New results recently reported by NAPA indicate that most 401(k) consultants support additional services in DC plans.
PIMCO’s 12th annual Defined Contribution Consulting Support and Trends Survey included 77 consulting firms, representing 17,000 plan sponsors with $4.4+ trillion in plan assets. 64% of those responding indicated they think plans should offer a “separate retirement income tier” that might include retiree-focused products and services.
Reportedly, 67% of DC assets are held by participants 50+ years old and PIMCO suggests that “…401(k) plans will need to tailor their offerings further…to support the distinct needs of those no longer working. “Right” retirement income investments need to be researched, but should include no additional fiduciary risk, and liquidity and inflation protection to retain participants past retirement.
Here are some of the important results:
- 80% of respondents liked adding a retirement education tool
- 77% indicated allowing distribution flexibility
- 76% would like to see added retirement-focused investment options such as
- At-retirement target-date vintages
- Cash Management
- Income/multi-sector fixed income strategies
The past year has shown growth in consultants providing more discretionary services ranging from management replacement search decisions through monitoring recordkeepers. Respondents indicated they expect a growth of clients using discretionary services by 2020 (to 23%, up from the current 11%). A full 90% of respondents believe that “perceived mitigation” of fiduciary risk, is one of main motives that will impel plan sponsors to OCIO.
Nearly all respondents continue to recommend auto-enrollment with a 6% starting contribution. About half, indicated raising the cap above the 10% 2018 level and including some form of a brokerage window.
For details, see the NAPA Net article of 4/23/18 – “Most 401(k) Consultants Support Additional ‘Retirement Tier’ – NAPA Net, by Ted Godbout, go to www.napa-net.org/news/managing-a-practice/industry-trends-and-research/most-401k-consultants-support-additional-retirement-tier