DCIO Assets Up 12% in the Past 12 Months

Helped by a strong market and improving sales, defined contribution investment only (DCIO) managers have seen their assets grow 12% in the 12 months ended June 30, 2017, according to Sway Research’s report, “The State of DCIO Distribution: 2018—Key Benchmarks, Developing Trends, Winners and Outlook.”

While target-date fund and passive investments have been putting a damper on DCIO sales, DCIO managers have been successfully selling other vehicles, according to Sway. By year-end 2017, the research firm expects DCIO assets will rise 13% to top $3.8 billion in assets. This will give DCIO managers a 49% share of DC assets. By 2022, Sway expects DCIO firms will top $5.5 trillion in assets and command a 54% market share of DC assets.

DCIO sales leaders who responded to Sway’s survey said they had an average of $393 million of net sales in the first half of this year and $1.32 billion in 2016. Given the fact that in 2016, over half of DCIO managers had net outflows averaging $21 million, Sway says, the DCIO market is in a better place in 2017, with only 40% of manager experiencing net outflows this year.

“The DCIO market has undergone substantial changes in recent years, and managers have had to adapt both in terms of product, i.e. institutional pricing, more satellite less core for active managers; and sales and marketing, i.e. increased coverage of analyst teams and greater expertise around adviser practice management.”

Sway also found that many DCIO managers have discovered they can increase sales by focusing on third-party fiduciaries, such as Morningstar, Mesirow and Leafhouse Financial. They are also targeting large advisory practices with many affiliates, such as CAPTRUST Financial Advisors, Global Retirement Partners and SageView Advisory Group, “as they are typically staffed with elite plan advisers and advisory teams,” Sway says.

DCIO sales have been difficult to track, Sway notes, as the average manager can only track 54% of their sales to their source. However, through the use of data aggregation services, this is up from 46% in 2016, Sway says. Knowing which advisers are selling their products should help DCIO managers improve their sales going forward.