Filed Under:Life Insurance, Life Planning Strategies

Two-thirds of DC plan assets have an advisor

The report shows that DCIO net flows as a percentage of firm net flows hit 25 percent in 2012.
The report shows that DCIO net flows as a percentage of firm net flows hit 25 percent in 2012.

New research reveals that two-thirds of private defined contribution (DC) assets are invested in plans that have an ongoing advisor/consultant relationship.

This finding is reported in third quarter 2013 edition “The Cerulli Edge — Retirement Edition,” which examines trends among defined contribution invest-only (DCIO) wholesalers and the role the retirement specialist advisors play in DCIO sales. The Cerulli Associates survey additionally provides quantitative insights regarding annuities and insurance, retirement income and individual retirement accounts.

The report shows that DCIO net flows as a percentage of firm net flows hit 25 percent in 2012. DCIO gross flows as a percentage of firm gross flows and DCIO assets as a percentage of firm asset totaled 18 percent and 13 percent, respectively, last year.

“The defined contribution (DC) market continues to present a key source of assets and flows,” the report states. “The benefit of managing DC assets is most evident during market downturns. During the two most recent bear markets, the differences between contributions and distributions were at their highest levels.”

The report observes that increasing contributions to target-date funds — mutual funds that automatically reset the asset mix (stocks, bonds, cash equivalents) in its portfolio according to a time frame selected by the investor — is a “major challenge” confronting asset managers. Nearly three of the asset managers polled (73 percent) identify this as a hurdle in their efforts to manage DC plan assets.

Other major challenges flagged by the asset managers include:

● Increasing competition for assets (67 percent)

● Cost concerns and fund expenses (27 percent)

● Investment performance/not meeting screening criteria (20 percent)

● Firm’s best-performing funds in asset classes not typically used in DC plans (13 percent); and

● Lack of resources/personnel to develop relationships with decision-makers (7 percent).

When asked whether asset managers provide sufficient information to make investment decisions, 55 percent of the retirement plan specialist advisors say “yes.” Nearly one-third (32 percent) say “no.” 

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Nichole Morford

Nichole Morford
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