1. January 14, 2015 1
Key Takeaways
— DCIO profit margins remained
healthy in 2014 but more firms saw
margins slip below 25% than in 2013.
— Corporate DCIO assets will reach
$2.4 trillion in 2014 and grow to
$3.3 trillion by 2017, according
to Ignites Retirement Research’s
projections.
— DC asset turnover in 2015 is
estimated at 6% of assets, which
should result in about $344 billion
in DCIO assets in play. Small and
mid-size plan segments should be
the key generators of opportunities.
The DCIO asset-gathering opportunity has grown over the years with expec-
tations for it to continue in the near term. We expect DCIO assets to grow
by 11% in 2015, providing some compelling opportunities. On the other hand,
profit margins in DCIO seemed to have stalled or tipped downward in 2014. In
this Briefing, Ignites Retirement Research analyzes profitability in the DCIO busi-
ness and projects DCIO asset and sales trends in the coming year. The expected
sales cycle in 2015 looks solid overall. However, we identify some distinct market
segments where the opportunities are most positive.
Our understanding of profit margins and sales targets stems from our recent
survey of DCIO managers. Ignites Retirement Research surveyed top DCIO pro-
viders in October and early November of 2014; surveyed firms represent nearly
$550 billion in DC assets.
DCIO Profitability
DCIO business for asset managers remains a
high-margin business. However, those margins have
narrowed for many firms in our survey. Most impor-
tantly, the majority of firms are no longer reporting
profit margins in ranges above 30%. Indeed, half
of the surveyed firms cite margins on their DCIO
business of 25% or less in 2014, whereas only 17%
of firms had margins of 25% or less in 2013. And
at the upper end, the portion of firms that reported
profit margins of more than 40% dropped from
25% in 2013 to 10% in 2014.
The factors for success have tightened for asset
managers. They can no longer dabble in DCIO and
achieve high levels of success. The market has fast
become very competitive and complex, requiring
significant focus to gain share. This dedicated com-
mitment naturally raises distribution costs to com-
by Tom Modestino, Retirement Research Director
Profitability and Growth
in DCIO

2. Proprietary surveys we’ve fielded include:
• Retail Investors (age 50s & 60s)
• DCIO Managers and Marketing Heads
• DC Recordkeepers
• Specialist Plan Advisorss
• IRA Provider
• Target Date Fund Providers
• Third Party Administrators
• Financial Advisors
Personnel
Tom Modestino is Retirement Research
Director. He has over 20 years’ experience
working for and consulting with financial
services firms on asset-gathering strategies
in retirement markets. Previously, he was
an Associate Director at Cerulli Associates,
where he led the retirement practice. Prior to that,
Tom held senior marketing positions at New York Life
Investment Management, John Hancock and Sun Life of
Canada. He earned his BA from Boston College.
Contact Tom at tmodestino@money-media.com
Loren Fox is Director of Research at
Ignites Research. Previously he was a
senior research analyst at Strategic Insight,
producing market intelligence on the
fund industry. Prior to that Loren was a
journalist, working at Institutional Investor,
Business 2.0, and elsewhere. He earned his BA from Johns
Hopkins University and MS from Columbia University.
Contact Loren at lfox@money-media.com
For subscription information, please contact Ben Northover at BenN@Ignites.com or 212.542.1291
Ignites Research provides actionable, concise analysis
on the retail retirement markets
Our proprietary surveys are complemented by interviews with key executives,
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deliver weekly intelligence on the latest trends.
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Subscribing clients include:
• John Hancock Investments
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• Hartford Funds
• T. Rowe Price
• Allianz Global Investors
• Lincoln Financial Group
• Goldman Sachs
• OppenheimerFunds
• Broadridge Financial Solutions
• Fidelity Investments
• Many more

3. January 14, 2015 3
Source: Ignites Retirement Research
Ranges of Managers’ Avg. Net Profit Margins on DCIO AUM
0%
10%
20%
30%
40%
50%
40% 36% – 40% 31% – 35% 26% – 30% 21% – 25% 0% – 20%
¢ 2014
¢ 2013
30%
0%
20%
17%
10%
42%
20%
17%
10%
0%
10%
25%
pete effectively.
This difficulty in standing out in the crowd has been compounded by an
emphasis on lowering investment management fees. Both sponsors and interme-
diaries are aiming for reduced fees, and DCIO managers felt this pinch in their
profit margins for 2014. DCIO sales executives that we spoke to were not thrilled
by the margin squeeze, but they were reconciled to ever-so-slightly tighter mar-
gins and were not especially concerned about further margin erosion.
One factor that is intensifying the competition is the fact that top DC record-
keepers that also have DCIO operations are rapidly moving DCIO from a loss
leader for them to an integral offering to help stem the lower-margin recordkeep-
ing businesses. Key recordkeepers have dedicated more resources to the effort
through increased hires and reorganizations that stand apart to better compete
with “pure play” DCIO firms.
Our research does show that margins remain healthy. Some 70% of DCIO
managers achieved profit margins of 21% or greater in 2014. This remains a posi-
tive outcome compared to DC recordkeeper margins that now typically hover
just above single-digit percentages.
Redemption rates of DCIO assets deserve careful consideration – and they
have remained largely stable for the industry from 2013 to 2014. Factors be-
hind redemptions include: plans moving to new recordkeepers; asset classes
losing market favor; funds underperforming their peers; sponsors rationalizing
the number of choices in lineups; and new plan advisors demonstrating their
value through plan changes. In our survey, the median overall redemption rate

4. 4 January 14, 2015
0%
10%
20%
30%
40%
50%
Over $2 billion$1 billion – $2 billionUnder $1 billion
Source: Ignites Retirement Research
DCIO Net Sales/Net Flows Targets for 2015, 2014
30% 30%
20%
30%
50%
40%
¢ 2015
¢ 2014
among firms in the first half of 2014 was 24%, compared to 27%
in 2013. The typical industry range for DCIO redemption in a
year hovers between 20% and 30%.
Survey data reveal that smaller IO players suffer higher re-
demptions at nearly twice the rate of large IO players. This did
not improve much from 2013. Smaller firms are scrambling to
sell more with fewer resources. Larger firms have the luxury of
scale that allows higher levels of service for clients.
DCIO assets are less sticky than they were just a few years
ago, as sponsors and intermediaries scrutinize funds more closely and more
frequently. DCIO managers must consider being more proactive in identifying
redemption risk situations at all gatekeeper levels (although sometimes it’s not
possible to prevent redemptions, as Bill Gross’s sudden departure from Pimco
showed). Saving business is always less expensive than winning new assets.
What are firms targeting for sales in 2014 and 2015? It can be difficult to as-
sess hard sales data for DCIO because industry reporting remains limited at best.
In our survey, most firms (70%) had a DCIO net sales target of greater than $1
billion for 2014. As well, 30% of firms targeted sales of less than $250 million.
Many firms were on track to hit or slightly exceed their goals as of late in fourth
At the end of the Briefing you
can download the spreadsheets
underlying the charts in this
piece — for use in your own
internal presentations.

5. January 14, 2015 5
Sources: Ignites Retirement Research; US Dept. of Labor; ICI
Projected Corporate DC and DCIO Assets ($Billions)
$0
$2,000
$4,000
$6,000
$8,000
2017P2016P2015P2014E2013
¢ Corporate DC Assets
¢ Corporate DCIO assets
$4,714
$2,206
$5,191
$2,445
$5,712
$2,719
$6,283
$3,029
$6,832
$3,348
quarter 2014. Interestingly, DCIO managers are optimistic about prospects in
2015. Among our surveyed firms, 70% are targeting more than $1 billion of net
sales in 2015, similar to 2014.
Of course, given the tougher profit margin environment in 2014, it may take
more sales to produce the desired profit level. Fortunately, we expect continued
growth in overall DCIO assets.
DCIO Asset Growth
Total assets in the corporate DCIO market are estimated to have reached $2.4
trillion in 2014, as solid markets propelled growth for the year (the SP 500
index rose 13% in 2014). Corporate DCIO largely comprises 401(k) plans and
some money purchase plans. Our figures would be higher with the addition of
403(b) and 457 markets, but they remain minute DCIO opportunities for now.
The 2014 estimate for total DCIO assets represents a solid increase of 11%,
or roughly $240 billion, from year-end 2013 figures. The five-year CAGR for
corporate DCIO assets was a strong 15% through 2013. DCIO accounts for 47%
of corporate DC assets.
For 2015, we project DCIO assets rising by another 11%, hitting $2.7 trillion.
The institutionalization of DC markets, plan sponsor awakenings to fiduciary
duty and rising influence of specialist advisors drive the rise of DCIO compared
to proprietary assets. We expect DCIO to account for 49% of corporate DC as-
sets – which we expect to rise by 23% to $3.3 trillion in 2017.

6. 6 January 14, 2015
Because we predict DCIO to continue to outpace the growth of corporate DC
overall, DCIO should exceed 50% of corporate DC assets in 2018 and beyond.
While the current trends that are driving DCIO growth may soon begin to crest,
the opening of target-date fund architecture is just beginning to accelerate, and
that should help keep the DCIO market larger than half of corporate DC assets
overall. With the majority of DC flows captured by target solutions, monitoring
the performance of allocation sleeves in these funds will become just as impor-
tant as vetting choices in a plan’s core investment lineup.
DCIO is among the fastest-growing markets for asset managers, driven by
heightened plan fiduciary oversight that includes new fee disclosures. Asset al-
location funds, at nearly 15% median DCIO allocation, are growing in terms of
netting cash flows in plans through auto enrollment features and QDIA options.
Proprietary lifecycle funds (both target date and target risk) hold the largest share
of DC flows. Asset managers wait impatiently for open architecture models to
ignite, with the latest hope resting partly on the Dept. of Labor’s guidance that
urged sponsors to consider multimanager target-date funds.
For DCIO opportunities outside of asset allocation funds, sponsors are shift-
ing away from style-box based builds. Passively managed investments have been
proliferating, especially in large-plan markets. This is leading to fewer oppor-
tunities for actively managed DCIO solutions. Also, small- and midsize-plan
markets are beginning to be affected by the growth of passive as the fee focus
moves down market.
Despite the outward trends of growth in DCIO opportunities, DCIO manag-
ers face a very complex and rapidly changing environment. DCIO teams require
deep distribution expertise that draws on significant resources to effectively
cover a variety of gatekeepers (specialist, recordkeepers, TPAs, consultants and
plan sponsors). DCIO firms are tasked with capitalizing on the most productive
of these relationships amidst a very competitive environment, even as DC flows
favor passive investments and target-date funds. It has become survival of the
fittest for DCIO managers.
Assessing DCIO Leaders
The DCIO market has been a strong revenue generator for asset managers
dedicated to DCIO sales and marketing. But a core group of managers have cap-
tured the lion’s share of asset opportunity in the market. We estimate that the
10 biggest DCIO players control roughly 62% of the DCIO market. These firms
have mastered the challenges of standing out among recordkeeper gatekeepers,
consultants and specialist plan advisors.
Ignites Retirement Research analyzed the estimated leaders in the DCIO space
for 2014. Many of these firms were early entrants into the market and now com-
mand a dominating presence in the space. Overall, the top 15 commandingly
outspend lower-tier players on staff and marketing, leading to the top 15 players

7. January 14, 2015 7
DCIO Market Share Leaders ($Billions)
Rank Company
2014 YE Estimated
DCIO Assets
Estimated
Market Share
1 BlackRock $452 17.4%
2 T. Rowe Price $229 8.8%
3 SSgA $221 8.5%
4 PIMCO $219 8.4%
5 Fidelity $104 4.0%
6 JP Morgan $96 3.7%
7 Northern Trust $93 3.6%
8 Invesco $90 3.5%
9 Wells Fargo $62 2.4%
10 Goldman Sachs $57 2.2%
11 MFS $53 2.0%
12 American Funds $52 2.0%
13 Federated $44 1.7%
14 BNY Mellon $42 1.6%
15 Franklin Templeton $42 1.6%
Source: PlanSponsor, Ignites Retirement Research
controlling 71% of the DCIO market.
These firms benefit from some combination of top-known brands, deep dis-
tribution relationships, legacies connected to target-date funds, and unparalleled
sales forces. They own scalable DCIO asset businesses that generate growing
revenue streams from more stable DC assets that allow their marketing budgets
to grow in tandem. Beyond the top 15, nearly 30 other firms, typically wielding
less-known brands, vie for the 29% of DCIO asset share that’s left.
The firms that generally maintain half of 1% market share or less of DCIO
assets tend to cluster slightly above or below $10 billion in DCIO AUM. Few of
these firms achieve exceptional growth from year to year to break through to
a higher tier (although it’s not impossible, it happens infrequently). We expect

8. 8 January 14, 2015
these firms to be among the early exits from the DCIO business or to signifi-
cantly restructure their DCIO operations (perhaps through MA, such as Nu-
veen’s acquisition by TIAA-Cref). There will be an occasional firm to enter the
DCIO market; BMO Global Asset Management and Nationwide did so in 2013,
but 2014 saw no significant new entrants.
DCIO Sales Potential in 2015
Among the trillions in corporate DC assets, the genuine opportunities will
come from fund/manager turnover – which we estimate will total $344 billion
in 2015. This includes mixes of sponsors switching to new recordkeepers or,
within the same platform, shifting fund mandates. The majority of this turnover
of assets will come from the largest plans with a healthy dose from small and
mid-plans combined.
We expect overall average turnover rates of nearly 6%. As sponsors increas-
ingly seek out qualified expertise for help, intermediaries are shaking up plan
lineups. In addition, advisors and consultants are installing institutional process-
es that raise the bar for asset managers, in turn increasing turnover occurrence.
Turnover rates are expected to be highest in the market segments of plans
between $1 million and $25 million, with rates averaging roughly 10.3%. The
small- and midsize-plan space continues to be underserved, particularly from a
fiduciary standpoint. Turnover of DC plan providers should be relatively high-
er among this small end of the market as retirement plan specialists offering
meaningful fiduciary support take over plans from legacy recordkeepers that
Corporate DC and DCIO Sales Estimates for 2015 ($Billions)
2015 Corporate DC
Asset Estimate
Est. Asset % Turnover
(Asset-Weighted)
2015 Corporate DC
Sales Potential
2015 DCIO Sales
Potential
$1 m $285.6 8.0% $22.8 $11.2
$1m–$5m $628.3 9.5% $59.7 $20.6
$5m–$10m $286.6 11.0% $31.5 $10.9
$10m–$25m $457.0 11.0% $50.3 $19.1
$25m–$50m $294.3 8.0% $23.5 $10.1
$50m–$250m $799.7 5.5% $44.0 $21.1
$250m–$1B $856.8 4.5% $38.6 $24.7
$1B $2,113.5 3.5% $74.0 $49.6
Total $5,721.9 6.0% $344.4 $167.2
Sources: Ignites Retirement Research; US Dept. of Labor; ICI; SPARK Institute

9. January 14, 2015 9
provided less support in arrangements that often bundled investments with
recordkeeping.
The specific DCIO opportunity is smaller in dollar terms than DC asset turn-
over totals because each segment maintains varying levels of open architecture.
Excluding proprietary recordkeeper businesses, we anticipate the genuine level
of opportunity available for DCIO managers in 2014 will be $167 billion.
Some segments will serve DCIO better than others. For example, bundled
proprietary funds (especially in off-the-shelf target-date funds) are still widely
used in small-market and mid-market platforms. And 30% of the DCIO asset
opportunity will emanate from mega-plans with more than $1 billion of assets
–these plans tend to be institutional sales rather than retail DCIO clients and
are typically served by national consultants.
However, 36% of the opportunity for DCIO managers rests in small- and
mid-market plans between $1 million and $50 million. The money in motion
here will be highest, as specialist plan advisors increasingly gain traction in
these segments. In these plan markets, DCIO managers selling actively man-
aged mutual funds must find ways to differentiate their products as both core
options in plan lineups and sleeves inside target-date funds amidst largely closed
architectures. g
Interested in the graphics in this Briefing? Clients can download the spreadsheets
underlying the charts for use in internal presentations. Just click here to download the
Excel file.