Private DC Assets Reach $4.7 Trillion

Total private defined contribution (DC) plan assets surpassed $4.7 trillion at the end of 2013, with $1 trillion in adviser-sold channels, according to Cerulli Associates.

Jessica Sclafani, senior analyst at Cerulli, explains that service providers overseeing private DC assets have benefited from strong equity market performance, as well as an increased focus on improving plan participation ratios and participants’ ability to retire successfully. These factors have come together to drive more money into the DC system, meaning greater opportunity and competition. 

“The implementation of auto-features, such as automatic enrollment and automatic escalation, has also helped drive assets into the industry,” she adds.

The findings are from Cerulli’s report, State of DCIO 2014: The Emerging Role of the Specialist Advisor, which analyzes the defined contribution investment-only (DCIO) and non-recordkeeping segments of the DC market. Sclafani says the report shows that, as the DC market continues to evolve, it is becoming more heterogeneous in that plan designs and asset allocations can vary widely depending on a plan’s overall asset size and the involvement of advisers and consultants. This means different plans can present significantly different opportunities for the various types of service providers in the DC investment chain. 

Remarking on another important trend, Sclafani says the DC industry is also slowly turning away from standalone investment decisions towards “total plan wellness.” As part of this shift, a large part of advisers’ and consultants’ proposed value-add in the DC space is specific to improving overall plan health and the average participant’s ability to retire with adequate income, she explains. As a result, more time and attention must be paid by advisers, consultants and service providers towards increasing participation ratios and deferral rates.

But there won’t be just one effective strategy or service model for advisers and consultants in this environment, Cerulli suggests. DC providers must be cognizant of the plan segment in which they are operating to be successful. Employers across industries and size classifications will require unique services and capabilities.

Information on how to obtain Cerulli reports is available here.