Editor’s note: This story was updated per corrections requested by Grey Goose.
Here’s the thing: if you don’t bring up collective investment trusts (CITs) to clients, someone else will.
It was among the key takeaways of a panel discussion Saturday at the annual GRP Advisor Alliance summit in Coronado, Calif.
They’re nothing new but nonetheless gaining momentum in the 401k space for various reasons—above all, their competitive price point.
Moderator Patrick Morrell, retirement plan consultant with New York-based Renaissance Benefit Advisors Group, began the discussion not with a definition of CITs but instead a metaphor he heard during a workshop at the conference Friday.
“Who shops at Costco?” he asked the audience. “Who buys vodka at Costco? What kind of vodka do you buy?”
Bargain boozehounds among the bunch shouted Kirkland, a brand often compared to Grey Goose (as both are manufactured in the Cognac region of France).
“Oh my gosh, you’ve now gotten a $50* bottle of vodka for $24,” Morrell said. “Same product, same result, different package.”
His point: along the same lines, CITs are an extension of mutual funds. And while it seems the industry is in agreement that CITs are lower cost, better performing vehicles that are gaining in popularity, Morrell asked the panel for insight into how advisors are introducing the product to plan sponsors and committees and what challenges they’ve faced when doing so.
The overall verdict?
401k advisors aren’t facing much pushback at all. CITs are going over swimmingly with investors, and the panelists believe it boils down to cost.
Today’s investing environment is breeding bargain shoppers as price compression continues driving costs down and creating an increasingly competitive marketplace.
For those reasons, “utilizing CITs have been a benefit to winning business,” said panelist Brian Raymond, CIO of Alliance Benefit Group of Michigan.
To that Alex Assaley, fellow panelist and managing principal of AFS 401k Retirement Services, added: “The ability to share a story with [clients] on ways in which we can find efficiency in pricing for best-in-class investment options was a really great way to insulate our relationship…one additional way to stay in front of and bring new ideas and bring opportunities for our clients and retirement committees to become more efficient in the pricing structure of their plans.”
Fellow panelists agreed and reiterated Raymond and Assaley’s opinions, a response we’re assuming wasn’t exactly expected by Morrell. But that being the case, he followed up by asking the advisors if they then use CITs to prospect and open doors with clients.
The experts were in agreement once again: no, in fact, they don’t.
When competing in finals presentations and drafting RFPs, where competition is stiff, advisors of course should be able to check off that box and demonstrate that knowledge, they said.
However, “anybody trying to lead with ‘I have a better investment lineup,’ you’re not going to get across the threshold of the front door,” said Steven Glasgow, executive vice president of Janney Montgomery Scott LLC.
Instead the panel collectively prefer to use CITs as a tool to demonstrate their expertise and value, as well as poke holes in what clients or prospects are currently doing in their plans.
*Days later we were contacted by Grey Goose with a request to clarify its price point. According to 20somethingfinance.com, a 1.75-liter bottle of Kirkland Signature French Vodka is $24.99 (price may vary). The same size bottle of Grey Goose is $40.99 (price may vary) on totalwine.com.
Jessa Claeys is a writer, editor and graphic designer.
