Companies Adding New Providers, Dropping Fund Families and Dropping Tainted
Funds
DURHAM, N.C. and FLORHAM PARK, N.J., Jan. 20 /PRNewswire/ -- Forty-seven
percent of corporate Chief Financial Officers recently surveyed say that the
401(k) plan at their company includes funds that have been tainted by the
recent mutual fund scandal. Among those companies affected by tainted funds,
three-quarters already have made or may make changes in their plans in
response to the scandal: 38% have already made changes, 8% have plans to make
changes, and another 31% are considering changes.
Across all companies, including those that have not been affected by
tainted funds, half are at least considering changes: 21% have already made
changes, 6% are planning to make changes, and 23% are considering changes.
These are findings from a special survey of 307 CFOs conducted by
Financial Executives International (FEI) and Duke University's Fuqua School of
Business to explore 401(k) plan changes resulting from the mutual fund
scandal.
Among those companies that have already made changes to their plans, 65%
of the changes occurred in the fourth quarter of 2003 and 35% have occurred in
2004. Among those planning on making changes, 80% will occur some time during
the first quarter of 2004.
What Types of Changes?
The most common 401(k) plan change is to add new providers to the fund
lineup. However, among the firms that have already made changes, almost half
(47%) have eliminated all the funds from a tainted fund family. Another
one-quarter have selectively eliminated the tainted funds, but not the entire
family of funds.
The following table summarizes the most common changes that companies are
making to their 401(k) plans in response to the ongoing mutual fund scandal.
The responses are listed separately for companies that have already made
changes, those that are planning to make changes, and those that are
considering changes. (Multiple responses were permitted, so the percentages
do not add to 100%.)
Companies that Companies that Companies that
already made plan to are considering
changes make changes changes
Eliminate all funds
from tainted family 47% 41% 31%
Selectively eliminate
tainted funds but not
entire family 25% 24% 32%
Add new providers 52% 77% 49%
"The 401(k) landscape is shifting beneath our feet," said Colleen Sayther,
President and CEO of FEI, "and the ramifications for retirement plan investors
and providers are profound. Clearly, a reputation untarnished by allegations
of improper trading will give mutual fund companies a leg up in the
competitive 401(k) marketplace. Companies are making changes to their 401(k)
plans when they're uncomfortable with a fund family's reputation."
Why are Companies Changing Their 401(k) plans?
Most of the plan sponsors making changes to their 401(k) plans are doing
so because they are concerned about legal or fiduciary consequence if they do
not make the changes. About half simply prefer not to deal with an investment
provider they find untrustworthy. Only 15% of the companies considering
changes are doing so because of pressure from their employees. Fund
performance is a reason for change among about a third of companies that have
already made changes to their 401(k) plans.
See table below for the most frequent reasons companies list for changing
their 401(k) plans in response to the mutual fund scandal. (Multiple
responses were permitted, so the percentages do not add to 100%.)
Companies that Companies that Companies that
already made plan to are considering
changes make changes changes
Legal or fiduciary
concerns 60% 77% 72%
Uncomfortable dealing
with tainted funds 57% 59% 47%
Poor fund performance 33% 29% 25%
Why Are Some Companies Not Changing Their 401(k) plans?
Across all companies surveyed, half say that they have no plans to change
their 401(k) investment options. Even among firms that have been affected by
tainted funds, 23% say that they have no plans to alter their 401(k).
Sixty two percent of the companies that are not changing their 401(k)s
answered that they have had a satisfactory relationship with their fund
provider. Fifty-two percent say that their employees appear satisfied with
the current investment options and have not requested any change. Finally,
37% responded that their employees have ample opportunities and can opt on
their own to avoid tainted funds. (Multiple responses were permitted, so the
percentages do not add to 100%.)
About the Survey
This special survey, conducted by Financial Executives International and
Duke University's Fuqua School of Business, interviewed 307 CFOs of U.S.
companies electronically the second week of January. CFOs from both public
and private companies and from a broad range of industries, geographic areas
and revenues are represented. Among the industries represented are
retail/wholesale, mining/construction, manufacturing, transportation/energy,
communications/media, technology, and banking/finance/insurance.
To gauge the country's economic outlook from the perspective of corporate
CFOs, FEI and Fuqua have conducted the "CFO Outlook Survey" quarterly for the
past seven years. Detailed results of the most recent "CFO Outlook" are
available at http://www.cfosurvey.org.
Survey data tabulation is done in cooperation with StatPac Inc.,
http://www.statpac.com.
Financial Executives International (FEI) is the leading advocate for the
views of corporate financial management. Its 15,000 members hold
policy-making positions as chief financial officers, treasurers, and
controllers. FEI enhances member professional development through peer
networking, career planning services, conferences, publications, and special
reports and research. Members participate in the activities of 86 chapters,
75 of which are in the United States and 11 in Canada. For more information
about FEI, visit http://www.fei.org.
The Fuqua School of Business at Duke University was founded in 1970.
Fuqua's mission is to educate thoughtful business leaders worldwide and to
promote the advancement of business management through research. For more
information, visit http://www.fuqua.duke.edu.
Contact:
Abby Katzen Chris Allen Jim Gray
TowersGroup FEI Duke-Fuqua
212.354.5020 973.765.1058 919.660.2935
abbykatzen@towerspr.com callen@fei.org jigray@mail.duke.edu
SOURCE Financial Executives International; Fuqua School of
Business at Duke
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Related links:
http://www.fei.org
http://www.cfosurvey.org http://www.fuqua.duke.edu
Company News On-Call:
http://www.prnewswire.com/comp/310650.html
CONTACT:
Abby Katzen of TowersGroup, +1-212-354-5020,
abbykatzen@towerspr.com, for Financial Executives International;
Chris Allen of FEI, +1-973-765-1058, callen@fei.org; Jim Gray of
Duke-Fuqua, +1-919-660-2935, jigray@mail.duke.edu
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