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Cogent Reports™: Advisors Are Packing DC Plans with Passive Investment OptionsCAMBRIDGE, Mass. --(Business Wire)-- Responding to industry pressure to reduce overall plan costs, including internal management fees, financial advisors are significantly changing their fund lineup to include more passive investment options in the defined contribution (DC) plans they manage. In fact, two-thirds (64%) of advisors with at least $10 million in plan assets now include passive investments on their recommend list, compared with just over half (54%) who did so last year. These and other findings are included in Retirement Plan Advisor TrendsTM, an annual Cogent ReportsTM study by Market Strategies International. Driven in part by the addition of passive investment options, DC plan advisors, on average, now use 5.7 investment managers in the plans they service-a 46% increase over the average of 3.9 managers they were using last year. "Unlike the retail marketplace, where we see advisors consolidating their mutual fund assets with fewer providers, open architecture platforms in the DC plan market are facilitating the expansion of investment offerings, enabling advisors to respond to market demands and client requests with more options, especially choices that provide better value for their plan participants," says Linda York, vice president of the syndicated research division at Market Strategies and lead author of the report. "Increasingly, this is resulting in growing use of indexed funds and heightened competition for actively-managed strategies and target date solutions as advisors pursue the best-in-class providers in each category." The full report, first conducted in 2011, evaluates the competitive position of 47 leading DC investment managers on a variety of metrics, including identifying those managers advisors have recently started or stopped recommending to clients. While American Funds ranked first with 22% of advisors planning to add the firm, second place Vanguard (19%) experienced the most significant year over year increase in momentum. "The surge for Vanguard is a clear result of the increasing prevalence and preference among DC advisors for recommending passive investments within DC plans. At the same time, it's important to note that American Funds has long been recognized as a low-cost active manager, which is helping to insulate the firm from competitors in today's cost-conscious environment," continues York.
DC INVESTMENT MANAGER MOMENTUM: ESTABLISHED DC ADVISORS
^ Significant increase from 2013 About the Retirement Plan Advisor TrendsTM Report Cogent Reports conducted an online survey with 437 financial advisors from August 18 to September 7, 2014. In order to qualify, respondents were required to have an active book of business of at least $5 million, at least a portion of which consists of DC plans. Cogent Reports set quota targets and weighted the data to be representative of the overall advisor universe using the Discovery Data Financial Services Industry database as a sample source. Market Strategies will supply the exact wording of any survey question upon request. About Market Strategies International Market Strategies International is a market research consultancy with deep expertise in consumer/retail, energy, financial services, healthcare, technology and telecommunications. The firm is ISO 20252 certified, reflecting its commitment to providing intelligent research, designed to the highest levels of accuracy, with meaningful results that help companies make confident business decisions. Market Strategies conducts qualitative and quantitative research in 75 countries, and its specialties include brand, communications, CX, product development, segmentation and syndicated. Its syndicated products, known as Cogent Reports, help clients understand the market environment, explore industry trends and monitor their brand and products within the competitive landscape. Founded in 1989, Market Strategies is one of the largest market research firms in the world, with offices in the US, Canada and China. Read Market Strategies' blog at FreshMR, and follow us on Facebook, Twitter and LinkedIn.
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