Here’s something to give every 401k advisor pause (or should).
“Anyone know the average number of funds offered by the typical 401k advisor?” Christopher Giles, senior managing partner of GRP Advisor Alliance, asked attendees at the firm’s annual summit in Phoenix on Friday morning. “It’s 800. I’ve seen some as high as 1,600. How does one even perform quarterly due diligence on that many?”
It was a lead-in point to a larger discussion of collective investment trusts, the new/not-new product getting a lot of attention in the retirement space of late.
The reason for the renewed interest was explained by Sharon Ennis, a senior vice president with Reliance Trust and someone who Giles claimed “knows more about CITs than any person should.”
“In the early 1990s, banks took their assets out of collective trusts and put them in 40 Act funds,” she explained. “In 2000, the SEC said they could now be processed on platforms, and so that streamline in operational ease, combined with demand for lower fees, means they’re now moving in the opposite direction.”
She also busted a popular myth; that CITs are less regulated than other products, noting that they’re overseen to one degree or another by the SEC, IRS, DOL and banking regulators.
“CITs have been around for 75 years, but like the old adage says, everything old is eventually new again, and that certainly applies to CITs,” she quipped.
Giles introduced a list of industry challenges for the 401k space, which he said CITs address. They include:
- Advisors should bring innovative ideas, programs and investments to their clients
- Employees, regardless of employer plan size, should be treated equitability
- Plan design and lineups are continually changing
- Advisor may need to streamline processes
So how do advisors innovate in light of these challenges? Giles added the following:
- Be innovative advisors!
- Look toward the future and changing dynamics of the largest plans
- Aggregate purchasing power (our industry’s version of 1,000 lbs. of seeds)
- Identify and forge strategic partnerships and share a common goal
- Create simple processes and messaging