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The Line Separating Retail and Institutional Advisory Markets is Blurring

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The once clear-cut distinction between asset managers who serve retail clients and investment consultants catering to institutional customers is blurring, according to a new report.

Cerulli Associates, Boston, arrives at this conclusion in the March 2012 edition of the Cerulli Edge—U.S. Asset Management. The monthly research publication focuses on key U.S. financial services industry trends and topics.

The report finds that mounting profitability pressures and attractive margins are prompting financial advisors, investment consultants and assets managers to secure new sources of revenue by moving beyond their traditional markets. As a result, more retail advisors are moving up-market by pursuing employer-sponsored, defined contribution plan business; and investment consultants are extending their services into the retail market.

Specialist advisors who are registered investment advisors are more likely than other advisors to be focused on the DC plan business.  The report finds that 82% of RIAs serve the DC plan market. This compares with 70% among insurance broker-dealers, 67% among dually registered advisors, 65% among independent and regional broker-dealers, 46% among wirehouses and 40% among bank broker-dealers.

Cerulli estimates that institutional assets comprise the larger share of the market at $17.3 trillion, growing 6.3% during the prior year. Retail assets, by contrast, account for $10.1 trillion and rose by 7.2% over 2009’s figure.

The distinction between advisor and consultant and institutional and retail requires asset managers to reconsider their distribution organizations to serve the DC markets, the report says. Asset managers indicated that they were still growing their DC teams in 2011, with the largest increases planned for intermediary sales and internal sales positions.

Cerulli estimates the investment-only opportunity in the less than $10 million segment of the DC plan market at nearly $356 billion.

This is greater than the opportunity in the $10 million to $50 million segment of the market, the report adds. A smaller number of plans in the $10-$50 million segment represent an investment opportunity of almost $201 billion, Cerulli says.


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