PLANSPONSOR - October-November 2022 - 24

INVESTMENTS |COVER STORY
improved, Toledano says. " I think you need to start with, 'What
kind of positive impact on projected outcomes are we seeing?'
" You also can [assess] whether participant behaviors have
improved, such as, has there been an increase in those participants'
contribution rates? How many people have updated the
managed account provider's system [with information about their
outside assets]? And how many participants went to the website,
phoned the call center, or had a virtual or in-person meeting with
the managed account provider? " he says.
The additional services for participants will become the
most important value differentiator among managed account
providers, Esselman says. " In the future, I think it really will be
that they're trying to build people their own financial advisory
program experience, " he says. " At some point, maybe five or 10
years down the road, the industry will be giving away personalized
asset allocations for free. We're not there yet, but we will be.
It's everything else-the participant services-that will distinguish
the managed account providers. " -Judy Ward
When to Consider a Dynamic QDIA
W
They combine the best of two investment types
hile target-date funds solved many problems over the
years-e.g., providing a simple investment solution
for participants confused by plan menu choices and
moving them, via an adjusted glide path, into funds appropriate
for their age-there is also, increasingly, an industrywide recognition
that one size does not really fit all. As participants grow
older and closer to retiring, their financial lives often become
more complicated, requiring more customized solutions than a
target-date fund can provide.
In response, some plan sponsors are looking into offering
multiple qualified default investment alternatives, including
managed accounts, in order to serve the needs of multiple
cohorts of employees. " We've been talking to advisers about
'dynamic QDIAs,' " says Michael Doshier, senior retirement strategist
at T. Rowe Price Intermediaries in Baltimore. Typically, the
scenario discussed involves the automatic enrollment of young
participants into a TDF; then some trigger-such as age, account
balance or some combination of key factors or life events-causes
participants to get automatically shifted into a managed account
solution, he says.
" There's a uniform belief now in the industry that the
single, blunt-force instrument of automation is perfectly fine
for a 25-year-old but that doing the same things for a 65-year-old
could be dangerous, " he says.
Under the Pension Protection Act of 2006, plans have three
options for a QDIA: target-date funds, managed accounts and
balanced accounts. While target-date funds remain the primary
choice for most plan sponsors, managed account funds have
evolved in recent years, with new technology bringing down the
costs associated with them. But, for now, when plan sponsors use
managed accounts as their QDIA, most default all participants
24 PLANSPONSOR.COM October - November 2022
into them, rather than starting the process with a dynamic
QDIA, also known as a hybrid QDIA.
A Demand for Personalization
" Sponsors recognize that participants want personalization and
that the managed account programs have come a long way in
terms of the data points and the personalization, and customization
has increased, " says Nathan Voris, director, investment
insights and consultant services at Schwab Retirement Plan
Services Inc. in Richfield, Ohio. " So, you're seeing more adoption
there. More advisers are also leveraging managed accounts
as a tool in their tool kit or building a collective investment trust
they can use in a managed account. "
Empower Retirement was the first recordkeeper to introduce
dynamic QDIAs, in 2016, and other recordkeepers, including
Fidelity Investments, Schwab and Principal Financial Group
followed suit.
" Advisers are taking a much more active role, and that's
driving adoption of these QDIAs, " Voris says. " We're seeing
more and more plan sponsors, and more and more advisers, ask
questions about our capabilities in this space and exploring it as
an option. "
Voris says multiple QDIAs are one of the top three topics
that come up for discussion with advisers, and interest has
increased significantly over the past three years. That said, adoption
from plan sponsors remains low, he adds. " That's usually
the last part to come. "
An Opportunity for Engagement
Voris says dynamic QDIAs create an opportunity to engage with
participants when they are transitioning from a target-date fund
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PLANSPONSOR - October-November 2022

Table of Contents for the Digital Edition of PLANSPONSOR - October-November 2022

INSIGHTS
INDUSTRY ANALYSIS
RULES & REGULATIONS
UPFRONT
Deep Dive
Managing Volatility
New Solutions
Participant ESG Demands
Good Practices
FIDUCIARY FORUM
INSIDE ANGLE
PLAN PROFILE
PLANSPONSOR - October-November 2022 - Cover1
PLANSPONSOR - October-November 2022 - Cover2
PLANSPONSOR - October-November 2022 - 1
PLANSPONSOR - October-November 2022 - INSIGHTS
PLANSPONSOR - October-November 2022 - 3
PLANSPONSOR - October-November 2022 - RULES & REGULATIONS
PLANSPONSOR - October-November 2022 - 5
PLANSPONSOR - October-November 2022 - 6
PLANSPONSOR - October-November 2022 - 7
PLANSPONSOR - October-November 2022 - 8
PLANSPONSOR - October-November 2022 - 9
PLANSPONSOR - October-November 2022 - UPFRONT
PLANSPONSOR - October-November 2022 - 11
PLANSPONSOR - October-November 2022 - 12
PLANSPONSOR - October-November 2022 - 13
PLANSPONSOR - October-November 2022 - 14
PLANSPONSOR - October-November 2022 - 15
PLANSPONSOR - October-November 2022 - Deep Dive
PLANSPONSOR - October-November 2022 - 17
PLANSPONSOR - October-November 2022 - 18
PLANSPONSOR - October-November 2022 - 19
PLANSPONSOR - October-November 2022 - 20
PLANSPONSOR - October-November 2022 - 21
PLANSPONSOR - October-November 2022 - 22
PLANSPONSOR - October-November 2022 - 23
PLANSPONSOR - October-November 2022 - 24
PLANSPONSOR - October-November 2022 - 25
PLANSPONSOR - October-November 2022 - Managing Volatility
PLANSPONSOR - October-November 2022 - 27
PLANSPONSOR - October-November 2022 - 28
PLANSPONSOR - October-November 2022 - 29
PLANSPONSOR - October-November 2022 - New Solutions
PLANSPONSOR - October-November 2022 - 31
PLANSPONSOR - October-November 2022 - 32
PLANSPONSOR - October-November 2022 - 33
PLANSPONSOR - October-November 2022 - Participant ESG Demands
PLANSPONSOR - October-November 2022 - 35
PLANSPONSOR - October-November 2022 - Good Practices
PLANSPONSOR - October-November 2022 - 37
PLANSPONSOR - October-November 2022 - FIDUCIARY FORUM
PLANSPONSOR - October-November 2022 - INSIDE ANGLE
PLANSPONSOR - October-November 2022 - PLAN PROFILE
PLANSPONSOR - October-November 2022 - Cover3
PLANSPONSOR - October-November 2022 - Cover4
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