The decline in plan sponsor appetite to change recordkeepers has dropped at a steady rate, not in spikes, which makes it likely that we will not see a dramatic increase any time soon. Meanwhile, many of the larger, more established recordkeepers are having record years; that means the rich keep getting richer while the rest are suffering. For this reason, picking the winners among the 40 or so larger national recordkeepers becomes even more important. Here are some things to look for:

* Participants and assets under management - More is better. Obviously these factors generate revenue that sometimes, not always, leads to profits. The number of plans is much less important and in some cases more is not better. Higher average account balances are the key factor.

* Revenue and profit - Not many recordkeepers break out or disclose this information. Even if they do, how can you trust the numbers unless they are audited?

* Growth - Is the provider growing more than the market average? Do not be fooled by increases in assets due to market growth.

* Business growth - Are they hiring or firing? Sales people are the last to go, so a decline in sales forces is not a good sign (although not necessary terrible). Ask how much the provider is spending on technology, which is important to keep up services and help reduce costs in a deflationary market.

* Pricing - If a recordkeeper's prices are much higher or lower than their competition, then there could be serious issues.

* Corporate strategy - Is the 401(k) business important to the overall corporate strategy? Asset managers like the 401(k) recordkeeping business because it flows funds, but even managers like MFS decided to sell their recordkeeping division. Schwab's focus on capturing rollovers, for example, means they are less likely to exit.

* Senior management - There are three factors to consider:

1) Experience in the industry

2) Talent level

3) Tenure - changing management every three to four years never allows a strategy to take hold.

* Wholesalers - For most advisers, the only meaningful interaction they have is with their wholesaler, who is the giraffe at the watering hole with the best perspective. If your wholesaler is good - meaning in the top quartile in sales within their organizations - and either stops aggressively selling to you or leaves the company, chances are that something is wrong.

While it is hard to predict the "when" and "who," there will be significantly fewer national recordkeepers in three years. Advisers who can steer their clients clear of the recordkeepers without a seat in this game of musical chairs will be much appreciated and will avoid the headaches of having to go through painful and time-consuming transitions.

Reach Barstein at



DOL sues accounting firm

The U.S. Labor Department has filed suit against Parnell & Co. LLC, alleging that the South Carolina accounting firm helped itself to at least $75,000 from the employee 401(k) plan.

The lawsuit was filed against the Greenville, S.C.-based firm and its owner Christopher Parnell, according to the Associated Press. The suit seeks to recover over $75,000 in lost earnings and assets.

The owner was allegedly part of an investment group that received money from the 401(k) plan along with at least $120,000 from real estate transactions, according to the Greenville News, but the 401(k) never received any money from those investments.

Parnell also allegedly made several withdrawals from the 401(k) amounting to $6,000 for "non-plan purposes and obligations." There is no longer enough money left in the 401(k) plan to make the required distributions to the plan participants.

The Labor Department wants a judge to order Parnell to repay the funds and ban him from controlling any further retirement plans. Parnell and his firm could not be reached for comment. - Michael Cohn, Accounting Today

Register or login for access to this item and much more

All Employee Benefit Adviser content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access