The latest research from global research and consulting firm Cerulli Associates finds that evolving qualified default investment alternatives (QDIA) structures and retirement income flexibility are two “emergent” trends for the defined contribution (DC) industry in 2017.
“Critics deride target-date funds for their one-size-fits-all structure,” Bing Waldert, managing director at Cerulli, said in a statement. “Simpler managed accounts and other innovative products, which transition participants into managed accounts, seek to provide superior retirement solutions without added fees.”
“Asset managers should closely watch product development in QDIA trends in the DC market,” Waldert continued. “These products represent an opportunity for asset managers with capabilities in the multi-asset-class space. Multi-asset-class solutions are one of the key ways in which asset managers are redistributing their intellectual capital to compete against the continuing rise of passive products.”
Cerulli believes the retirement income space in 401k plans is ripe for product development, particularly for insurance companies that continue to experience pressure on their legacy accumulation-oriented annuity business.
“Nearly half of mega plan sponsors believe that participants should leave their assets in plan at retirement and take income from the 401(k),” Waldert concluded. “The second key development to watch in mega plans is to see whether they adapt to become a retirement income platform. 401k plans do not provide the desired flexibility for retired investors to use them as an income platform. Consultants should work with plan sponsors to modify plan documents to allow greater flexibility.”
The first quarter 2017 issue of The Cerulli Edge – U.S. Retirement Edition discusses how plan sponsors and service providers are examining the role of third-party administrators, small 401k plans, retirement income, and QDIAs when planning for their future.