Asset Managers Should Adopt Holistic View of DC and Retail Markets

When evaluating broader distribution strategies, asset managers should adopt a holistic view of the defined contribution and retail investor markets, according to the latest Cerulli Edge—U.S. Asset and Wealth Management Edition.  

While top-tier asset managers have well-established wholesaler teams dedicated to the DC market specializing in retirement plan advising, a notable challenge arises with “dabbler” and “nonproducer” plan advisers. This subset, forming a significant portion of broker-dealer advisers and broker-dealer adviser-sold DC assets, blurs the coverage areas between retail and DC wholesalers, introducing a logistical complexity for engagement, according to the Boston-based firm.

“Dabbler and nonproducer retirement plan advisers make up the majority of B/D-based retirement plan advisers and a meaningful portion of B/D adviser-sold DC assets,” Shawn O’Brien, director of retirement, said in a statement. “However, some asset managers say their firm still employs a siloed approach to covering these advisers, with little communication between retail and DCIO wholesaler teams.”

Cerulli’s research found that dabblers and nonproducers are more likely to offload their investment lineup responsibilities to their home office or a third party. When asked about the fiduciary status across dabblers’ DC assets under advisement as of year-end 2022, the answers showed low levels of in-house fiduciary coverage, with: ERISA 3(38) (14%), ERISA 3(21) (21%), non-fiduciary capacity (43%) and third-party fiduciary (21%). The split was similar for nonproducers across ERISA 3(38) (12%), ERISA 3(21) (12%), non-fiduciary capacity (51%) and third-party fiduciary (25%).

Nearly half of dabbler and nonproducer advisers (44%) expressed a willingness to explore DC plan opportunities if they receive enhanced support for cultivating wealth management clients from their DC business. Cerulli recommended that asset managers’ distribution teams adopt a collaborative coverage model to address the needs of these advisers, fostering growth in the retirement plan segment of their businesses.

Asset managers can employ different strategies to support advisers in managing their practices and expanding their client base, Cerulli suggested. Assistance can range from:

• helping dabblers and nonproducers build prospect lists;
• make introductions and enhance online presence; and
• provide a more structured approach through frameworks or practice management solutions.

Alternatively, some asset managers can take a less formal route, sharing success stories from specialist advisers that showcase examples of how successful plan advisers approached practice initiatives.

“B/D-based advisers lean on asset managers for nonproduct-related tools, education, and strategic guidance that help them better serve their clients and grow their book of business,” O’Brien said. “By helping advisers improve and grow their practices, asset managers win advisers’ loyalty and trust, positioning themselves as strategic partners and laying the foundation for long-term, reciprocal relationships.”