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Stable Value Managers Advised to Look at Wholesaling to Crack Small Plan Market

Stable value managers face a challenge in trying to capture a bigger share of the market for small retirement plans. Unlike large plans, which often look to the entire universe of money managers to choose their investment options, and sometimes choose them directly, small plans typically rely on a broker to find a plan provider and then choose their investment options from those offered by that provider. In many cases, the resulting investment lineup will consist primarily of funds proprietary to that provider.

"If you visit one of these small-plan companies, you might find a CEO, his brother the CFO, a couple of people who are close to them, and 30 other people running around the shop floor," said Brian Haendiges, head of the institutional business group at financial services firm ING, speaking at a breakfast roundtable during the SVIA Forum. "These are people busy doing the work that's their business." While they are interested in maximizing their own retirement savings, he said, they have little time to discuss the details of different types of investing options, particularly those as nuanced as stable value funds.

That being the case, Haendiges said stable value managers looking to gain market share among small plans may want to focus their efforts on selling on a wholesale basis to the providers who service that segment of the market. Among the financial services firms that do big business with small plans are insurers ING, John Hancock, Hartford and Principal, as well as mutual fund companies American Funds and Fidelity Investments. ING services approximately 20,000 plans with as few as 10 and as many as 2,500 participants, and assets ranging from $200,000 to $50 million. Its typical client, Haendiges said, has 25 to 250 participants and $500,000 to $5 million in plan assets.

Haendiges warned that most plan providers servicing the small-plan market already have a proprietary stable value product or provide one through an alliance with another stable value manager. Where supplanting the proprietary or alliance fund is unlikely, he said, outsiders trying to break in might want to pitch themselves as a supplementary stable value manager who could add diversity to the provider's proprietary product. Breaking into the small plan market through brokers could be tougher still, he said, but suggested that any manager trying to do so would probably want to focus on the larger brokers, on the chance they might be more readily able to find a home with their clients for non-proprietary investment products.

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