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Portfolio > Asset Managers

"Rich opportunities” in the 403(b) market

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Fueled by an equity bull market and greater efforts to boost employee participation, defined contribution plan assets reached $6.4 trillion in 2013, according to new research from Cerulli Associates.

The company’s report, “State of DCIO 2014: The Emerging Role of the Specialist Advisor,” shows private defined contribution (DC) plan assets climbing to $4.7 trillion at year-end 2013. Of the total, $1 trillion in assets were advisor-sold.

“The advisor-sold share of private DC assets remained consistently near 20 percent over the past five years, reaching 21.5 percent in 2013,” the report states. “Mutual funds continue to be the dominant investment vehicle…”

Among the report’s additional findings:

  • Asset managers are directing more resources and attention to the defined contribution investment-only (DCIO) market, target-date funds being a particular area of focus.
  • The DC market is shifting its focus from stand-alone investment decisions to plan wellness. As a result, worksite advisors are increasingly emphasizing DC plan health and employee-participants’ ability to retire.
  • To secure more business, DC plan record-keepers and asset managers should establish robust incentive programs to reward lead-sharing between retail and DCIO-specific sales forces.
  • Third-party administrators struggling to increase revenue should explore partnership, especially with independent broker-dealers.
  • “Rich opportunities” exist for retirement plan advisors in the 403(b) plan market. This is a result of Internal revenue code changes that made the plans —tax-advantaged retirement vehicles used by educational institutions, non-profits, hospital service organizations and self-employed ministers—more like private sector 401(k) plans.

“Consultants reported a significant uptick in activity in the 403(b) space, where plans are transitioning from a multi-vendor to single-vendor relationship,” the report states. “Some asset managers will benefit from this consolidation, as the number of investment options available on the participant investment menu drops…”

See also:

IRS finally answers after-tax IRA rollover question


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