The eVolution of 401 (k) Plans-Opportunities and Challenges

October 9, 2001

Abstract

Boston, MA, USA October 9, 2001

The eVolution of 401(k) Plans – Opportunities and Challenges

The e-transformation of 401(k) plans will unlock $1.2 trillion in assets from the small plan market and improve rollover retention rates translating into a $196 billion opportunity.

In a new report “The eVolution of 401(k) Plans,” Celent Communications traces the evolution of the 401(k) marketplace and analyzes the impact the Internet is having on plan providers, sponsors, and participants. From detailing the “must-have” features for today’s e401(k) offerings, to profiling the strategies of six leading e401(k) providers, this report analyzes the trends and strategic implications facing401(k) plan providers.  

Today’s winning e401(k) platforms offer 1) wide investment choice; 2) automated recordkeeping and administration; 3) easy-to use, feature-rich sponsor and participant web sites; and, 4) multiple front-end connections. To meet these demands, Celent expects the top 401(k) providers to build out these capabilities in an integrated approach, while smaller players will look to forge partnerships in order to offer a competitive product.

The small plan market will be the most affected by the advent of e401(k) plans. The plans are easy to administer, cost-effective and provide investment options that make them attractive to the small business owner. In turn, Internet technology allows the e401(k) providers to service the market segment more profitably. “Within the under 100-employee segment, small plan market penetration will climb from 20% to 40% by 2003,” says Pamela Brewster, Celent analyst and author of the report. The addition of new plans as well as plan conversions to the new e401(k) platforms will allow providers to tap into $1.2 trillion in potential assets.

Celent also predicts that 401(k) plans will become conduits to build lifetime relationships with participants and convert those into cross-sell opportunities into IRAs, brokerage accounts, insurance, and more. Educational tools, online advice, automatic rollovers and personalized communication, among other features, will arm providers with the means to build lifetime relationships. One expected benefit from these changes will be an increase in rollover retention rates. At current average rates of 20%, Celent states an estimated $196 billion in revenues is being forfeited.The features embedded in the new e401(k)s should boost these rates.

A Table of Contents is available online.

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Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned operating unit of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
mpace@celent.com
Tel: +1 212 345 1366

Europe (London)
Chris Williams
cwilliams@celent.com
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
ynagaoka@celent.com
Tel.: +81 3 3500 3023

Table of Contents

 

Boston, MA, USA October 9, 2001

  

Return to Abstract

 

EXECUTIVE SUMMARY 3
BACKGROUND 4
THE IMPACT OF THE INTERNET 8

 

Say Good-Bye to Paper-Based Systems

8

 

Function Over Form

9

 

More Options, More Outlets

10

 

Educating the Masses

10

 

401 (K) Plans Must be Sold

11

 

Cracking the Small-Plan Market

12

 

Platform Considerations

14

E401 (K) PROVIDER PROFILES 15
  Emplanet 16
  Expertplan 17
  Gold K 18
  CitiStreet 20
  Fidelity 21
  First Union 23
E401 (K) PROVIDER COMPARISONS 24
FUTURE TRENDS 31
STRATEGIC IMPLICATIONS 36
        

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