DC investment advisors are increasingly stepping into the role of asset allocator — a position that has traditionally been the domain of the asset manager, notes industry insider Jerry Bramlett.
The trends that are supporting this shift are likely to gather momentum over time, especially among the larger specialized DC firms, Bramlett writes in his most recent “Inside Investments” column in NAPA Net the Magazine.
Going forward, the headwinds that asset managers will face have mostly to do with the conflict of interest that arises if they were to take on a fiduciary role as it relates to managing plan assets, Bramlett believes. While this would be a big (if not impossible) challenge for a mutual fund provider, for an asset manager that has asset allocation as its core competency, it is conceivable to create a structure whereby they could serve in this capacity. “Just as the investment advisor who acts in a fiduciary capacity has had to create a compliance framework so as to safely manufacture and distribute a ‘fund,’ it is conceivable to reverse engineer that framework to work for the asset allocator as well,” he writes.
As DB plans continue to fall by the wayside and DC continues on its course to be the dominant employer-based retirement program, competition for asset management mandates will increase — competition that will result in increasingly superior participant outcomes, Bramlett asserts. And while many see regulatory intervention as the way forward, Bramlett says, “The fact is that Adam Smith’s invisible hand is already hard at work in the DC industry.”
In addition to Bramlett’s regular column on investments, the Winter issue of NAPA Net the Magazine includes the cover story on making the ROI connection between the bottom line and employee well being, as well as feature articles on robo-advisors’ entry into the 401(k) market and preparing for the SEC’s coming money market reforms. The issue also features insights from contributors Staff Chalk, Warren Cormier, David Levine, Brian Graff, Don Trone, Joseph DeNoyior, Jania Stout, Fred Barstein and Lisa Greenwald Schneider.
To view Bramlett’s column, click here and select “Asset Allocation and the Changing Role of the Plan Advisor.” And to view a pdf of the full 52-page issue, click here.
