Custom Target Date Fund Recommendations on the Rise

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A growing number of DC specialists—financial advisors managing at least $50 million in DC assets—are now recommending customized funds to their plan sponsor clients, further signaling a potential shift in the target date fund marketplace. In fact, this segment’s customized fund recommendations have increased significantly from 5% in 2015 to 15% in 2016.

What’s more, nearly half of DC specialists (46%) continue to advocate using an external manager for target date funds rather than the proprietary target date funds offered by the current plan recordkeeper. This is further evidence that incumbent recordkeepers must continue to up their game in this increasingly competitive marketplace.

At the individual brand level, DC specialists are equally likely to tap American Funds and Vanguard as their target date fund provider, while American Funds enjoys a stronger advantage across all other DC AUM segments. Emerging DC advisors—financial advisors managing under $10 million in DC assets—also gravitate to Vanguard, Fidelity, T. Rowe and BlackRock when recommending target date fund providers to clients.

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Consideration of target date fund providers remains largely based on fees and long-term performance. However, full-service plan providers and DC investment managers must understand the specific nuances by plan advisor producer and channel to retain and win business.

For more findings from the Retirement Plan Advisor Trends™ report, download a replay of our most recent webinar, Unlocking DC Growth Opportunities in an Evolving Regulatory Era.

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