DCIO: Growing Part of Asset Manager Business

The defined contribution investment only (DCIO) business is moving from a minor appendage of an asset management firm's sales effort to its backbone, according to Sway Research’s latest report.

The study, which is based on recent surveys of 19 DCIO managers and 11 DC platform gatekeepers, reveals that at the average asset management company, the DCIO business generated 19% of firmwide gross sales and 28% of firmwide net sales in 2008. Thus, steady contributions from plan participants greatly lessened market-related net redemptions from DCIO assets relative to other business lines, Sway said in a release about the study.

The research found that more than half of those surveyed believe their firm’s DCIO business will experience a period of accelerated growth over the next 12 to 18 months, primarily as a result of investors’ needs to amplify retirement savings rates on the heels of stock market losses. Another 40% of DCIO managers believe growth rates will remain strong and steady.

“Although the DCIO market has its challenges—namely the rise of proprietary target-date funds and increased competition from managers of all sizes—this market is rapidly growing in importance to asset management executives, and for good reason,” said Chris J. Brown, Sway Research’s founder and principal.

The report features key DCIO business benchmarks, such as sales force productivity, headcounts and compensation, profitability across investment vehicles and relative to retail mutual funds, and annual DCIO sales and marketing budgets.

More information about purchasing “The State of DCIO Distribution: 2010—Strategies for Increasing Productivity and Profitability” is available at www.swayresearch.com.