PLANSPONSOR - December 2018/January 2019 - 19

Priorities for TDF Selection
ACCORDING to Loren Fox, director of
research for Ignites Research, a top factor
in selecting a target-date fund (TDF) is
its fees: 79% of plan sponsors and 76%
of advisers that responded to the firm's
Tapping Target Date Potential 2018
survey cited a fund's fees as crucial. This
criterion has risen in significance among
plan sponsors; only 63% cited it as crucial
in Ignites' 2016 survey.
Ignites surveyed 250 plan sponsors
from across the U.S. that use targetdate
funds in their defined contribution
(DC) plan, plus those recognized by
sister company Financial Times as Top
401 Plan Advisors-collectively having
a median of $525 million in plan assets
under advisement (AUA).
" Sponsors' priorities differ in
some areas from advisers' priorities, we
found, " Fox says. For example, sponsors'
second biggest concern is the potential
for a target-date solution to generate
retirement income, cited by 71%. Yet only
25% of advisers cited that as a key consideration
in picking a fund, ranking it sixth
overall. Another top priority for advisers
is the glide path, cited by 77%; glide path
is fifth in importance among sponsors,
cited by 59%.
" That is not to say sponsors aren't
paying attention to how fund allocations
shift as participants approach their target
date. It did increase in importance among
sponsors from 2016, when just 36% cited
it, " Fox says. " The shift suggests that
more attention is being directed at retirement
preparedness and how aggressive
funds' glide paths should be. "
Another discrepancy is in the weight
given the choice of active vs. passive funds,
he says. Whether a product uses active funds
or index funds as the underlying investment
was cited by 39% of plan advisers,
while 63% of plan sponsors ranked it as
important. -Judy Faust Hartnett
Plan Sponsors' vs. Plan Advisers' Priorities
When Choosing Target-Date Products
Plan Sponsors Advisers
Fees/Expenses
Retirement income potential
Asset-class mix
Active or passive management
Glide path
Open architecture/Multi-manager form
Source: Ignites Research, Tapping Target Date Potential 2018
79% 76%
71%
68%
63%
25%
54%
39%
59% 77%
29%
56%
Note: Figures represent weighted percent of respondents citing a choice as " very
important " or " crucial. " Respondents could choose their top three priorities.
Annuities
Favored by
The Young
LIMRA Secure Retirement Institute (SRI)
researchers surveyed individuals who
considered but decided not to purchase
annuities to find out why. Forty-two
percent of these consumers said they
were open to the concept of annuities, that
annuities were good products and that
they would consider one in the future.
The main reason this group said they
decided against the purchase was that the
timing was bad (44%). Nearly two-thirds of
this segment is employed, and only three in
10 of the non-retirees plan to leave employment
in the next 10 years. Also, 61% said
having enough money to last through their
retirement is their single most important
objective for their assets in retirement.
On the opposite side of the spectrum,
18% of those who did not buy an annuity
said they would most likely never buy
one. About half of this group is already
retired, and one-third said they plan to
retire in the next four years. A characteristic
of this group is they put the most
stress on controlling how investments are
managed and are more apt to have guaranteed
income through their pensions-
not the case with younger workers.
Defined contribution (DC) plan
sponsors have been hesitant to offer annuities,
for want of a better safe harbor when
selecting a provider-something the Tax
Reform 2.0 legislation may address.
Jafor Iqbal, assistant vice president,
LIMRA SRI, says, " Annuities are unique
investment products, offering a combination
of guarantees-guaranteed income
that investors cannot outlive, protection of
principal from market volatility, or guaranteed
death benefits for beneficiaries.
-Rebecca Moore
PLANSPONSOR.com December 2018-January 2019 17
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