Wells Fargo Hopes To Bag Wal-Mart’s $15.6B Retirement Plan Over BofA

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Wal-Mart (NYSE:WMT) is reportedly inviting bids from the country’s biggest wealth managers to run its 401(k) program which has $15.6 billion in assets currently handled by Bank of America-Merrill Lynch (NYSE:BAC). [1] Bank of America has been looking after the lucrative account for 15 years now and may very well retain it, although Wells Fargo (NYSE:WFC) is being named a strong contender for the job. Wal-Mart is seeking bids mainly to see if it can lower the costs associated with the retirement plan which holds investments from 1.2 million of its employees.

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The importance of Wal-Mart’s 401(k) program for employees to wealth management giants is clear from the very size of the assets concerned. The size more than makes up for the fact that the average contribution per employee of $15,000 does not give managers much room to demand a high fee amount. In comparison, an average retirement plan saw 10,000 employees contributing roughly $63,000 at the end of 2011. [1]

The fact that Wal-Mart is shopping for a new manager comes as an opportunity for Wells Fargo to capitalize on its experience in managing similar plans for other retail giants like Lowe’s (NYSE:LOW). Wells Fargo has been aggressively expanding its business beyond the traditional loans-and-deposits offerings, and the wealth management business figures high on the bank’s priority list. Being able to enlist Wal-Mart as a customer would do wonders for Wells Fargo’s image in the industry – especially given it would have beaten Bank of America-Merrill Lynch to the punch in the process. And not to mention that it will boost its IRA fees (shown in the chart above) going forward.

But then, Bank of America will also not let go of the business so easily. After all, Wal-Mart’s $15.6 billion in assets form an important, albeit small part of more than $2.1 trillion in assets of its wealth management arm.

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Notes:
  1. Banks vie to run Wal-Mart’s coveted $15 billion retirement plan, Reuters, Jun 20 2013 [] []
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