Even as assets and revenue are dwindling for DCIOs under pressure from index funds and TDFs, there is more demand for marketing and sales support from broker dealers, advisors and record keepers.
And as more money moves into index funds, even those that benefit from those inflows have lower margins. With the DOL conflict-of-interest rule threatening some of the traditional methods that DCIOs support their business partners, who are key to the distribution of their investments in DC plans, something has to give.
DCIOs will have to start making very difficult decisions about which partners to support, trying to pick the winners in the advisor-sold DC industry and perhaps shunning others, as well as deciding whether to support independent broker-dealers within which advisor groups are forming – in turn representing a relatively new group to support. So even as revenue and margins for independent BDs get thinner, some of the support that independents charge for access to their advisors, especially the Elite plan advisors, might be going away.
Providers and advisors are playing a negative zero sum game with DC plans. Just as fees continue to decline, a dollar paid to one party usually means a dollar lost to another. With advisors and small-market record keepers closer to the client, and with greater influence, DCIOs are seeing their own margins under pressure. At the same time, the demand for marketing support and value-added services from partners only increases.
Along with having to make tough choices (which might accelerate record keeper, advisor and BD consolidation), DCIOs have to get smarter and more strategic. For the first time, we are seeing more DCIOs either eliminating outside wholesalers or scaling back. Though these sales forces are relatively small compared to the retail market, there is more leverage with larger pools of money available. The days of a DCIO wholesaler getting paid on the number of advisors they visit rather than focusing on the right advisor are slowly waning.
The days of distributing white papers or research as a value add as a way to win business are over. Actionable services that put advisors in front of prospects, make them more money or save them time are what advisors really want.
With better data and analytics, DCIOs that focus their sales people on the right people as well as the right time to visit, and support them with more internal resources, will win.
