Fidelity Investments is making inroads in the market for bundled 401(k) plans sold to small companies through banks and other intermediaries.
Its intermediary sales arm, Fidelity Investments Institutional Services Co., has gathered $1 billion of assets under administration in 200 plans since the spring of 1998, the company said.
That is when Fidelity started offering the combination of its mutual funds and a proprietary record-keeping platform through middlemen for companies with more than 100 employees.
In the first quarter of this year, Fidelity started offering the bundled service for companies with fewer than 100 employees. Since 1995, Fidelity had been offering its mutual funds with third-party record keepers.
Between the bundled and unbundled 401(k) business, Fidelity Investments Institutional Services manages or administers $3 billion of 401(k) assets, in almost 1,300 plans.
The bundled 401(k) program was launched without fanfare, but Fidelity has been signing up 30 to 70 plans a month, said Dan Geraci, executive vice president with the Boston-based company.
Boston-based Fidelity is the nation's biggest 401(k) provider. In addition to the $3 billion administered by Fidelity Investments Institutional Services, the company has $368 billion of 401(k) assets under administration through plans sold directly to large employers.
Those sales are made through Fidelity Institutional Retirement Services Co., whose record-keeping platform Fidelity Institutional Services started making available to intermediaries in the spring of 1998.
Fidelity's intermediary business has been able to boost sales by launching an educational effort in the second quarter aimed at plan members. The company has found that enrollment in 401(k) plans has increased by a third at companies that show a short video and distribute customized literature that explains 401(k) plans and their benefits.
Mr. Geraci would not specify goals for how fast the business should grow. But he did say there is plenty of potential since there are 250,000 brokers in the United States that could be selling 401(k) plans to small businesses and other clients.
Selling 401(k) plans is a "powerful hook to set in a relationship" with a small-business client, Mr. Geraci said.
There is modest potential in the small-business market, according to Spectrem Group, a San Francisco-based research company.
The firm estimates that just 13% of companies with five to 100 employees had 401(k) plans last year and expects that to grow to 15% by 2003. Thirty- six percent of companies with 100 to 500 employees had 401(k) plans last year. Spectrem projects that figure will rise to 41% by 2003.
Fidelity administers or manages $52 billion of total retirement assets through intermediaries, including 401(k) plans, individual retirement accounts, and profit-sharing plans.