The middle market is where it’s at, at least according to asset managers in the 401(k) space.
Research bigwig Cerulli Associates finds that given the saturation of the advisor-sold and institutional DC markets, asset managers are focusing their efforts in the middle market, including 401(k) plans ranging from $25 million to $250 million in assets.
The Boston-based firm asked record keepers about their focus over the next 12 months, and boutique 401(k) consultants were identified as the most influential intermediary within the mid-market, and their primary sales target.
DCIO asset managers also highlighted the mid-sized DC plan market, and in particular, the boutique DC consultant, as the most opportune segment for increasing DC assets and revenue.
“The boutique DC consultant category is distinct in that it works with a wide range of DC plans in terms of asset segmentation,” Jessica Sclafani, associate director at Cerulli, said in a statement. “As boutique DC consultants continue to broaden the scope and size of plans with whom they work, with some even reaching into the large DC plan market, asset managers can no longer afford to ignore them.”
This “influential” and relatively new intermediary category is a bright spot against a difficult 401(k) landscape characterized by negative net flows in the corporate market, fee compression, and an increasingly litigious environment, according to Sclafani.
Although there are no hard and fast rules determining the firms that qualify as boutique 401(k) consultants, they tend to have a legacy in benefits consulting, or are retirement specialist advisors that have evolved to focus almost solely on DC plans and are now attracting plans with significantly greater assets than the typical reach of a retirement specialist advisor.
Some firms are retirement-focused RIAs and others are consultant practices that reside in a wirehouse. Classic examples of boutique 401(k) consultants include CAPTRUST, SageView, and Lockton.
“Given their growing influence, it is imperative that an asset manager’s DCIO sales force and consultant relations team work together to formulate a specific plan as to how the boutique DC consultant will be addressed,” Sclafani concluded.” While some DCIO asset managers have already developed a refined strategy for covering the boutique DC consultant, they are outnumbered by firms that are still in the process of figuring it out or have not yet begun. Cerulli observed several models of coverage and finds the most successful are those with an emphasis on communication and flexibility.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
