In Practice September 21, 2015

DCIO Providers Evolving With Adviser Demographics

Cerulli outlines DCIO firms’ top concerns regarding retirement specialist adviser demographics. 
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A report from Cerulli Associates finds even those defined contribution investment only (DCIO) firms satisfied with their current retirement specialist presence are rethinking strategies to detect and cultivate the next generation of adviser relationships.

The third-quarter issue of “The Cerulli Edge – Retirement Edition” predicts the next decade will very likely bring a sharp acceleration of long-tenured and experienced adviser retirements.

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Even if recruiting picks up in the next several years it will do little to stem the impending talent crisis among advisory firms, Cerulli warns, in no small part due to the significant time and training required to develop a skilled and trustworthy adviser. This has DCIO firms asking whether they will be able to maintain strong access to defined contribution plans currently generated by specialist advisers.

The Cerulli report shows a relatively small and aged group of professionals makes up today’s retirement specialist adviser industry—defined as the group of consultants and advisers who derive more than 50% of annual practice revenues through work with defined contribution (DC) plans. Jessica Sclafani, associate director at Cerulli, notes these retirement specialists are “the ultimate sales target” for DCIO providers. Winning the favor of one retirement specialist often means winning expanded access to hundreds of millions or even billions of dollars in new DC plan assets.

But more and more the quality of a given retirement specialist as a DCIO prospect is tempered by the fact that there are so few of them. Across all advisory business models (broken down by Cerulli as bank, wirehouse, regional, insurance, independent broker/dealer, dually registered, and registered investment adviser models), Cerulli finds there are only about 4,200 practices in total. In other words, the true DC retirement plan specialists only represent about 5% of the total adviser headcount. While only a small minority in terms of headcount, this small segment of advisers has for years enjoyed outsized influence.

As these 5% of practices mature and even begin to unwind, the numbers make it clear that DCIO providers are going to look more at “dabblers” in DC as top drivers of future growth—defined by Cerulli as practices with between 15% and 49% of revenues generated via DC plans. This segment is attractive today because it has some familiarity with the strict regulatory requirements involved in serving DC plans, while also presenting significant room to capitalize on the knowledge and maintain substantial growth in the next decade.

NEXT: Crafting new partners 

Cerulli suggests that, by targeting the emerging DC advisory specialist, DCIO providers have the opportunity to “rear advisers within their system of investment beliefs and products.” For the advisers, there is opportunity to gain helpful value-add and tools to more efficiently and effectively pursue retirement plan business.

Given the ongoing fiduciary rulemaking at the Department of Labor and the Securities and Exchange Commission, Cerulli feels registered investment adviser (RIA) firms are particularly likely to be targeted for more collaboration by DCIO firms.

“Excluding insurance advisers, the channels with the highest prevalence of retirement specialists are registered investment advisers and the dually registered, defined as registered representatives who also maintain an independently owned RIA,” the Cerulli report explains. “The RIA channel is particularly well suited to participate in the DC market given its independent model, fiduciary mindset, and transparent positioning. This structure aligns well with the concerns of plan sponsors.”

Across business models, Cerulli estimates that as of year-end 2014, there were approximately 11,150 dabbler adviser practices that influenced $417 billion in DC assets, excluding the insurance channel. The research further breaks the dabbler segment into two subcategories.

“On one hand, there are ‘dabbler’ advisers who have a handful of retirement plan clients, but no intention to tilt their business in this direction,” Cerulli explains. “Alternatively, there are dabblers who some asset managers refer to as the ‘emerging specialist.’ The emerging specialist is still an adviser with less than 49% of revenue generated from retirement plans, but is focused on growing this part of the business.”

Cerulli concludes that, to date, most asset managers remain focused on true retirement specialists, “but some firms are shifting their attention to also address dabbler advisers who exhibit certain characteristics that signal the potential to become a retirement specialist over time. For example, some asset managers emphasize the emerging specialist as a way to establish a strong relationship early on with an adviser who is positioned to bring them more retirement business.”

Information on obtaining full Cerulli reports is here. 

Deals & People September 18, 2015

Retirement Industry People Moves

Promotions, hires and additions at BPAS, Hatteras Funds and Westwood Holdings.
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Paul Neveu has been promoted to president of BPAS plan administration and recordkeeping services. He will lead all the firm’s defined contribution and VEBA services, including sales, marketing, daily administration, programming and trust operations, plan consulting, implementation, operations, and related areas, as well as the BPAS Fiduciary Services division.

Neveu joined BPAS in 2005 with 14 years of experience in the retirement plan industry, including nine years with Federated Investors. He holds a bachelor’s degree in business administration from the University of New Hampshire and is a Certified Employee Benefit Specialist (CEBS). 

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Barry S. Kublin, chief executive of BPAS, cited Neveu’s industry knowledge, client and staff relations, and clear understanding of the firm’s value proposition as playing a critical role in BPAS’ growth and success over the past few years.

BPAS is a national provider of retirement plan administration with clients across the United States and Puerto Rico.

NEXT:  Hatteras Funds adds account exec and two alternatives experts.

Michael Lee has rejoined Hatteras Funds as southeast executive director to focus on business development and client relations, serving financial advisers in the brokerage, registered investment adviser (RIA) and consulting communities. His area is the southeast, including Alabama, District of Columbia, Florida, Georgia, Kentucky, Mississippi, North Carolina, South Carolina, Tennessee, Virginia and West Virginia. Lee, who is based in Raleigh, North Carolina, returns with extensive alternative investments experience representing hedge fund of funds, private equity fund of funds and alternative mutual funds.

Before rejoining Hatteras, Lee was a senior vice president with Direxion Investments. Before Direxion, he was regional director for Hatteras Funds in the southeast. Lee holds a bachelor’s degree in business administration from Rider University as well as the Chartered Alternative Investment Analyst (CAIA) designation.

Christopher Minton joins Hatteras as southwest regional director. He has more than 10 years of industry experience, most recently as a vice president, senior regional director for Neuberger Berman, managing client relationships within wirehouse channels. He will be responsible for serving the southwest, including Texas, Oklahoma, Colorado, New Mexico, Arkansas and Louisiana. Before Neuberger, he was regional vice president, external wholesaler for Touchstone Investments in Dallas. Minton holds a bachelor’s degree in marketing from the University of Kentucky.

Matthew Hurd has been named senior vice president, national accounts, at Hatteras. With more than 14 years of sales and marketing experience, he will focus on business development and product expansion. Previously, he was vice president, strategic account manager at F-Squared Investments, in charge of business development, relationship building and new business. Earlier in his career, Hurd was an account executive at Fidelity Investments. Hurd holds a bachelor’s degree in business and economics from the University of Maine, Farmington.

Michael J. Hutten, president of distribution at Hatteras Funds, cites Lee, Minton and Hurd for their specialization in alternative investments as well as their passion for helping advisers build better portfolios.

Hatteras Funds provides alternative investment solutions.

NEXT: Westwood Funds takes on national accounts director

Jonathan S. Dale has been named national accounts director, financial institutions, a newly created position at Westwood Holdings Group Inc.

Dale is responsible for financial intermediary firm relationships for Westwood mutual funds and managed accounts. He plays a key role in expanding Westwood’s institutional investment brand and promoting its array of strategies with wealth management broker/dealers, registered investment adviser (RIA) platforms, turnkey asset management providers, retirement plan service providers and consultants.

Before joining Westwood, Dale spent 15 years with SEI’s investment manager services division. Most recently he served as distribution director, in charge of helping asset management firms create, promote and negotiate their mutual funds and exchange-traded funds (ETFs) to decisionmakers at major financial intermediaries. Dale holds a bachelor’s degree in business administration and business management from West Virginia University. He holds designations as a Certified Financial Planner (CFP), Chartered Financial Consultant (CFC), and FINRA Licenses 7 and 63.

Westwood Holdings Group, Inc. provides investment management services to institutional investors, private wealth clients and financial intermediaries, and reports that it has $23.1 billion in assets under management, including $4.3 billion in mutual funds, as of June 30.

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