Press Release
New Role Emerging for 401k Providers
New Conning & Company Study Forecasts Retirement Marketplace Issues for Insurers
HARTFORD, CT., March 7, 2002 -- In the wake of Enron, employers are looking to 401k plan providers to steer employees to appropriate investment options and clearly disclose any risks associated with these retirement plans.
Particularly in the wake of Enron's apparent demise and the loss of retirement funds suffered by many companies' employees, the need for investment advice is growing. The ability to provide sound investment advice is emerging as a top competitive advantage for insurers who provide defined contribution plans, according to a new study from Conning & Company.
The Conning study, "The Retirement Markets - The Pressures and the Promise," reports that as companies further embrace defined contribution plans, they do not want to be morally or legally responsible for employees' retirement investment decisions. This has created a competitive advantage for 401k providers who can deliver more personalized investment advice and customer service to plan participants. In an increasingly crowded and competitive environment for providing plans, such a capability could be a major advantage.
"Retirement plan debacles like the one at Enron are motivating plan sponsors--that is, the employers--to get out of the business of advising employees on where to put their retirement money," said Elvin Turner, vice president at Conning & Company and author of the study. "But at the same time, they want their employees to get a high level of service and advice. Coincidentally, the employees with the most complex issues are usually the ones with the higher balances and are highly attractive to the plan providers as well. It's a circumstance in which the provider of choice is actually the one who could nurture the most profitable segment of the employee population."
Conning suggests that while providers need to pay a great deal of attention to all participants, they are ill-advised to treat all participants the same. Conning introduces its "Participant Investment Decision-Making Process," a model that enables insurers or other providers to anticipate employees' needs and develop services to meet those needs. Insurers can segment their customer base carefully and identify high-potential participants and help them make their investment decisions.
While Enron's situation had some unique twists, Turner sees some implications for other employers. "High-profile events like Enron will further push employers to find ways to provide employees with relevant advice about the potential risks associated with their retirement plans and about ways that they can insulate themselves from those risks," summed up Turner. "Smart insurers have an opportunity now to increase their business by responding to employers' demand for more advice."
The Conning study, "The Retirement Markets - The Pressures and the Promise" is available from Conning & Company for $1,000.00 by calling toll free (888) 707-1177 or (860) 520-1521. A complete listing of all Conning Strategic Studies can also be found by visiting the company's web site at www.conning.com.
About Conning
Conning is one of the largest asset managers specializing in insurance company investments in the United States, a leading source of private equity capital to financial services companies and a nationally respected provider of research publications on the insurance industry. Conning is located at CityPlace II, 185 Asylum Street, Hartford, CT 06103.
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