PA: How did you develop the program?
SOKOLIC: We partnered with Jason
Roberts and the Retirement Law Group.
We said, “Here’s what we’re trying to
solve and develop. Help us create the
most robust process that can offer the
most protection possible, and tell us what
that will look like.” He provided much of
the content, and we packaged it, both for
advisers and plan sponsors, in bite-size
pieces and easy-to-understand language.
PA: How does the QDIA Selection
Process Kit address the various types
of potential QDIAs?
SOKOLIC: For a process to be effective
and withstand potential litigation, it must
be unbiased, and it must allow for all
three options. At some plans, a managed
account could be the right solution, at
others a risk-based fund, at others a target-date fund. Additionally, not all target-date
funds are created equal, so we also need
to determine what a target-date fund
should look like for the specific participant
One important reason we wanted to
partner with Jason was to get an independent, expert view of the QDIA process
and to increase our value proposition with
the consultant and adviser community.
Our primary goal is to help participants
achieve a secure retirement.
PA: I appreciate your point. We’ve seen
a lot of interest in managed accounts
recently. Do you believe this program
will help plan sponsors evaluate their
demographics and how their plan and
participant groups might be better
suited for one option vs. another?
SOKOLIC: That’s the intent of the program.
When an adviser takes over a plan, it may
never have had an adviser. Maybe it was
a startup, and now it’s at $5 million and
ready for one. There’s no guarantee it had
a process implemented upfront, and if it
didn’t, even if you’re in a target-date fund,
it may have a proprietary offering that’s
bundled with the recordkeeping services
and the fees aren’t considered separately.
Is the selection what’s best for the participants? The program gives the adviser, and
the plan sponsor, the consideration and
process to arrive at the answer.
Again, this is about building a relationship with the adviser, helping him or her
QDIA Selection Process
manage their practice more efficiently,
more effectively and to potentially minimize risk.
PA: Anything else we should discuss?
SOKOLIC: From our proprietary research,
we found there’s a gap in the industry—
that many plan sponsors and advisers
chose their QDIA in 2007, but the choices
were limited. Investment menus were
different. There were far more proprietary bundled providers where, if you
were with one, you got its target-date
fund almost by default.
So, if an adviser is in the retirement
plan business, he or she should want
to take a step back and say, “I need to
consider this and encourage my plan
sponsors to look at this, because the decision we made 10-plus years ago may not
be the best for today.”
To sum up, it’s a five-step process:
assess, research and evaluate, make
the selection, implement, then monitor.
And the key is that it’s repeatable and
ongoing—something we envision advisers
and plan sponsors doing every few years.
Besides asking, “Is this QDIA beating the
benchmarks? Is there manager tenure
there, is there turnover?” you’ll need to
know, “Is it also right for my participant
base?” Your participant base will change
over time, and plan sponsors need to
keep considering that. ■
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This material has been prepared for educational purposes only. It is not intended to provide, and
should not be relied upon for, investment, accounting, legal or tax advice.
American Century Investments and Retirement Law Group are not affiliated companies.
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6/7/17 10:36 AM