Big Banks Competing for
By Margaret Collins, San Francisco Chronicle
April 4, 2011
Bank of America,
JPMorgan Chase and Wells Fargo are adding staff, creating easier-to-use
technology and competing on fees in an effort to win a bigger share of the
trillions of dollars in 401(k) savings plans.
doubled its sales force dedicated to selling retirement plan services to
employers in 2010, according to Michael Falcon, whose job as head of
retirement in the
for the bank's asset management unit was created in January.
$2.9 trillion in 401(k) plans as of September, and the total may reach $4
trillion by 2015, according to Cerulli Associates, a
research firm. Increased competition from banks may lead to lower costs
and more choices for employers and savers, says Laura Pavlenko Lutton, an
editorial director in the mutual fund research group at Morningstar. And
it may mean less revenue for the top three 401(k) administrators:
Fidelity, Aon Hewitt and Vanguard, which together had 43 percent of the
market at the end of 2009, compared with a combined share of less than 10
percent for Bank of America, JPMorgan and Wells Fargo, according to
expensive plan administrators charge fees equal to more than 6 percent of
the amount of money in employee accounts annually, while the lowest-cost
providers charge less than one-tenth of 1 percent, says Ryan Alfred,
co-founder of BrightScope, a
firm that rates 401(k) plans. In most cases, the money comes out of
employees' assets, but some companies shoulder a portion or all of the
fees. Bank of America, JPMorgan and Wells Fargo would not disclose the
average fees for plans they serve.
managing director of Institutional Investment Consulting, says the
employers he works with that sought bids on their 401(k)s in the last year
were able to realize average cost savings of 31 percent.
switched its plan to JPMorgan last year to reduce costs and improve
services for employees, says Tresia Franklin, head of benefits and
compensation for the
, company. JPMorgan had the best pricing for the services Hallmark wanted,
she says, while declining to disclose specific numbers. The plan had been
administered by Aon Hewitt, the consulting and human resources outsourcing
firm, which declined to comment on the change or its fees.
searching for new ways to make money as losses on mortgages and increased
regulation of fees have curbed their revenue sources, says Terry Moore,
managing director of the
banking practice for consulting firm Accenture.
Wells Fargo has
added features that allow employers to more closely track their employees'
saving and investing, says Laurie Nordquist, director of institutional
retirement and trust for the bank. In 2010, Wells Fargo added $6.2 billion
to the defined-contribution assets it administers.
of America gathered an additional $14.5 billion, and JPMorgan Chase added
$10 billion in 2010. The total market grew by about $125 billion in the
first nine months of last year.
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