Starting in January 2014, 51% of retirement plan sponsors will change their investment lineups, paving the way for more mutual funds to fill their needs, according to a Cogent Research study.

Why? Well, after the enactment of the Department of Labor's Employee Benefits Security Administration final fee disclosure regulations last summer, plan sponsors now have greater transparency in the investments they choose, and are now better educated shoppers.

But is this an opportunity for defined contribution investment only providers to increase their presence on retirement platforms or does this signify stronger winds of change blowing through the retirement space in the form of a 12b-1 fee overhaul?

"We found in our study that a lot of plan sponsors are, as a result of the fee disclosure requirements that were enacted last year, evaluating any and all ways they can not only comply with regulations, but reduce plan costs and still offer an optimal plan design and investment options to their participants," according to Kathy York, vice president, syndicated division of Market Strategies International, the parent of Cogent Research, and the author of the study.

York said that plan sponsors are sticking with their plan providers and looking to change their investment menus as a result of the regulations. "We have a companion study where we look at the recordkeeping side of the DC business [but] we didn't see many plan sponsors really looking at changing their plan provider. So we think what is really going on is a way to reduce plan costs by adjusting their investment menu. The fee disclosure requirements were enacted last year, and plan sponsors are anticipating more modifications to their investment lineups this year than last year. These two events really seem to correlate."

With this re-shuffling of the investment decks there will be opportunity for DCIO providers to sell their wares on retirement plan platforms. "What we found is plan sponsor satisfaction overall with the investment managers is mediocre," said York.

"The industry average for satisfaction with providers is 51%, though this does vary by specific firm. With this and the propensity to be re-evaluating or modifying their investment lineup it certainly does present an opportunity for asset managers trying to get into or increase their presence in this space."

Russ Shipman, senior vice president and managing director at Janus Capital Group, said that to some extent products have become commoditized so his firm is focusing on providing products that overall "give a smoother ride to participants with less volatility." He also noted that the next great opportunity for DCIO providers, a few quarters down the road, could be a move toward open architecture target-date funds.

Shipman cited a bullet point in EBSA's bulletin put out in February 2013 that gave insight into where the government may take a more active hand in the future. For example, one of EBSA's bullet points advised plan sponsors to: "Inquire about whether a custom or non-proprietary target date fund would be a better fit for your plan."

"We and some of our peers in the industry-I know PIMCO has been handing out materials on the subject at every conference-believe this could be a great opportunity in the future for DCIO providers with a more open architecture approach on recordkeeping platforms," said Shipman.

Fred Barstein, chief executive officer of The Retirement Advisor University at UCLA Anderson School of Management Executive Education, which is a retirement planning certification program, said that plan sponsors' discussion of fees will go much deeper than the re-evaluation of investments.

"I would take the view that for DCIO providers to compete on price rather than the value of the funds is dangerous. I don't think that is what they want to focus on," said Barstein.

"The fee disclosure began the discussion among plan sponsors about the fees they are paying for the funds. The next question should be 'Are they [fees] reasonable?' and 'Should these fees be equal for all participants?' "

According to Barstein, plan sponsors are beginning to wake up to this point and there is a lot of discussion about revenue sharing by participants. "Just to say the fees are high is not looking at the actual problem," he stated.

Shipman said that fees are certainly on the mind of Janus and other DCIO providers. "After the 408(b)(2) and 404(a)(5) regs became final last summer there is definitely an awareness of fees. I don't want to say we've gone from fee awareness to fee aversion though," he added.

"Plan sponsors want products with as clean a fee structure as is possible," Shipman said. "With this focus on fees, we've seen more business with the no 12b-1 fee N shares of our funds that we began marketing in May of 2012. (At Janus the N shares are comparable to R6 shares at other providers.) There are currently $2.5 billion invested in this share class."

Matt Smith, managing director of Retirement Services at Chicago-based BMO Global Asset Management, said he has also seen more interest in R6 shares. He noted that fees will have to come from another source, such as direct payment by the plan sponsor or a separate fee for participants. While this will simplify the fees in reports to participants, he said it will not always lessen the overall plan fees.

"Fee disclosure has raised the awareness of plan sponsors. They may be looking for a better deal on fees and in the end this may trigger a re-evaluation of the plan investments as a whole," Smith said.

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