Even as more money is going into TDFs in DC plans and index funds overall, financial advisors are also looking to work with fewer mutual fund providers. According to research by Market Strategies International, conducted earlier this year with more than 1,400 advisors, 39% of assets are being placed with the advisor’s primary provider, up from 33% last year.
In addition, advisors are working with an average of 10 mutual fund providers, down from 11 last year; RIAs are working with the fewest providers and wirehouse reps are working with the most. The big winners of this trend are American Funds and DFA, with other firms like Russell, Ivy, American Century, T Rowe and Goldman Sachs also doing well. For a list of the 10 most popular mutual fund firms, click here.
The trend toward using fewer providers also seems to be hitting the DC market for both DCIOs and record keepers. When searching for new record keepers, most plan advisors place a vast majority of their business with three to five primary providers, using niche players for special circumstances while including others for show. Even so, many plan advisors service clients with more than three to five record keepers, since most of the business comes from advisor-of-record activity.
While consolidating providers might make sense, it’s a lot of work for little or no gain — and potentially disruptive to clients. The trend toward using fewer DCIOs also continues, as plan advisors look to partner and go deeper with fewer firms — which makes annual reporting and fund replacement that much easier.
