from Vanguard Group.
By the end of last year, 59% of Vanguard’s record-kept plans adopted auto enrollment vs. 34% in 2013, Amber Brestowski, head of institutional advice and client experience, said in an email.
Among those plans, 60% defaulted employees at a deferral rate of 4% or higher. “Ten years ago, only 35% defaulted employees into the plan at a rate of 4% or higher,” she said.
Vanguard was the fifth-largest record keeper in the P&I survey with $719.3 billion assets under administration, up 26.3%.
Last year, “account balances increased by 19%, and 43% of participants increased their savings, an all-time high since we began tracking this metric,” Brestowski said. “Even despite market volatility, only 5% of non-advised participants traded, a record low.”
Vanguard achieved its AUA growth even though the number of participants in its record-kept plans remained flat: 5.73 million as of Dec. 31 vs. 5.74 million as of Sept. 30, 2022. Brestowski didn’t comment.
Small plans to fuel growth
Smaller plans will play a bigger role in record keepers’ efforts to grow.
Research published last year by Cerulli Associates and the SPARK Institute found that 30% of DC record keepers serve as pooled plan providers and 25% serve as record keepers but not in a fiduciary role. “That’s pretty large,” said Elizabeth Chiffer, a retirement analyst for Cerulli, whose survey covered 20 record keepers, including nine of the 10 largest.
PEPs can be big business. For example, Ascensus reported in September that its offering crossed the $1 billion AUA level, having registered in 2021 as a pooled plan provider.
The Cerulli-SPARK survey also reported that 80% of the respondents were pursuing startup plans such as 401(k) plans for employers not currently offering a retirement plan but excluding state-sponsored retirement plans.
Over the years, MEPs, PEPs and other groups of plans have grown, reaching nearly $90 billion in assets as of June 30, 2023 for Voya Financial, said Douglas Murray, senior vice president and head of wealth solutions, distribution and client engagement. Voya acts as a record keeper, not as a pooled plan provider. “We expect growth in 2024,” he said.
Voya operates in a variety of retirement market sizes and structures — government plans and corporate plans — “which gives us diversification,” Murray said.
Voya enjoyed an overall 98% client retention rate last year, and growth was organic. Murray said the company has been making a concerted effort to expand its middle-market business — plans with $50 million to $250 million in assets.
Voya’s managed account business grew by 28% last year and Murray predicted this will be a big growth area. Voya even created a team to educate participants about managed accounts.
In the latest P&I survey, Voya placed sixth in AUA with $519.7 million, up 20.4% from the previous survey. It ranked fifth in participants with 6.95 million, up 5.8%. It had the sixth-largest number of sponsors — 54,093 — up 2.6%.
Charles Schwab was another record keeper that scored a trifecta in the latest survey. AUA of $262.3 billion grew by 30.7%, good for a ninth-place ranking. The number of participants in Schwab record-kept plans reached 1.65 million, up 9.2%, while placing 15th. Sponsors grew by 6.4% to 1,225, placing 23rd.
Schwab benefited from market gains but also by mergers and acquisitions and by adding new clients. Schwab didn’t buy record keepers, but its existing clients bought other employers, explained Traci Stahl, chief operating officer, Schwab Workplace Financial Services. Schwab DC clients completed approximately 200 mergers and acquisitions of other employers and their plans last year, she said.
“Our clients want more engagement,” said Stahl, noted that Schwab has redesigned a website that provides financial information, offers additional student-loan support and conducts more educational webcasts.
Fidelity Investments, the industry leader in AUA and in the number of participants, also posted gains among the three survey categories. AUA rose 28.9% to $3.43 trillion. The number of participants rose 6.1% to 31.75 million. The number of DC clients grew 2.3% to 31,259 plans, placing eighth.
“Improved market conditions certainly have an impact,” Wilson Owens, Fidelity’s senior vice president for strategy, planning and personalized planning and advice, said in an email.
“Additionally, we have engaged with a number of new clients over this time period — including one very large plan sponsor — bringing many new participants and their assets to Fidelity," wrote Owens, who didn’t provide details. Fidelity focused on expanding its presence in healthcare and higher education markets last year, Owens said.
Owens said Fidelity’s growth is built on providing more than retirement services. Clients “can opt into much more than defined contribution plans,” Owens said. “From stock plan services, health savings accounts and student debt solutions, plan sponsors find they are able to offer a robust financial benefits package to employees by partnering with Fidelity.”
