Beneficial for participants of bane of their existence—however 401(k) advisors feel about the DOL’s fiduciary rule, it appears to be working in one important area.
“Amid a persisting trend toward lower cost and more transparent share classes, as well as the recent Department of Labor ‘Conflict of Interest Rule,’ the R6 share, which typically has no revenue sharing, has witnessed significant asset growth,” Boston-based Cerulli Associates reported on Tuesday.
Moreover, the low-cost and transparent attributes of the share class resonates with DC plan sponsors to the point that 64 percent of asset managers view large DC plans as the most popular channel for the R6-share class.
Mutual funds endured outflows of $9.8 billion during July, marking the second straight month of outflows. Despite that, capital market performance was enough to propel asset growth to 2.5%, ending the month at $12.5 trillion.
Cerulli also notes that after tepid growth in May and June, ETF assets jumped 5.5 percent in July, to finish the month at $2.36 trillion. While global market performance was a key driver, massive July flows of $45.9 billion were also a contributor.
Assets have shifted to lower-cost share class offerings. In a recent Cerulli survey, firms expect to see the biggest increase in use of I-shares, R6-shares, and a platform/wrap share class—64 percent, 55 percent and 50 percent, respectively.
Additionally, financial advisors report that while 23 percent of their 2015 practice sales was in A-shares, they expect to increase their use of platform and institutional share classes.