What You Need to Know
- As firms absorb smaller ones, the trend is especially evident in the $25 million to $500 million segment, a Cerulli report found.
- DC plan intermediaries range from broker-dealer-based advisors in the micro plan market to institutional investment consulting firms at the larger end.
- Many aggregator firms have taken an institutional approach, centralizing the due diligence and investment analysis at the home-office level.
RIA aggregator firms continue to vacuum up smaller outfits in the defined contribution space, giving them greater influence in the DC market, particularly in the $25 million to $500 million segment, according to a new report from Cerulli Associates.
Because of this market concentration, defined contribution investment-only managers must tailor their distribution strategies to the needs and objectives of RIA aggregators and other important DC plan intermediaries, the report said.
RIA aggregators such as Focus, Mercer and Hightower have been in a feeding frenzy this year, buying up firms across the U.S. The number of total deals in the RIA industry has hit record highs in 2021.
More than 80% of corporate DC plan assets are mediated by advisors or consultants, according to the report. Considerable diversity exists among DC plan intermediaries, ranging from broker-dealer-based advisors in the micro plan market to institutional investment consulting firms at the larger end of the market.
“More than ever, DCIO asset managers must hold a keen understanding of these various intermediary types, the needs of their plan sponsor clientele, and how to best engage with them,” Shawn O’Brien, senior analyst at Cerulli, said in a statement.
Managers are keenly focused on RIA aggregators’ growing influence in deciding DC plan investments. Cerulli’s research found that 66% of managers believe that aggregators have become a primary influencer in deciding DC plan investments in the $25 million to $250 million segment.
For plans in the $250 million to $500 million range, this rises to 68%.