A new study by Cogent Reports reveals that financial advisors who focus on the defined contribution (DC) plan market still hold the bulk of their total AUM with individual clients. Thus, their perceptions of and exposure to investment managers and DC plan providers are largely shaped by their retail relationships and experience. As a result, full-service providers and firms with a strong retail presence have a definite advantage over defined contribution investment only (DCIO) providers and record-keeping specialists in capturing financial advisors¡¯ DC plan business. These and other findings are included in the recently released Retirement Plan Advisor Trends, a Cogent Reports study from Market Strategies International.
Among financial advisors who manage at least $10 million in DC assets, only one-third (35%) report that DC plan assets comprise 25% or more of their total book. Furthermore, in dollar terms, just 15% of these plan producers have $50 million or more in DC plan assets under management. ¡°Among financial advisors, true DC plan specialists are a small, rather elite group,¡± says Linda York, vice president and author of the report. ¡°Establishing and protecting a DC-focused relationship is complicated and influenced by the web of relationships established over the years through their broader retail business.¡±
The firms that have managed to break through in the advisor-sold DC market are primarily those that also have a strong retail presence and a successful reputation in the financial advisor community. Not surprisingly, the leaders in overall brand equity¡ªa composite measure of top-of-mind consideration, awareness and brand impression¡ªare big firms with multiple lines of business. While this reality creates an uphill battle for DC-only firms, the study identifies ways that record-keepers and managers can more effectively position their firms for future growth.
¡°A strong retail presence, while important, only gets you so far. Firms need to also emphasize what DC plan advisors care most about: best-in-class advisor service and support, good value for the money, and strong risk management practices and fiduciary support,¡± says York. ¡°Bring those things to the table, and advisors will take notice.¡±
