According to Cerulli Associates’ DCIO-focused research, this makes sense, considering DCIO wholesalers are finding it more difficult to influence the larger firms in this segment that have a due diligence process in place.
DCIO selling initially focused on the gatekeepers at recordkeeping firms that opened their platforms beyond their proprietary offerings. Analysts would choose funds to be included in selected lists, and these funds were placed in potential investment menus when the recordkeeper was included in an RFP.
In the current selling process, the adviser or consultant is more involved in the investment menu design and fund selection.
“Asset managers feel that intermediaries have considerable influence on DC fund flows,” said Kevin Chisholm, senior analyst in Cerulli’s retirement practice, and lead author of this research. “Our research shows that advisers/consultants are responsible for about 50% of an asset manager’s IO flows, and in some instances the influence is as high as 85%. By comparison, analysts at recordkeepers are responsible for 28% of investment-only flows.”
A person with strong product knowledge, a CFA designation (or working toward it), and strong client-service skills can be a better fit to cover these firms, Cerulli says. It is difficult to determine where this position fits within the organization; support for advisory firms is usually part of the retail segment, while these kinds of roles are often positioned within the institutional group.
"Those that are moving ahead with the position have one reporting structure for DCIO sales that enables them to create the position without having to figure out where it sits within the organization,” said Chisholm. “However, there still exists the challenge of determining which firms are consultants and which are advisers.”
Chisholm says the decision should be based on the client's typical interaction with asset managers. If the adviser/consultant firm is mostly interested in obtaining information regarding investment strategies, the firm should be considered a consultant.
If the adviser/consultant mostly seeks business support from asset managers (such as prospecting support), the firm is an adviser and should be covered by the DCIO wholesaler because it is the best position to provide that support.
If an adviser/consultant seeks investment strategy information and business support, the DCIO wholesaler should be responsible for covering that firm.
These findings are from “The Cerulli Report: State of DCIO: Evolving Asset Manager Opportunities in the Mid-Sized and Small Plan Marketplaces.”
The report is available for purchase by contacting CAmarketing@cerulli.com.