PLANADVISER - May/June 2018 - 26

feature
How DCIO providers
position themselves to stand out
FoCuSCuRrEnT
T
he latest research from defined contribution investment
only (DCIO) distribution researcher Sway
Research found that the long-running bull market
and improving net sales are boosting DCIO asset bases. As
of a year ago June 30, the average manager experienced
12-month asset growth of 12%. Sway further projects that,
by the end of 2022, DCIO assets will soar 45% to $5.5 trillion,
for a 54% share of the retirement asset market.
Still, DCIO providers acknowledge that they face challenges
in a crowded marketplace, with the majority of
investment sales going to low-cost index funds. Nonetheless,
by highlighting products that are unique, and supplying
support to retirement plan advisers, DCIO providers are
finding that they can stand out.
" The landscape has gotten much more complicated due
to the fiduciary rule changes and how the market has
reacted to them, " admits Mike DeFeo, managing director
and head of DCIO at Voya Investment Management in New
York City. " It has become much harder for DCIO providers to
sell product because sales are less transactional and driven
more by the home office in terms of gatekeepers and getting
shelf space. But because it is getting harder to earn the right
to be included on those approved lists, here at Voya our key
account people are spending a lot of time with those gatekeepers
to gain approvals, " he says.
When working with the gatekeepers, Voya's sales team
focuses on " everything a professional buyer would be interested
in: consistency of performance, investment philosophy,
and cost, to deliver the best value they can, " DeFeo says. " This
has resulted in an increased use of passive and index options,
as well as clean shares without revenue sharing. "
While DCIO providers say the Department of Labor (DOL)
fiduciary rule has negatively affected their business in
terms of the majority of flows to retirement plans outside of
target-date funds (TDFs) going to low-cost index funds, they
also say it prompted many plan sponsors to overhaul their
investment menu, and this movement has created opportunities
for DCIO providers.
Fidelity Investments' most recent survey of plan sponsors
found that 92% of plans consult an adviser. " As they
work with advisers, sponsors want to understand how effectively
their plan is helping participants adequately prepare
for retirement, and this provides an opportunity for both
the defined contribution [DC] and DCIO market, " says Jordan
Burgess, head of specialist field sales at Fidelity Institutional
Asset Management in Smithfield, Rhode Island.
" Eighty-two percent [of plan sponsors] reported making
a plan design change, with 56% of the changes to increase
26 | planadviser.com may-june 2018 Art by Armando Veve
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PLANADVISER - May/June 2018

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