DCIO providers is the shift away from the first generation of
TDFs manufactured by recordkeepers,” says Bing Waldert,
an analyst with Cerulli’s retirement team in Boston.
Advisers and sponsors are increasingly interested in open-architecture target-date fund products, which will boost
DCIO sales, he says.
In fact, Huxhold says, that in the last six or seven months,
John Hancock has received several inquiries from sponsors
about its open-architecture TDFs. “They are looking for best
of breed,” he says.
DCIO providers also lead the way with innovation in
TDFs, says Dan Cook, another Cerulli analyst. “Many firms
are entering the waters with new and innovative products,
including those that provide retirement income,” Cook
says. These products could do particularly well if the fiduciary rule prompts retirees to keep their assets in their
plan, he says.
BlackRock, for one, is currently discussing with its plan
sponsor clients what their responsibilities will be in terms
of offering investment options for retirees in their plans,
says Anne Ackerley, head of BlackRock’s U.S. and Canada
defined contribution business, in New York City. “Now, as
the Baby Boomers are beginning to retire, along with the
distinct possibility that people will remain invested in the
401(k) plan past retirement, we are having discussions
about what decumulation looks like in a 401(k),” Ackerley
says. “This is an emerging trend.”
Further, many sponsors are looking for custom TDFs,
Voya’s largest plan sponsors already use customized
products, De Feo says. “While [the practice] hasn’t trickled
down to other market segments, we do expect that will
happen over time,” he says.
Shining a White Light on Fees
“The 408(b)( 2) fee disclosure rules in 2011 have brought
greater transparency and scrutiny to administrative and
asset management fees,” says Chris Brown, founder of Sway
Research, in Newton, New Hampshire. “Now, the impending
fiduciary rule has heighted this focus,” Brown continues.
“This has placed greater pressure on asset management fees,
which places active managers at a disadvantage to passive
ones, which can manage money at a far lower cost, particu-
larly in the large-cap domestic equity style box and target-
The trend has made it necessary for active managers,
whose products are sold at a premium price, “to demon-
strate premium value,” says David Blanchett, head of
retirement research at Morningstar Investment Manage-
ment in Chicago.
MassMutual, which entered the DCIO market in 2015,
has done just that and has enjoyed success due to the firm
offering 12 top-performing funds in its lineup, says Aruna
Hobbs, head of institutional investments for retirement