A growing number of companies are hiring mutual funds to replace banks and financial planning firms as 401(k) providers, according to Brightwork Partners. The Stamford, Conn.-based research/consulting firm found that within the past two years, nearly 400 401(k) sponsors with more than $1 million in plan assets made the switch, boosting mutual funds’ share of the market from 23% in 2004 to 26% today. In contrast, banks’ share fell from 19% to 14%, and financial planners dipped from 6% to 4%. Meryl Baker, a principal at Brightwork, told Dow Jones Newswires that companies choose mutual funds because “they are increasingly focused on the customer service dimension, and because of the decline of the requirement to hold [their] proprietary funds in the plan.” About 55% of plan sponsors say they switched to get better investment advice for their clients.
