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What’s Ahead for DC Asset Management?

Speaking at GRP Advisor Alliance’s Participant Outcomes & Financial Wellness Summit in Phoenix on Jan. 16, Charlie Ruffel, founder of Asset International and now head of a private equity fund that invests in investment managers, opined about the future of investment management in the DC world.

Noting that DC plans represent the biggest pool as assets in the world (even bigger if you count IRAs, which are fueled by DC plans), more and more fund managers are greedily eyeing the market. “Long only fund managers will no longer be able to mail it in,” noted Ruffel. “Though they are far from being dead, with healthy margins, they have to tell a good story and justify their fees.”

Larger plans like IBM are using highly customized, low-cost TDFs combined with managed accounts and institutionally priced annuities for retiring workers — all for 10-20 BPs. Ruffel predicted, “CITs down market are inevitable. Though there’s a lot of focus on retirement income, no one has gotten it right yet.”

Ruffel recommends that advisors embrace participant outcomes rather than focusing on analyzing investments and look for asset allocation products in the form of CITs. Though retirement income is complex and evolving, Ruffel said that’s good for experienced advisors, who should strive to “own it.”

Though GRP was focused on financial wellness at their conference — announcing a “semi-exclusive” deal with Liz Davidson’s Financial Finesse — the advisors seemed more interested in GRP’s institutionally priced, multi-manager CITs, especially their asset allocation products.

Advisors at the conference account for more than $100 billion of DC assets — a figure that would dwarf the $20 billion-plus in IBM’s DC plan. Will the low-cost CIT story, wrapped with financial wellness, attract enough advisors to drive down asset manager fees? Will these advisors use them? It seems that the story is good — now it’s about execution.

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