Exclusive: Fidelity loses pair of 401(k) clients

By Ross Kerber

BOSTON (BestGrowthStock) – Fidelity Investments has recently lost large contracts to run 401(k) retirement-savings plans for Ford Motor Co and Apple Inc (Read more about Apple stock future.), a sign of rising competition in the normally quiet sector.

A Ford spokeswoman confirmed the automaker shifted the operations of at least two of its retirement plans to Affiliated Computer Services Inc, a Texas company being bought by Xerox Corp.

In a note to employees Ford said it expects the shifts to lead to improved service and lower administrative costs.

Separately, a document sent to Apple employees shows the computer maker is moving its 401(k) plan to a unit of Charles Schwab Corp. Apple and Schwab said executives would not comment.

The Ford and Apple plans control at least $8 billion in retirement savings, according to federal filings.

Fidelity said it is doing well by other measures and has picked up some big new contracts. But the moves show how the industry that manages retirement savings is coming under increased pressure, said Tom Kmak, chief executive of Fiduciary Benchmarks, a Kansas firm working for plan sponsors.

The loss of some showcase clients won’t help morale at Fidelity, Kmak said. “When you lose one or two, people hang their heads,” he said, adding that Fidelity’s high market share could absorb the hits.

In an interview last week Fidelity President Rodger Lawson noted growing pressure on 401(k) costs. “This is becoming a bloody, brutally competitive world,” he said.

Fidelity served as “recordkeeper” for more than 33,000 plans with more than $660 billion in assets at the end of 2008, according to data from PlanSponsor magazine. That was more than double its nearest competitor.

The company has made it a priority to run company workplace plans, betting that many individual clients will open other Fidelity accounts as well.

Fidelity’s spokeswoman said it has gained other large clients recently, including a major U.S. company with more than 240,000 participants and $15 billion in plan assets, which she declined to name.

Fidelity data shows it gained share to run retirement plans like 401(k)s in 2009. The company said it served as recordkeeper for 19.5 percent of the total amount of assets these plans had under administration at the end of 2009, up from 18.3 percent at the end of 2008.

It declined to provide further details.

PlanSponsor figures also show Fidelity’s client list growing from 2006 to 2008, a period when other many other companies’ client rolls declined.

Rohail Khan, ACS managing director, said that years of financial market turmoil had made more companies reconsider their loyalties to existing plan administrators, and look for ways to trim costs.

“Clients are not willing to auto-renew their relationships,” he said.

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(Reporting by Ross Kerber, editing by Leslie Gevirtz)

Exclusive: Fidelity loses pair of 401(k) clients