PLANADVISER - January/February 2020 - 15

ON THE MOVE
➜ Faegre Baker Daniels
and Drinker Biddle &
Reath have announced
their merger, following
an affirmative vote by
the partnerships of both
organizations. The combined
firm begins operations
as Faegre Drinker
Biddle & Reath (Faegre
Drinker) on February 1.
'Made to Stick'
What makes participants opt out of the default investment?
MORNINGSTAR has published a detailed
new white paper titled " Made to Stick: The
Drivers of Default Investment Acceptance
in Defined Contribution [DC] Plans. "
Written by David Blanchett, head of
research, and Daniel Bruns,
retirement
vice president, product strategy, both with
Morningstar Investment Management, the
paper analyzes the survey responses of
some 46,439 participants across 175 plans,
which use 18 different target-date series.
According to the analysis, approximately
80% of participants initially accept targetdate
funds (TDFs) when those are offered
as the default investment, although acceptance
declines to approximately 70% after
five years of participation in the plan.
" While we find that certain target-date
attributes do have a relation to default
investment acceptance, they tend to be
less important than certain demographic
variables such as income and balance, "
Blanchett says. In other words, examining
the characteristics of the plan population
will tell more about the use of default
target-date funds than will examining the
characteristics of the default fund itself.
Blanchett notes that the findings do
show that default investment acceptance
increases marginally for target-date funds
with lower expense ratios, lower levels
of equity risk and higher relative performance,
expense ratio having the largest
effect among the three. In terms of practical
takeaways, Blanchett says, participant
age has an " interesting effect " on default
acceptance rates.
" Older people are less likely to accept
a default investment, but it's not simply
because they're older, " he says. " Almost the
entire effect comes about because older
participants tend to have higher balances
and higher incomes than those who are
younger. When you control for age, income
and balance, default acceptance is pretty
much the same for all ages. "
Therefore, Blanchett says, the research
shows it is important to understand the
underlying drivers of behavior.
" If you just think default acceptance
diminishes with age, you're missing the
deeper point, " he says. " If you have a plan
with an older population that has lower
income and lower balances, the patterns
of behavior could be totally different than
in a plan where you have mainly highbalance,
high-income older employees. "
-John Manganaro
➜ Charles Schwab has
announced that Tom
Bradley, a former president
of TD Ameritrade's
retail and institutional
businesses, will join
Schwab's adviser services
business as senior vice
president. After the close
of Schwab's acquisition of
TD Ameritrade, Bradley
will help integrate the two
firms' adviser businesses.
➜ Fiduciary Investment
Advisors and DiMeo
Schneider & Associates
will combine operations.
The merger is intended
to provide an expanded
geographic footprint
and increased growth
opportunities.
➜ Adam Antoniades of
Cetera Financial Group
has been appointed
as the firm's CEO and a
member of the board
of directors. Antoniades
had served as Cetera's
president since 2014.
Art by Melinda Beck
planadviser.com January-February 2020 | 15
➜
http://www.planadviser.com
PLANADVISER - January/February 2020

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