The questions are easy. The answers? Not so much—but Boston(ish)-based Beaumont Capital Management is giving it a shot when it comes to fiduciary responsibilities involving target date funds.
According to the tactical ETF investment firm, 401(k) advisors and plan sponsors face “vastly increased responsibilities” in the handling of their target date fund offerings.
Market uncertainty and the Department of Labor’s fiduciary rule mean the popular fund product demands greater involvement and oversight to meet the “heightened complexity and rigor of new DOL compliance standards.”
Beaumont runs through specifics of the DOL’s high-profile new rules and responsibilities for fiduciaries, while offering guidance.
“The target date fund is one of the most commonly utilized offerings in 401(k) plans, and for good reason,” Dave Haviland, BCM’s managing partner, portfolio manager, and author of the new whitepaper said in a statement. “For the participant, they are a straightforward way to start investing for retirement.”
However, he added that since many first-generation TDFs “failed,” including their performance in the 2008 market downturn, the DOL has a close watch on this class of funds.
He argued there are five responsibilities that all retirement plan professionals now must follow. They are:
- Create an objective and documented process for comparing, selecting, reviewing TDFs
- Understand the funds’ investment mix, strategies and risks and how they change over time
- Determine that base expenses are appropriate for the services provided
- Establish if the TDFs are designed to avoid large losses
- Create effective participant communications – no longer just a goal, it is required
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
