DCIO Shift towards Advisers Expected to Grow

The current selling process has shifted beyond the “gatekeeper” role for advisers, to one where the adviser or consultant is much more involved in the investment menu design and fund selection.

According to Cerulli’s latest research, advisers and consultants were responsible for about 50% of an asset manager’s investment-only flows, and in some cases, they are responsible for as much as 85% of flows. By comparison, analysts at recordkeepers are responsible for 28% of investment-only flows.

Cerulli’s research, “State of DCIO: Evolving Asset Manager Opportunities in the Mid-Sized and Small Plan Marketplaces,” examines this shifting influence and the impact on investment-only (IO) asset managers.

“Plan sponsors used to hire [advisers] to guide plan design, but now they’re hired to be investment consultants. They have their own selected list of funds in each category that they give recordkeepers during the RFP process, and only consider the recordkeeper’s recommendation if one of the funds on their selected list is not available on the platform,” comments Kevin Chisholm, senior analyst and author of the report. 

Cerulli cautions asset managers that it is still necessary to cover recordkeepers because they still control the platform. An adviser cannot use a fund if it is not available on the platform, and if there is no selling in agreement in place.

Ultimately, asset managers should strive to have their products available on all platforms, but should first concentrate their efforts on making sure that funds are available on platforms that are used by advisers that are receptive to using their funds.

"We expect recordkeeper influence on investments to continue to decline. We see the expansion of the fiduciary definition and the liability it brings will force recordkeepers to distance themselves from investment decisions. It is clear that advisers and consultants are the key decision-makers in the DCIO selling process," added Chisholm.

Other recent research has drawn similar conclusions (see “Wirehouse and Indie B/D Advisers Key to DCIO Sales Success”).