Fidelity Displaced as the Top Distributor and Mutual Fund Provider, According to 2010 Investor Study (and what it means for 401(k) plans)

That’s the title of a press release I received this week from Cogent Research, a market research and strategic consulting firm based in Cambridge, Massachusetts about the results of their 2010 Investor Brandscape™ report.

According to Cogent, Fidelity Investments has forfeited its position as both the number one distributor and mutual fund provider to key rivals Charles Schwab and Vanguard. Cogent said it is because of significant shifts in brand perceptions, household penetration, as well as changes in investor loyalty.

The Cogent report which is based on a representative survey of 4,000 affluent and high net-worth investors in the United States reveals a decline in the number of investors using 401(k) plans. In fact, for the first time ever, affluent investors now report having more dollars allocated to IRAs than to employer-sponsored retirement plans.

In an interview Meredith Lloyd Rice, an author of the report, made the following key points.

  • The proportion of investors that hold a 401(k) has gone down significantly. As of Oct. 2009, she said, only 59% of investors’ surveyed hold an employee-sponsored retirement account, down from 70% in Oct. 2008.
  • The population is also aging and those closer to retirement are rolling over their employee-sponsored retirement plans into IRAs, another reason for the decrease in participation in 401(k) plans.
  • Younger investors are more likely to start their own businesses or freelance and aren’t necessarily working in traditional full-time jobs that offer employee-sponsored retirement plans.
  • High unemployment is also cutting into contributions.

In big picture terms, the results of this report aren’t about market share or brand loyalty. Rather, It’s how the intersection of our aging population, higher unemployment, and lower 401(k) participation is impacting retirement security – or lack thereof.


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