Industry Insight from Fred Barstein
Evolution of Defined Contribution Advisors - 2010 DCP Advisor Study

The recently released 2010 DCP Advisor Study, now in its fifth year, focuses primarily on advisor satisfaction with services provided to them by record keepers.  Along with satisfaction of the major areas of service (see complete list of record keepers profiled below), the DCP Advisor Study provides an interesting profile of DC advisors and demonstrates the maturation process of this evolving profession since 2006 when the Study was first published.

Not surprisingly, the level of experience for DC advisors in the financial industry has progressed dramatically with a 100% increase in years selling DC plans, as blind squirrels continue to get weeded out and barriers to entry increase.  The ranks of RIA’s have doubled at the expense of insurance advisors and benefit brokers.  Additionally the demise of wire-houses has been greatly exaggerated with little if any change since 2006 – independents have gained market share by about 10% with insurance agencies losing even more.  Payouts have increased for DC advisors by 15%, while the move to a pure fee based structure, though not dramatic, is up over 20% in the last five years.

Most dramatic is the success of DC focused advisors in the face of one of the worst markets in over 75 years.  Total commissions for DC advisors are up 50%, while DC commissions are up almost 100% since 2006.  Given market conditions and price compression, it is not surprising that total assets under management are up over 100% with DC assets up over 200%.  This means that advisors have had to work harder to make more or just stay even.  77% of advisors surveyed work primarily in the under $10 million market and just 4% work in the over $50 million.  The focus for DC advisors is squarely on their bread and butter DC plans with interest in non-qualified plans and rollovers waning over the past five years.  More advisors disclose fees to their clients, but fewer advisors believe that their clients understand what they are paying advisors and providers alike.  There is no change in the number of advisors that consider themselves to be a fiduciary since 2005, but a significantly larger percentage of their broker dealers acknowledge their status.  Almost 30% more new money is going into target date funds since 2009 and more women have entered into this male dominated profession since 2006.

Though few shockers in the profile, the 2010 DCP Advisor Study provides an interesting snapshot into the continuing evolution of a still nascent profession.  We expect more concentration of plans and even more assets in the hands of the Elite 5000[1] DC advisors and more advisors to grow into this group, swelling it to 10,000 in the next three to five years.  Even as retirement income intelligencia and the Obama administration tries to move the focus to the distribution phase of retirement, clearly these very busy and in-demand DC advisors are still very focused on the accumulation phase.

Return to Newsletter