PLANADVISER DCIO Industry Snapshot

Mutual funds continue to be the investment vehicle of choice among the 42 DCIO providers surveyed, while exchange traded funds are almost entirely avoided.

The 2017 PLANADVISER Defined Contribution Investment Only (DCIO) Survey was conducted in April and May via a detailed online questionnaire, shared with approximately 114 investment firms known or thought to market to defined contribution (DC) plans.

In the end, 42 organizations from across the U.S. agreed to complete the survey in its entirety, offering up a rich snapshot of the DCIO industry.

Notably, the survey respondents continue to strongly favor mutual funds for their client portfolios, with 64% of DCIO assets invested through mutual funds. This is a 2.7% drop from the previous year, while separate account assets grew 9.5% year-over-year, now representing 20% of client portfolios among survey respondents. Another 16% of assets are invested via collective investment trusts.

Among the survey respondents there was no exchange-traded fund use reported, matching the relative unpopularity of ETFs across the wider defined contribution (DC) investment marketplace.  

According to the 2017 provider data, DCIO firms on average report 70 recordkeeper selling agreements, a 13.2% jump from 2016. Conversely, DCIO firms report a 13.4% drop in the number of adviser-focused salespeople; however the average number of institutional salespeople and dedicated DCIO sales support both rose modestly, 1.1% and 7.1% respectively.  

In terms of products and services DCIO providers are delivering to retirement-specialist advisers, respondents report a 16.8% increase in manager research offerings, a 17.7% jump in training for DC plan sales/service staff, and a 10.9% boost in plan benchmarking services. On the other side, providers report a 22% drop in the offering of target-date fund evaluation tools.

Unsurprising given the big uptick in Employee Retirement Income Security Act (ERISA) litigation, respondents have increased their offering of access to ERISA counsel by 22% compared with last year; there was also a sizable growth in the offering of investment committee meeting support, up 9.1%.

In terms of gross DCIO assets managed, BlackRock, Nuveen and State Street Global Advisors reported the largest client bases. The size rankings continue as follows: T. Rowe Price; J.P. Morgan Asset Management; Wells Fargo Asset Management; PIMCO; and Invesco.

Among the most popular DCIO products stand T. Rowe Price Retirement Date Funds; BlackRock LifePath Target Date Funds; State Street Global Advisors S&P 500; American Funds EuroPacific Growth Fund; JPMorgan SmartRetirement; and AB Target-Date Strategies.

Fastest growing in the sample in terms of new DCIO assets were Janus; First Eagle Investment Management; State Street Global Advisors; Capital Group/American Funds; Legg Mason; and T. Rowe Price.