Advisors Expect TDFs to be Primary Vehicle for Alternative Assets in 401(k)s
Retirement plan advisors expect target date funds—custom or off-the-shelf—to be the primary vehicle for alternative assets in DC plans implementation, according to the 2025 Defined Contribution (DC) Consultant Study, released today by T. Rowe Price.
“… consultants and advisors stand ready to expand their product and service offerings to support plan sponsors in navigating an increasingly complex landscape…”
Jessica Sclafani, T. Rowe Price
The study reflects viewpoints from 36 top DC consultants and advisors, covering a wide range of topics including expectations for the implementation of alternative assets in DC plans (new this year); target date solutions evolving to incorporate retirement income; managed account use and positioning; and renewed interest in capital preservation investment options in a shifting rate environment.
“Results from the 2025 DC Consultant Study depict an industry poised for change. We see this reflected in consultants’ and advisors’ evolving views on private assets in DC plans, to their consideration of target date solutions that can support participants in both the savings and spending phase, and to exploring the role of managed accounts and advice,” said Jessica Sclafani, Global Retirement Strategist T. Rowe Price. “Our findings show that consultants and advisors stand ready to expand their product and service offerings to support plan sponsors in navigating an increasingly complex landscape – both from investment and regulatory perspectives.”
Alternatives and obstacles
Survey respondents anticipate little support for offering alternative investment strategies as stand-alone options in a plan. When asked to indicate which alternatives are most likely to be incorporated into DC plans over the next 12-24 months, data revealed a noteworthy year-over-year increase in average expectations for implementation of private credit and private equity.
High fees were identified by 72% of respondents as a barrier to implementation of alternative investments in DC plans, followed by liquidity concerns (44%), and operational complexity (39%).
Retirement income
Retirement income services and products continue to slowly gain traction, while the landscape has become increasingly complex. Respondents indicated a significantly lower percentage of their DC plan clients do not have an opinion on retirement income, compared to four years ago.
Consultants and advisors identify a systematic withdrawal as the preferred feature for delivering income to retired DC plan participants, garnering an average rating of 3.2 on scale of 1-4, 4 representing most appealing. From there, respondents assigned the highest average rating to target date solutions that incorporate retirement income, like partial annuitization or a managed payout capability.
Managed accounts
Consultants and advisors are also focused on managed accounts and their ability to offer a more personalized investment experience. Results showed more than one-third (37%) of respondents offer a proprietary managed account solution, which is most commonly positioned as an opt-in option on the investment menu.
There is also neutral to slightly positive support to use managed accounts in dynamic QDIAs, where participants are initially defaulted into target date solutions and at a later age are re-defaulted into a managed account.
Capital preservation options
Respondent firms expect renewed interest in revisiting plans’ existing capital preservation investment options, reigniting the debate between stable value and money market funds.
This is primarily motivated by today’s evolving interest rate environment, which has created an atypical situation where money market fund yields are outpacing stable value crediting rates—a dynamic that has only occurred two other times over the past 29 years. The data also reflects some interest in how best to use capital preservation products like stable value in other investment options, such as target date funds, managed accounts, and retirement income products.
Additional key findings
New this year, the study explores the expanding scope of student debt and emergency savings programs, and adoption of artificial intelligence (AI) tools as they pertain to employer-sponsored retirement plans.
Around 85% of respondents believe the implementation of in-plan student debt programs may increase, while 70% believe the same for in-plan emergency savings solutions.
Close to half (44%) of respondents said they are still evaluating AI use cases, as tools like chatbots, investment education, and real-time Q&A are gaining traction.
Other key findings include:
- There is strong support from consultants and advisors for blended target date solutions, constructed with both active and passive investment strategies.
- More than two-thirds (73%) of respondents pointed to a “greater focus on fixed income diversification opportunities” driving their evaluation of the asset class.
- Respondents were more likely to prefer active management in credit-oriented fixed income sectors, including bank loans and floating rate (86%), high yield (85%), and emerging market debt (84%).
The executive summary, available here, includes more details on the findings..
The 2025 Defined Contribution (DC) Consultant Study includes 36 DC consulting and advisory firms (81% consultant, 19% advisor) representing nearly $9 trillion in assets under advisement (AUA). Respondent firms’ AUA reflects over 70% of the $12.5 trillion DC plan market.
SEE ALSO:
• Goldman Sachs, T. Rowe Price Team Up to Sell Private-Market Products for Retirement and Wealth Investors
• Guaranteed Income Features in Target Dates Exceed $100B
• Managed Account Usage Shows Positive Impact on Retirement Savings
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
