According to the annual Retirement Plan Advisor Trend Study, conducted for Cogent Reports by Market Strategies International, two-thirds (64%) of advisers with at least $10 million in retirement plan assets now include passive investments on their recommendation list. This compares with just more than half (54%) who did so last year.
Driven in part by the addition of passive investment options, DC plan advisers, on average, now use 5.7 investment managers in the plans they service—a 46% increase over the average of 3.9 managers they were using last year, the report shows.
“Unlike the retail marketplace, where we see advisers consolidating their mutual fund assets with fewer providers, open architecture platforms in the DC plan market are facilitating the expansion of investment offerings, enabling advisers to respond to market demands and client requests with more options, especially choices that provide better value for their plan participants,” says Linda York, vice president of the syndicated research division at Market Strategies and lead author of the report.
This is resulting in growing use of indexed funds and heightened competition for actively-managed strategies, according to Cogent Reports. Open architecture target-date solutions are also getting a closer look as advisers pursue the best-in-class providers in each asset class underlying their target-date fund (TDF) offerings.
The full report evaluates the competitive position of 47 leading DC investment managers on a variety of metrics, including identifying those fund managers that advisers have recently started or stopped recommending to clients. While American Funds ranked first, with 22% of advisers planning to add the firm, second place Vanguard (19%) experienced the most significant year-over-year increase in momentum.
“The surge for Vanguard is a clear result of the increasing prevalence and preference among DC advisers for recommending passive investments within DC plans,” York says. “At the same time, it’s important to note that American Funds has long been recognized as a low-cost active manager, which is helping to insulate the firm from competitors in today’s cost-conscious environment.”
Other well-known fund providers mentioned in the trends report include:
- BlackRock, with 18% of advisers planning to add the firm to the recommendation list, and 2% planning to drop it;
- Fidelity Investments, with 15% of advisers planning to add the firm, and 4% planning to drop it;
- Franklin Templeton Investments, with 12% of advisers planning to add the firm, and 1% planning to drop it;
- J.P. Morgan Asset Management, with 10% of advisers planning to add the firm, and 2% planning to drop it;
- Oppenheimer Funds, with 10% of advisers planning to add the firm, and 5% planning to drop it;
- Dodge & Cox, with 10% of advisers planning to add the firm, and 2% planning to drop it;
- T. Rowe Price, with 9% of advisers planning to add the firm, and 1% planning to drop it; and
- PIMCO, with 9% of advisers planning to add the firm, and 10% planning to drop it.
Information about how to obtain the full Retirement Plan Advisor Trend Study is available here.