Nov 07 2010
Ranking Advice in DC Plans
There are many advice offerings for DC plans. The matrix below reflects the current landscape,
with the "do-it-yourself" vs. "do-it-for-me" models on the x axis and "generic" vs. "individualized"
models on the y axis.
As you can see, almost all plans offer education and guidance. A majority of plans, probably upwards of 70% according to a recent PSCA study, offer investment advice through a modeling or asset allocation tool. According to Schwab, a majority of plans, probably more than 70%, also offer target date or lifecycle funds. These funds provide participants convenient execution (i.e., they can buy one fund that does it all for them) but, aside from age, are not customized to their specific situation.
Managed accounts can provide high levels of both individualization and execution. Interestingly, however, they aren't offered in as many plans as the other options. Plan sponsors might want to consider offering a managed account solution in their plans, alongside other advice options, to meet the needs of plan participants who are looking for a fully individualized and delegated solution.
with the "do-it-yourself" vs. "do-it-for-me" models on the x axis and "generic" vs. "individualized"
models on the y axis.
As you can see, almost all plans offer education and guidance. A majority of plans, probably upwards of 70% according to a recent PSCA study, offer investment advice through a modeling or asset allocation tool. According to Schwab, a majority of plans, probably more than 70%, also offer target date or lifecycle funds. These funds provide participants convenient execution (i.e., they can buy one fund that does it all for them) but, aside from age, are not customized to their specific situation.
Managed accounts can provide high levels of both individualization and execution. Interestingly, however, they aren't offered in as many plans as the other options. Plan sponsors might want to consider offering a managed account solution in their plans, alongside other advice options, to meet the needs of plan participants who are looking for a fully individualized and delegated solution.