Fidelity Investments says it plans to expand distribution of its 401(k) services through better penetration with advisers at banks.
"Banks are a natural fit for advisers to cross-sell 401(k) because they have corporate relationships with those clients already," said Dave Liebrock, an executive vice president at Fidelity's Advisor 401(k) Platform. "We want to develop our presence in banks through both bank trust and the bank's broker-dealer marketplace."
Fidelity sells 401(k) products and services through 40,000 intermediaries, including banks. Since it launched the Advisor 401(k) Platform in 1998, it has amassed 2,100 plans, with 352,000 participants and $12.6 billion of assets under management. Of the 2,100 plans, 233 are served by bank advisers, according to a Fidelity spokesman.
The unit of the Boston fund company has added 30% a year to its plan total, Mr. Liebrock said, and a lot of "upside potential" remains.
"I think that advisers are looking at the 401(k) marketplace as a potential to diversify their book and to cross-sell 401(k) plans to other financial services," he said. "I think the marketplace is growing. The turnover in the marketplace is growing, and there is tremendous opportunity for advisers."
Each year, more than 26,000 401(k) plan sponsors, with more than $800 billion of assets, seek a new provider, Mr. Liebrock said. Fidelity Advisor 401(k), which is a suite of services for employer-sponsored plans offered through advisers to small and midsize companies, has a 97% retention rate, he said.
Mr. Liebrock said he believes Fidelity has retained customers because of its scale, range of services, and customer service. He said banks are ripe for cross-selling.
"I think the bank channel has changed," he said. "In the past, banks predominantly sold only proprietary products. Now the bank channel is selling more than just its own products. Fidelity is a great fit for those banks because of our brand and our service model."
Fidelity reported in August that average participant balances in its 401(k) plans were at their highest since 1999 and that plan participation rates had stabilized after a few years of slight declines. It didn't specify what the numbers were, however.
Data from the sixth edition of "Building Futures," an analysis of nearly 8.6 million participants in the 10,800 corporate defined contribution plans served by Fidelity at the end of 2004, showed a 10% increase in average 401(k) account balances, to $61,000, from $55,000 the year before, the company said.
Analysts said Fidelity can succeed in the bank channel because of the wide array of products it can immediately offer banks with an open architecture product mix.
"Banks like to work with brands that their customers can easily recognize; name recognition is important," said Burton Greenwald, an analyst at BJ Greenwald Associates in Philadelphia. "When you put Fidelity's products next to your proprietary products in a menu of options, it gives your products a certain degree of validity. Fidelity can fill all the blanks that a small or midsize bank can't fill."
Mr. Liebrock said that, ultimately, banks are no longer concerned with just providing their own products to customers.
"My take is, from the bank's perspective, having the relationship is the most important thing," he said. "It is not just about selling products. Banks want the relationship. They are better off offering more nonproprietary products than if someone comes in and offers more products and dislodges the relationship."
Fidelity said this month that it had enhanced its Advisor 401(k) Platform to include a Web-based sales automation program, an online retirement planning tool, and a program to facilitate fee-based servicing.
The enhancement, Fidelity PlanSponsor Link, lets advisers work with Fidelity to customize a Web site for each prospect. The site, which includes contact information for the adviser and content specific to the prospect's key plan needs, helps advisers streamline the transition to Fidelity by enabling key documents to be posted online.
Fidelity Advisor 401(k) also introduced a service program designed to help advisers who offer their plan-sponsor clients negotiated pricing that does not include asset-based fees. The new program offers advisers access to 140 funds from nine families.
