Spending Increases on DCIO Efforts Fueled by Target-Date Fund Growth

According to a Sway Research press release, much of the spending increases are being directed at new sales force hires and marketing programs designed specifically to support retirement plan advisers.

Chris J. Brown, principal of Sway Research, said in the press release that “some of the increase in spending is in response to mounting competition from other asset managers as well as increased flows into proprietary Target-Date portfolios, all of which are placing greater pressure on DCIO executives to meet aggressive sales goals.” Nearly one-third of the fourteen managers surveyed by Sway for this study did not expect to meet 2008 DCIO sales goals, even before the fall credit crisis depressed the U.S. equity markets.

The growth of Target-Date funds has already begun to impact flows from DC plans into investment-only products. According to the gatekeepers from nine leading DC platforms that took part in a survey for the Sway study, assets under administration invested in Target-Date portfolios will increase from an average of 12% currently to 31% by 2015. The Sway report says both DC platform gatekeepers and retirement advisers overwhelmingly prefer using Target-Date portfolios as a QDIA option.

The study found a significant gap in DCIO productivity among investment management firms, with leading firms generating well-over $1 billion of sales per salesperson – four times as much as firms at the low end of the range. “This suggests that even without another increase in spending in 2009, many managers are in a position to enhance DCIO productivity and profit margins by improving the ways that sales and marketing resources are being used,” Brown said.

Based on surveys and interviews of DCIO sales executives, DC platform gatekeepers, and retirement advisers, the study, titled Best Practices in DCIO Sales and Marketing: Harnessing Value-Add Programs to Build Brand With DC Platforms and Intermediaries, features key DCIO business benchmarks, such as annual DCIO sales and marketing spending, staff headcounts across function, and sales force productivity. The report also utilizes feedback gathered from DC gatekeepers and retirement advisers to provide best practices for asset managers to establish and enhance relationships with these key audiences.

More information is at www.swayresearch.com .