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Where Have All the DB Players Gone? DCIO

by Sean

According to a recent study by Sway Research, "asset management firms are earning average margins of 25% on DCIO business versus roughly 18% in markets, such as mutual fund wrap and sub-advisory, and only 12% on the SMA business." As such, major defined benefit players such as BlackRock, Goldman Sachs, and PIMCO (among many others) are making a major push into the $1.7 trillion defined contribution investment-only business. In so doing, they'll be up against entrenched players like Capital Research, Fidelity, and Vanguard.

So what is it going to take for these firms to be successful? Here's the short list of things firms must consider:

• Establishing strong brand visibility among plan sponsors
• Gaining access to the large, open-architecture platforms
• Rolling out new products that meet plan participants' demands for income protection and generation over specific time horizons
• Increasing collaboration among historically channelized institutional and retail distribution and operations functions

In an environment where, according to kasina's "Future of Distribution: Stay the Course or Innovate," 90% firms are experiencing declining margins, firms with strong institutional investment management capabilities should take a hard look at the DCIO space.