Skip to main content
MENU
Subscribe
  • Sign Up Free
  • LOGIN
  • Subscribe
  • Topics
    • Alternatives
    • Consultants
    • Coronavirus
    • Courts
    • Defined Contribution
    • ESG
    • ETFs
    • Face to Face
    • Hedge Funds
    • Industry Voices
    • Investing
    • Money Management
    • Opinion
    • Partner Content
    • Pension Funds
    • Private Equity
    • Real Estate
    • Russia-Ukraine War
    • SECURE 2.0
    • Special Reports
    • White Papers
  • Rankings & Awards
    • 1,000 Largest Retirement Plans
    • Top-Performing Managers
    • Largest Money Managers
    • DC Money Managers
    • DC Record Keepers
    • Largest Hedge Fund Managers
    • World's Largest Retirement Funds
    • Best Places to Work in Money Management
    • Excellence & Innovation Awards
    • WPS Innovation Awards
    • Eddy Awards
  • ETFs
    • Latest ETF News
    • Fund Screener
    • Education Center
    • Equities
    • Fixed Income
    • Commodities
    • Actively Managed
    • Alternatives
    • ESG Rated
  • ESG
    • Latest ESG News
    • The Institutional Investor’s Guide to ESG Investing
    • ESG Sustainability - Gaining Momentum
    • Climate Change: The Inescapable Opportunity
    • Impact Investing
    • 2022 ESG Investing Conference
    • ESG Rated ETFs
  • Defined Contribution
    • Latest DC News
    • DC Money Manager Rankings
    • DC Record Keeper Rankings
    • Innovations in DC
    • Trends in DC: Focus on Retirement Income
    • 2022 Defined Contribution East Conference
    • 2022 DC Investment Lineup Conference
  • Searches & Hires
    • Latest Searches & Hires News
    • Searches & Hires Database
    • RFPs
  • Performance Data
    • P&I Research Center
    • Earnings Tracker
    • Endowment Returns Tracker
    • Corporate Pension Contribution Tracker
    • Pension Fund Returns Tracker
    • Pension Risk Transfer Database
    • Future of Investments Research Series
    • Charts & Infographics
    • Polls
  • Careers
  • Events
    • View All Conferences
    • View All Webinars
    • 2023 Defined Contribution East
    • 2023 ESG Investing
Breadcrumb
  1. Home
  2. DEFINED CONTRIBUTION
April 16, 2018 01:00 AM

Consultants question managed account value

Respondents to PIMCO inquiry say target-date funds offer better value

Robert Steyer
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print
    Getty Images

    A narrow majority of defined contribution plan consultants and advisers say managed accounts provide less benefit to participants than target-date funds, according to a survey by Pacific Investment Management Co. LLC, Newport Beach, Calif.

    Fifty-one percent of respondents disagreed with the statement that managed accounts' costs relative to target-date funds "are justified/reasonable given the value to participants," said a report on the survey of consultants who represent more than 17,000 DC plans with total assets exceeding $4.4 trillion.

    Only 3% strongly agreed with the statement, 10% agreed and 35% agreed somewhat.

    Participants' inadequate cooperation with managed account providers is part of the problem. Forty-one percent of respondents disagreed with the statement that participants "tend to add personal information, rendering advice more valuable." Only 6% strongly agreed, 20% agreed and 33% agreed somewhat.

    "We continue to hear that a lot of participants don't do it," Stacy Schaus, PIMCO's executive vice president and defined contribution practice leader, said in an interview. "It's a challenge to educate them. I think there's more work to be done."

    The survey of 77 consultants and advisers also found divergent views about the value of managed accounts. For example, 9% strongly agreed, 22% agreed and 38% agreed somewhat that managed accounts' investment methodology is "equal or superior" to that of target-date funds, while 32% disagreed. Also, 9% of respondents strongly agreed, 26% agreed and 43% agreed somewhat that managed accounts "help increase plan participation and/or contribution levels." However, 23% disagreed.

    Custom strategies growing

    The survey noted a greater use of custom target-date strategies and custom multimanager/white-label strategies. To best assess this growth, PIMCO analyzed responses from consultants who provided information on these topics for this survey and the 2017 survey.

    For sponsors offering custom target-date funds, the number rose​ to 594 from 304. The amount of assets under management for this approach climbed to $211 billion from $153 billion.

    "The single headline word for custom target-date funds is control," said Ms. Schaus, referring to sponsors' desire to manage ​glidepath design and underlying investments. "It can drive efficiencies and can drive down costs."

    Consultants told PIMCO that larger plans are the most likely to go with a custom target-date strategy. When asked what type of target-date strategy they would recommend for plans of different sizes, 53% cited custom approaches for plans with $1 billion or more in assets and 23% supported the strategy for plans with $550 million to $1 billion in assets. Four smaller categories received responses ranging from 8% to 3% for recommending custom target-date funds.

    For sponsors offering the multimanager/white label strategy, PIMCO reported the number rose to 123 from 105. Assets under management rose to $343 billion from $297 billion, based on sponsors who provided information in both survey years.

    Focusing on the future

    When asked to forecast this year, consultants said their clients are focused on fees. Given a list of what they expected their clients' top priorities would be, consultants cited variations of fees three times. Evaluating investment fees ranked first with 63% of responses; evaluating how plan costs were paid placed second (59%); and evaluating administrative fees (57%) tied for third with reviewing target-date funds.

    Cost also figured prominently in why sponsors balk at offering in-plan insurance products, such as annuities.

    When asked about the primary reasons clients might not offer in-plan options, 87% of respondents cited costs, up 13 percentage points from last year's survey.

    Insufficient government support — an enhanced safe harbor — placed second with 62%, the same as last year. Respondents were given a list of 12 choices and multiple responses were allowed.

    The role of a safe harbor has been a sore point for plan sponsors and providers, who have clamored for greater regulatory protection from the Department of Labor. Sponsors want to make sure they aren't liable for the failure of insurers they select if they offer an in-plan retirement income option.

    The third-ranked impediment to offering in-plan products was communication complexity, which was cited by 59% of respondents, up 21 percentage points. Portability received 59% of comments, down 9 percentage points.

    The survey also found that consultants believe in an expanded notion of financial wellness. When asked which services are important​ to include in a financial wellness platform, the top answer was budgeting, followed by retirement planning, emergency savings, debt repayment and financial education.

    Ms. Schaus said she was "delighted" that consultants are focusing on multiple factors that can "undermine retirement planning and savings."

    Related Articles
    Auto features and deferral rates is where action will be in 2018
    BlackRock: DC participants most concerned about monthly income in retirement
    Assets climb 14.9%; goals are steady
    Once adversaries, now collaborators
    Recommended for You
    A handful of $100 bills
    Seneca County moving participants in 457 plan to state deferred comp plan
    parliament 1550_i.jpg
    U.K. considers CDC model for multiemployer plans
    British-Union-Jack-Parliament_i.jpg
    New U.K. regulations allow DC plans to increase illiquid investments
    The Institutional Investor's Guide to ESG Investing
    Sponsored Content: The Institutional Investor's Guide to ESG Investing

    Reader Poll

    January 25, 2023
    SEE MORE POLLS >
    Sponsored
    White Papers
    Show Me the Income: Discovering plan sponsor and participant preferences for cr…
    Morningstar Indexes' Annual ESG Risk/Return Analysis
    The Future of Infrastructure: Building a Better Tomorrow
    Outlook 2023: Opportunity in a volatile world
    Research for Institutional Money Management
    View More
    Sponsored Content
    Partner Content
    The Industrialization of ESG Investment
    For institutional investors, ETFs can make meeting liquidity needs easier
    Gold: the most effective commodity investment
    2021 Investment Outlook | Investing Beyond the Pandemic: A Reset for Portfolios
    Ten ways retirement plan professionals add value to plan sponsors
    Gold: an efficient hedge
    View More
    E-MAIL NEWSLETTERS

    Sign up and get the best of News delivered straight to your email inbox, free of charge. Choose your news – we will deliver.

    Subscribe Today
    December 12, 2022 page one

    Get access to the news, research and analysis of events affecting the retirement and institutional money management businesses from a worldwide network of reporters and editors.

    Subscribe
    Connect With Us
    • RSS
    • Twitter
    • Facebook
    • LinkedIn

    Our Mission

    To consistently deliver news, research and analysis to the executives who manage the flow of funds in the institutional investment market.

    About Us

    Main Office
    685 Third Avenue
    Tenth Floor
    New York, NY 10017-4036

    Chicago Office
    130 E. Randolph St.
    Suite 3200
    Chicago, IL 60601

    Contact Us

    Careers at Crain

    About Pensions & Investments

     

    Advertising
    • Media Kit
    • P&I Content Solutions
    • P&I Careers | Post a Job
    • Reprints & Permissions
    Resources
    • Subscribe
    • Newsletters
    • FAQ
    • P&I Research Center
    • Site map
    • Staff Directory
    Legal
    • Privacy Policy
    • Terms and Conditions
    • Privacy Request
    Pensions & Investments
    Copyright © 1996-2023. Crain Communications, Inc. All Rights Reserved.
    • Topics
      • Alternatives
      • Consultants
      • Coronavirus
      • Courts
      • Defined Contribution
      • ESG
      • ETFs
      • Face to Face
      • Hedge Funds
      • Industry Voices
      • Investing
      • Money Management
      • Opinion
      • Partner Content
      • Pension Funds
      • Private Equity
      • Real Estate
      • Russia-Ukraine War
      • SECURE 2.0
      • Special Reports
      • White Papers
    • Rankings & Awards
      • 1,000 Largest Retirement Plans
      • Top-Performing Managers
      • Largest Money Managers
      • DC Money Managers
      • DC Record Keepers
      • Largest Hedge Fund Managers
      • World's Largest Retirement Funds
      • Best Places to Work in Money Management
      • Excellence & Innovation Awards
      • WPS Innovation Awards
      • Eddy Awards
    • ETFs
      • Latest ETF News
      • Fund Screener
      • Education Center
      • Equities
      • Fixed Income
      • Commodities
      • Actively Managed
      • Alternatives
      • ESG Rated
    • ESG
      • Latest ESG News
      • The Institutional Investor’s Guide to ESG Investing
      • ESG Sustainability - Gaining Momentum
      • Climate Change: The Inescapable Opportunity
      • Impact Investing
      • 2022 ESG Investing Conference
      • ESG Rated ETFs
    • Defined Contribution
      • Latest DC News
      • DC Money Manager Rankings
      • DC Record Keeper Rankings
      • Innovations in DC
      • Trends in DC: Focus on Retirement Income
      • 2022 Defined Contribution East Conference
      • 2022 DC Investment Lineup Conference
    • Searches & Hires
      • Latest Searches & Hires News
      • Searches & Hires Database
      • RFPs
    • Performance Data
      • P&I Research Center
      • Earnings Tracker
      • Endowment Returns Tracker
      • Corporate Pension Contribution Tracker
      • Pension Fund Returns Tracker
      • Pension Risk Transfer Database
      • Future of Investments Research Series
      • Charts & Infographics
      • Polls
    • Careers
    • Events
      • View All Conferences
      • View All Webinars
      • 2023 Defined Contribution East
      • 2023 ESG Investing