4/6/2011 2:21 PM ET|
Big banks go after 401k trillions
On the prowl to replace lost income, banks are seeking a bigger slice of the growing, $2.9 trillion 401k pie.
Bank of America (BAC, news), JPMorgan Chase (JPM, news) and Wells Fargo (WFC, news) 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 401k savings plans.
JPMorgan almost doubled its sales force dedicated to selling retirement-plan services to employers in 2010, says Michael Falcon, whose job as head of retirement in the U.S. and Canada for the bank's asset management unit was created in January. "It's one of the top priorities" at JPMorgan, he says.
Americans held $2.9 trillion in 401k plans as of September, and the total may reach $4 trillion by 2015, according to Cerulli Associates, a Boston 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 401k administrators: Fidelity, Aon Hewitt and Vanguard, which together had 43% of the market at the end of 2009, compared with a combined share of less than 10% for Bank of America, JPMorgan and Wells Fargo, according to Cerulli.
The most expensive plan administrators charge fees equal to more than 6% of the amount of money in employee accounts annually, while the lowest-cost providers charge less than 0.1%, says Ryan Alfred, co-founder of BrightScope, a San Diego company that rates 401k plans.
Employers seek cost savings
In most cases, the money comes out of employees' assets, but some companies shoulder part or all of the fees. Bank of America, JPMorgan and Wells Fargo would not disclose the average fees for plans they serve. Michael Kozemchak, the managing director of Institutional Investment Consulting, says the employers he works with that sought bids on their 401k's in the last year were able to realize average cost savings of 31%.
Hallmark Cards switched its plan to JPMorgan last year to reduce costs and improve services for employees, says Tresia Franklin, the head of benefits and compensation for the Kansas City, Mo., company.
JPMorgan had the best pricing for the services Hallmark wanted, she says. Franklin declined to disclose how much Hallmark pays the bank in fees or to quantify its savings. The plan had been administered by Aon Hewitt, the consulting and human-resources outsourcing company, which declined to comment on the change or its fees.
New ways to make money
Banks are searching for new ways to make money as losses on mortgages and increased regulation of fees have curbed their revenue sources, says Terry Moore, the managing director of the North America banking practice for consulting company Accenture.
"We've been upping the ante on retirement," says Andy Sieg, the head of retirement services for Bank of America Merrill Lynch. The bank has beefed up its retirement services staff with executives brought over from Fidelity and other rivals, including Rich Linton, who had overseen Fidelity's adviser retirement group and now has a similar role with Bank of America.
Wells Fargo has added features that allow employers to more closely track their employees' saving and investing, says Laurie Nordquist, a director of institutional retirement and trust for the bank. In 2010, Wells Fargo added $6.2 billion to the defined-contribution assets it administers. Bank 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.
401k leader 'comfortable' with competition
Fidelity, which dominates the industry, is "very comfortable" with the increased competition, says James MacDonald, the head of workplace investing for the mutual-fund company.
Fidelity administered 27% of all assets in 401k plans as of 2009, or three times more than Aon Hewitt, its closest competitor. Fidelity's client retention rate is 97%, and it runs the plans of General Electric (GE, news) and IBM (IBM, news), among others, according to BrightScope.
Bank of America's Sieg says his company will be able to claim market share by winning the plans of corporate customers of its banking business.
"We have access to more client companies than any other firm in the marketplace," he says. "We're just beginning to scratch the surface of that opportunity."
This article was reported by Margaret Collins and Elizabeth Ody for Bloomberg Businessweek.
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STOP! these monster banks have enough money! They need to stop being so DAMN GREEDY and let the people grow their savings for the future. These banks use OUR money every day and collect a minimum of 9% for things like credit cards, 5-6% On loans, never mind the ridiculous ATM fees. Even though that is all computerized with wire transfers. We are our own tellers. What do we get in return for the use of our hard earned money?? .03% interest, if that!!!!!!!
Let's just have our paychecks divvied-up and sent directly to the banks and the oil execs. After all, they need it more than we do, don't they? That's what they want us believe.
By the way, I can say all of this without being a Hippocrate. I don't use banks for these exact reasons.
They get your money under their control; they know your positions; they learn your investing and trading patterns. Then their proprietary trading groups and captive hedge funds take over, ransacking your investments in the markets and taking every nickel of profits you ever hoped to make. That’s exactly what has happened to the small investor over the last ten years.
Consider this: of the tens of thousands of retail investment products offered in the financial markets, not one even guarantees the purchasing power of your investment after inflation and taxes. That’s pathetic, particularly when you consider these big banks have the power to make anything happen in the markets that they want. And they wonder why so few people save. When they show me they care enough about me to develop and offer an investment product like this, then maybe we’ll talk.
Bank of America administering 401ks? hmmm until they merged with Merril Lynch their employee 401k plan was run by fidelity. Actually as late as 2009 Fidelity was their Contract administrator and Trustee.
So they want you to trust them with your company's 401k plan but they trust Fidelity for theirs.
Does the blatant greed and the unabashed avarice of these SOB banks ever end? They have thousands of slick stripe-suited gurus sitting behind mahogany desks all day long trying to scheme honest people out of their money at every turn.Thieves and blowhards like CEO Jamie Dimon at Morgan Chase are at the top of the food chain, $ 45 M / year ($750,000 per week), because they have perfected the art of separating hard working people from their money ... pure and simple. It's a godamn disgrace that these bastards are allowed to practice their dark arts with such impunity.Some day these crooks will get their turn in the barrel and they will see how it feels.... in spades.
Peace to all
Wells Fargo has added features that allow employers to more closely track their employees' saving and investing,Exactly what do they think gives them the right to let employers spy on what any individual is investing in in their private 401k plan? Most business' bailed out on "traditional" pension plans where they were in control of the "employees" retirement money when the "restructured" (Filed for bankruptcy).
Why do you hold the banks harmless in the equation? They wrote the bad loans! They were the 'experts'! They knew the loans would go bad - that's why they bundled them up, lied about the quality of the loans, and sold them. What responsibility did they take? None...they got bailed out. Now - if the experts get it wrong why should you expect the general population (non-experts) to get it right? You call the people who took out the loans ignorant...What do you call the bankers who wrote the loans knowing they would go bad?
$2.9 trillion in 401k plans - feel another harvest coming soon.
Or did you really think this money will stay around for your old age?
Easy to explain why Financial Institutions like JP Morgan, Wells Fargo and other members of the bankster mafia family are spending millions in stopping implementation of rules under Frank/ Dodd and vehemently oppose consumer protection legislation intended to prevent them from squandering and stealing billions by investing in hedge funds and derivatives. Who in their right mind wants to allow JP Morgan, who lost 2 billion dollars since the end of the first quarter (March), to handle their 401K savings.
That's right, lets keep letting the free unregulated financial markets continue to rob the wealth of our nation. If you do not like Frand/Dodd, then reinstate the Glass-Steagal that worked and protected the public well between 1933 and 1999 when it was repealed. The net effect of failing to regulate and, more importantly, failing to enforce and put these banksters in jail is what caused the financial meltdown of our economy.
By the way, for the popular position of blaming the banks for the mortgage problems, you guys do realize it took millions of willing Americans to sign-up right? A bank could tell me I can afford $400,000 that doesn't mean I am dumb enough to go out and buy a house that expensive. A bank could offer me an ARM that I couldn't afford if the interest rates actually went up like the contract says they might but that doesn't mean I am dumb enough to sign-up for it. I've got an ARM on a rental and I had it on an old house but I calculated the difference between the ARM and the fixed rate and I know my break-even point assuming worst case scenario and I also know I can still afford the payments given the worst case scenario.
I'm tired of ignorant Americans blaming the government and big businesses for problems that are a direct result of their ignorance. I'm also tired of the government protecting ignorant people from themselves. That isn't the Federal governments job. Pull your head out of your back side, get an education, and do your own work. Don't depend on everyone to look out for you and keep you all safe and sound. Don't be ignorant and blame others. Take some responsibility for yourself and your actions. The excuses are pathetic.
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