"It's a mature marketplace," he said. Signing up a big client "basically means you have to pry that relationship away from an incumbent manager," McIsaac said in a recent interview. "You better believe the incumbent manager is going to pull out all the stops."
T. Rowe Price Group has a similar partnership arrangement with DST Systems and now counts around $7 billion in assets from 401(k) and similar plans with under $20 million, up from $5.3 billion at the end of 2012.
The increase reflects both market gains and new outreach. Kevin Collins, T. Rowe Price's head of sales for the area, said it has shifted resources to pitch more financial advisors who create the small-business plans. Many are surprised to even hear from his company, Collins said, but like McIsaac he said the smaller plans are an easier pitch.
"The providers are looking to go where the growth opportunity is," Collins said.
Signing Up For Growth
To be sure, the small-businesses plans represent paltry sums for many asset managers. Vanguard in total managed $2.55 trillion in U.S. mutual fund assets as of March 31.
A factor helping Fidelity gather small-businesses assets is that about seven year ago it allowed retirement-plan administers to offer non-Fidelity funds. Vanguard made a similar change only in 2012.
Signing up small companies can pay off for the fund administrator when a company grows. One Fidelity client has been Facebook Inc's 401(k) plan, which held $24 million in 2010 and $72 million in 2012, the year of its latest filings.
One new client of the Vanguard-Ascensus partnership is Lintons Managed Services, a Pennsylvania food services provider, with a $1.7 million 401(k) offered by with about 75 participants.
Linton's plan administrator, Maureen Modestine, said fees are about 20 percent lower than before, when the plan was run by a payroll-processing company. She credits an advisor who found the new plan, Scott Race of Simon Financial Group in Bala Cynwyd, Pennsylvania. He said many small companies pay too much.