When it comes to defined contribution plan design and management, money isn't everything, says a new survey of DC consultants by Pacific Investment Management Co. LLC.
Costs and fees rank high among the concerns of the consultants and their clients, but other issues such as target-date fund glidepaths have emerged as topping to-do lists, especially in areas that focus on decumulation, said the annual survey, released April 15.
"It is fair to ask if we have seen the high-water mark related to the focus on fees — with plan sponsors now having appropriate governance mechanisms in place," said the report, describing the comments of 32 consulting and advisory firms. Together, the firms serve more than 3,750 DC clients with ag- gregate assets of more than $4 trillion.
"Consultants indicate client focus has shifted, with reviews of the target-date fund now the highest priority, followed by evaluation of plan cost and simplification of investment menus," the report said.
This "pretty significant shift in focus" reflects sponsors paying greater attention to defined contribution plans' efforts to help participants manage spending down — rather than accumulating — retirement assets, said Richard Fulford, the Newport Beach, Calif.-based PIMCO executive vice president and head of U.S. defined contribution.
For example, one question asked: What are the most important factors in evaluating and selecting investment default strategies? Glidepath structure placed first (82% of responses), followed by fees (56%) and probability of meeting retirement income objectives (47%). Multiple answers were permitted.
In the previous survey, fees finished first (83%), followed by glidepath structure (82%) and probability of meeting retirement income objectives (65%).