Mid-market defined contribution plans (plans with $25 million to $250 million in assets) account for more than $1.2 trillion in assets, or approximately 15.6% of total 401(k)s as of year-end 2023. Cerulli expects competition to intensify in coming years as asset managers seek to gain a foothold in an attractive market, according to The Cerulli Report—U.S. Defined Contribution Distribution 2025.

Cerulli research finds more than 75% of managers view mid-market plans as a meaningful source of growth for their firms over the next two years. With more than 16,200 individual mid-market 401(k) plans as of 2023, Cerulli expects this segment to grow to 17,220 plans by 2029.

“Asset managers find mid-market plans appealing for several reasons,” says Chris Bailey, director. “Mid-market plans are generally more sophisticated in their plan decision making compared to smaller plans while being less fee-sensitive than their peers in the large and mega markets. Asset managers, recordkeepers, and advisors see this as the ‘sweet spot’ in the DC space, with a relatively large number of plans and assets for providers to pursue with scalable product and service offerings,” he adds.

To maintain and grow their presence in this segment, asset managers are focused on the advisors and consultants working with these plans, namely independent DC specialist practices and the retirement aggregators that are acquiring specialist practices. With 85% of plan sponsors working with an advisor or consultant, building relationships with the retirement aggregators and retirement plan specialists serving them is necessary to capture and retain DC assets.

“Advisors and consultants manage $1.4 trillion in the mid-market segment of corporate DC, which translates to approximately 14% of total corporate DC assets and 90% of all mid-market assets,” says Bailey. “In other words, advisors and consultants hold significant sway over this market segment, requiring asset managers and recordkeepers to partner with them to serve plan sponsors and participants,” he adds.

To prevail in the mid-market, Cerulli recommends asset managers focus on engaging advisors and consultants during the product development process and investing in engaging with home offices and advisors in the field.

“Nearly every manager offers aggregators the types of support they value most after access to investment teams: thought leadership, market commentary, and guidance on regulatory changes. To stand out from the competition, Cerulli recommends asset managers focus on: (1) utilizing proprietary data and analyses to provide differentiated insights and perspective, (2) striving to be objective in insights and analysis, and (3) determining how best to reach their key contacts,” he concludes.