Asset Manager Competition Is Good for Clients

Retirement plan advisers can help their plan sponsor clients take advantage of emerging opportunities for better deals and service coming out of fierce competition among asset managers. 

By Javier Simon | May 04, 2017
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In the midst of market volatility and projections of a prolonged low-return environment, asset managers are seeking new ways to reach institutional investment buyers, including defined contribution (DC) retirement plans.

New research from Casey Quirk, a practice of Deloitte Consulting LLP, suggests this trend should present tremendous opportunity for retirement plan sponsors to take advantage of new innovations. On the flip side, it will be more important than ever for plan sponsors to monitor the marketplace of investment products to ensure they are still accessing top quality offerings.

Casey Quirk projects that investment managers who do nothing to modernize their sales and service approaches could face more than $770 billion in collective outflows through 2021. However, the firm projects that those which transition their capabilities to serve the evolving preferences of institutional buyers can expect to see inflows of as much as $1.5 trillion during the same time period. This dramatic flow of capital could significantly reshape the asset management landscape retirement plans and other institutional investors operate in.

Casey Quirk suggests asset managers that haven’t traditionally sought to do business in the space will increasingly seek “new” institutional buyers such as DC plans, while significantly adapting their offerings and sales structures to better serve clients in “this saturated, competitive environment."  

David O’Meara, a senior DC investment consultant at Willis Towers Watson, notes that as the retirement services industry shifts from the defined benefit (DB) to DC model, many asset managers are finding their products don’t exactly fit well into a DC plan sponsor’s investment menu. Product innovation can change that. O’Meara says managers will likely venture to create new vehicles like institutionally priced mutual funds or collective investment trusts (CITs).

“In the case of a CIT, the operational costs are lower and so they can operate on a more cost-effective basis which is crucial in today’s DC environment,” O’Meara says.

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