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In Practice August 26, 2026
A Concentrated Market
As DCIO competition intensifies, can smaller investment managers and providers keep up?
Reported by
Mallika Mitra
For defined contribution investment only companies, competition has never been tougher, as large asset managers continue to leverage scale, distribution reach and technology investments to gain market share. At the same time, experts say, the rise of managed accounts, retirement income solutions and customized investment offerings may require significant investment that not all firms can afford
The result is an environment that is making it more difficult for smaller players to remain competitive and is adding pressure for them to scale, partner and merge.
Concentration is growing among the top investment managers with strong target-date franchises, including BlackRock and Fidelity Investments.
“It is really a tremendous bulwark for their business because plan sponsors don’t like to change their target-date [fund provider],” says Chris Bailey, director of Cerulli’s retirement practice, adding that only about 5% of plan sponsors do change their TDF offering in any given year. It would take a lot for a plan sponsor to transition from one of the largest fund suites to a slightly smaller one, he says. “Because of the strength of their target-date funds, they continue to grow and gobble up a share of assets.”
The major players also “cover the waterfront” in terms of strategies, from fixed income and equities to active and passive management and beyond, Bailey says: “It gives them a really strong position to work from, and if you’re not one of those managers, it’s really hard to unseat them.”
While there are opportunities for investment managers to manage sleeves within TDFs, 96% of assets in mutual fund and collective investment trust TDFs are held in proprietary single-manager products, such as Fidelity TDFs for which Fidelity manages all of the underlying investments, explains Chris Brown, founder of and principal in Sway Research. TDFs that invest in more than one underlying manager generally attract smaller flows than those of leading providers.
At the same time, recordkeeper consolidation has narrowed shelf-space opportunities, and the growing influence of intermediaries is affecting distribution, with registered investment advisory aggregators pooling purchasing power, according to John Faustino, head of fiduciary governance solutions at Broadbridge Financial Solutions Inc.
How to Compete
For many DCIO firms, Brown says opportunities stem from the rise of in-plan income solutions and the move toward adding allocations to private market assets within TDFs and managed accounts. DCIO firms with affiliated insurance capabilities and those with capabilities in managing private equity, credit and real assets have a “tremendous opportunity” to partner with established partners. For example, he cites the combination of State Street and Apollo in the State Street Target Retirement IndexPlus series that launched last year.
Meanwhile, adviser home offices are increasingly focused on providing personalized education and advice to plan participants—both to improve investor outcomes and to grow advisers’ in-plan and out-of-plan businesses, Faustino says: “Supporting advisers’ efforts to deepen plan-participant engagement is becoming table stakes for DCIOs.”
There is also competition for the attention and mind share of advisers and consultants.
“The big managers do a really good job on creating thought leadership,” Bailey says. “But that costs money. … You’ve got to make an investment in time and energy to stay relevant to these [advisory] firms so that they are thinking about your product when there’s an opportunity to use it in a plan.”
Business Models That Are Most Vulnerable
Scale is a massive advantage, as is possessing an important capability, Brown says: “Firms without either will always struggle to keep up, and bottom-up, field-focused DCIO sales and marketing efforts don’t produce flows the way they once did.”
Home office relationships—and the staff and sponsorship resources to support them—are also more important than ever. Big investment management players can afford to support a broad network of distributors, while smaller managers may have to pare back, leaving them more at risk when a key relationship erodes, Brown adds.
Faustino says adviser home offices are increasingly acting as gatekeepers and exerting greater influence over both DCIO and recordkeeper relationships with advisers.
“DCIOs that are more adviser-centric—and that help advisers and their home offices strengthen their brands, deliver personalized advice and deepen wealth relationships—will have a meaningful advantage,” Faustino says. “Firms that fail to align their go-to-market approach with the priorities of their adviser home-office intermediaries will struggle.”
Necessary Partnerships
The build-versus-buy equation is evolving rapidly, as investment managers evaluate partnerships not only for technology cost savings, but also for the network access they can provide, Faustino says, adding that providers will be well-positioned if they can lower costs for DCIOs of all sizes while improving visibility with adviser decisionmakers.
“We are seeing the case for outsourcing resonate with larger firms, as well as small- and midsize firms,” Faustino says. “Having the resources to build an integration does not necessarily mean that building it in-house is the best use of those resources. When an outsourced relationship also improves market access, that can materially strengthen the overall cost-benefit case.”
Firms that have gained market share over the last five years not only have a solid brand, scale and the right products, but they also have the ability to partner on new retirement solutions, while plugging into the solutions of others via things like co-manufacturing, Brown says. He defines co-manufacturing as the repackaging of existing capabilities into new products that are exclusive to a specific distributor or recordkeeper.
“The ability to partner on new solutions, such as in-plan income solutions, investments with private markets access, and investments that are exclusive—and custom, in terms of fees—to a distributor/recordkeeper, will be crucial to DCIO success in the future,” Brown adds.
Will Consolidation Continue?
All sources interviewed for this article said they are not expecting a huge acceleration of investment manager mergers and acquisitions, but the trend is likely to continue.
Scale will remain a driver, both to reduce expenses and to offer a more comprehensive set of capabilities, Faustino says. Recordkeepers and advisory firms are moving toward fewer, larger strategic relationships, which continue to favor consolidation. Network access, through both recordkeepers and advisory firms, is also becoming a more important potential driver of DCIO consolidation, he adds.
What does this all mean for participants?
“Though greater scale typically leads to lower fees, having fewer options is generally not good for consumers or advisers,” Brown says. “More choice is good. More competition among manufacturers is even better. So there are trade-offs.”
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