As more and more plan sponsors begin to consider hybrid qualified default investment alternatives to help their 401(k) participants tailor their investment strategies, Principal Financial Group officially launched the “Principal Intelligent QDIA” at the NAPA 401(k) Summit in San Diego this week.
Des Moines, Iowa-based Principal Financial Group said plan sponsors that choose Principal Intelligent QDIA will provide participants with a path to greater personalization as their careers and lives evolve since the hybrid QDIA offers both target date strategies as well as a managed account service in one default option.
Unless a different investment election is made during enrollment, participants younger than the plan’s set transition age (e.g. 45 years old) will be defaulted into a target date fund. Once participants reach the plan’s set transition age, they will automatically move to a managed account service that will enable tailored investment strategies that consider more than age by using additional factors such as contribution levels, account balance, and Social Security benefit.
Participants can further refine the strategy by inputting additional financial and goal-based information such as other retirement accounts, desired retirement age, planned retirement expenses, and lifestyle in retirement.
“We know from research and our direct conversations with customers that personalized investment advice has become a need for retirement savers,” said Brett Fisher, head of investment product strategy for Retirement and Income Solutions at Principal. “Principal Intelligent QDIA can help participants feel more confident in their financial futures by getting them started on a savings path for retirement before ultimately helping them manage the wealth they’ve accumulated.”
Hybrid QDIAs have become more attractive over the past two years. According to Cerulli and Associates research, the number of plan sponsors adopting them as the default investment option increased 67% year-over-year from 2020 to 2021. Going into 2023, 86% of plan sponsors and 76% of financial professionals Principal surveyed agreed the most common default option by 2030 will likely be a target date fund with a managed account service.
Participants also acknowledge the value of advice, indicating their investing confidence increases from 35% to 65% when receiving professional help.
“Our ultimate goal is to give participants a holistic view of their financial outlooks so we can help them determine what may be necessary to reach their retirement goals,” Fisher said. “The more personalized and tailored those experiences can be, the better outcomes we believe can be created.”
SEE ALSO:
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• Hybrid 401(k)s, Protected Income and More: Quick Takes from the VCI Leaders Summit
• Next Retirement Reforms Need to Be ‘Smart’ Defaults: Shlomo Benartzi
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.
