PLANADVISER - July/August 2022 - 33

and plan assets.
Assessing risk tolerance is also a multistep process for
Mike Geraci, senior product manager of retirement investment
solutions for Commonwealth Financial Network in
Waltham, Massachusetts. Besides examining company
census data such as the employees' average age and account
balance, his firm also considers what kind of business it is
and the financial savviness of the workforce.
" If it's an investment firm, that's a more qualitative piece
where we can look at the risk and see if it aligns, " Geraci says.
He also will cross-check the participants' choices and
compare what they define as their retirement age against
the target-date fund they selected.
Jamie Worrell, managing director with Strategic Retirement
Partners in Providence, Rhode Island, also says greater
benefits result from a dynamic qualified default investment
alternative that considers the bigger picture for a participant;
here, the participant starts in a target-date fund and
eventually moves into a managed account. This strategy
would factor in " some other element beyond your age and
what inputs can we get, assuming we have inertia, " says
Worrell. He points to the value of capturing additional
elements such as risk tolerance, a participant's other assets
or even spousal assets. If the firm had more information,
" how would we alter your portfolio? " he says.
And while younger employees may have had their retirement
assets defaulted into a target-date fund when they
started investing, Worrell says, it may be necessary to go
back and re-enroll some senior employees into the TDF.
" You can have a segment of people who are misallocated
for their age, " he says, observing that he regularly sees some
participants nearing retirement with 80% allocated to equities.
" You have this left-behind population. "
Going Custom?
For advisers looking to improve participant outcomes, custom
solutions continue to appeal. Marinescu finds that clients that
choose a custom solution usually make the decision based on
the team responsible for the retirement plan. If they have a
DB plan, they usually have a dedicated investment team that
selects the funds and would leverage that expertise into a
custom TDF that reflects the same philosophy.
For instance, a client may prefer some managers of
certain asset classes to also manage specific assets within
a TDF. Second, it may have the capacity to perform due diligence,
including employing a consultant to analyze its demographics
and determine whether its population needs an
option as yet unavailable. Hiring a consultant makes sense
when " they don't really feel like their participants are average
from a demographic perspective, " Marinescu observes.
The volatility in the markets has prompted renewed
interest in custom choices, especially those that incorporate
alternative investments, according to Huxhold. The downside,
however, remains that they can be cost-prohibitive.
" Even if one wants to add more of something, such as
alternatives, we're conscious of cost, " he says. These types
planadviser.com July-August 2022 | 33
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