Wirehouse and Indie B/D Advisers Key to DCIO Sales Success

In Sway Research’s latest report, “The State of DCIO Distribution: 2012—Making the Most of Limited Resources to Thrive in a Maturing Market,” the authors conclude that the institutional DC market is out of reach for mutual fund managers, considering they lack the scale and ultra-low expenses necessary to compete for institutional mandates. Therefore, the focus of many DCIO sales efforts is the retail (less than $50 million plan) market.

Sway contends that in this market, winning and losing is determined by how competitive a firm is among the wirehouses and independent broker/dealers (B/Ds). Research found that more than $3 of every $5 flowing into asset manager coffers through the retail DCIO effort comes from wirehouse and independent B/D-based retirement advisers (those advisers who generate a substantial chunk of revenue from DC plans) and dabblers (advisers who manage a handful of DC plans).

Nearly half of sales (44%) come from wirehouse and independent B/D-based retirement advisers, while dabblers within these same firms account for 17% of annual gross DCIO sales for the typical asset manager. “This demands that asset managers foster strong communication and a cooperative effort between retail and DCIO field and key accounts (home office) sales staff,” said Chris J. Brown, principal of Sway Research.

Managers that are capturing market share in this space approach the market with a strong top-down (home office)/bottom-up (field sales) effort that combines experienced sales personnel and strong marketing in the form of innovative value-add programs, Sway found. Furthermore, managers with particularly strong DCIO marketing efforts are going beyond supporting retail distributors, such as the wirehouses and independent B/Ds, and are working hand-in-hand with DC recordkeepers to supply their plan wholesale forces with an array of marketing support, including value-adds, sponsorships of various events, and joint marketing efforts.

Sway writes that DCIO managers are paying considerable attention to mid-tier consultants—employer benefits specialists with hundreds of millions of DC plan assets on their books. Although difficult to market to because they tend to be highly self-sufficient, this segment will generate nearly one-fifth (18%) of retail DCIO sales for the average manager in 2011.

The report is based on surveys and interviews with 28 DCIO sales leaders, 10 DC platform gatekeepers, and more than 100 mid-tier consultants, retirement advisers, and dabblers.