It’s hard not to notice the declining DCIO support of plan advisors and distribution partners.
Along with some second- and third-tier DCIOs either exiting the market or significantly reducing their sales forces, many firms are cutting back their support of advisors, which could hurt the development of budding plan advisors.
Long-only DCIOs without a viable target-date fund strategy are facing a harsh reality. In addition, record keepers are getting more aggressive, pushing proprietary investments as their fees decline and making it even harder for DCIOs to win mandates. On the other hand, as participant-directed retirement plans where advisors have a large influence continue to grow, it’s hard to abandon the DC market from which most IRA rollover accounts emanate.
So what are DCIOs doing?
DCIOs have always focused on the 2,500 or so “Elite” Advisors (+$250 million DC AUM), accessing Core Advisors ($25-$250 million) through their retail wholesalers and Emerging Advisors through record keepers. Recent research by Ignites indicates that DCIOs are not hiring external wholesalers at the same pace as in the past and are becoming more strategic with the advisors they support.
So what happens to the Core and Emerging Advisors? DCIOs have become the backbone of support, education, training and practice management for advisors looking to grow their DC plan business. But with less support available, DCIOs will likely focus even more on Elites at the expense of others. With the average age of advisors in their mid-50s and fewer younger people entering the business, the turn in fortunes and strategies for DCIOs could hurt or slow the development of a new crop of plan advisors.
Aggregators or specialty groups may benefit from this shift, as DCIOs see them as an efficient way to access advisors — leaving Core Advisors and even some lower-tier Elites that want to remain independent out in the cold.
Regardless, like many aspects of the DC business, the DOL fiduciary rule may be a good excuse for DCIOs to get more strategic about their distribution, focusing wholesalers on servicing the right advisors at the right time about the right product and compensating the wholesaler accordingly. Right now, without good data and metrics, most DCIOs are flying blind.
Opinions expressed are those of the author, and do not necessarily reflect the views of NAPA or its members.
