PLANADVISER - March/April 2018 - 48
A QDIA in Transition
" O
ne thing we've learned as an industry is that
'auto' solutions work, " says Sangeeta Moorjani,
head of workplace product marketing and advice
at Fidelity Investments in Boston. Fidelity is now among the
providers pioneering an evolution in automated plan design:
qualified default investment alternatives (QDIAs) that seek
to move participants by default into the right investment
at the right time. Most often, that will mean automatically
switching participants, unless they opt out, from a default
target-date fund (TDF) into a managed account when they
reach a predetermined trigger, such as age 50.
" 'It's a very appealing concept,' is what we're hearing
from the [sponsor] marketplace, " says Holly Verdeyen, senior
director of defined contribution (DC) strategy at consultant
and asset manager Russell Investments, in Chicago. " In
terms of evaluation, we're talking to sponsors about it. But
in terms of movement, we haven't seen sponsors start using
these hybrids yet. "
Investment consultant Callan LLC has no plans so far
that have implemented hybrid QDIAs, but it has talked with
sponsors about the approach's viability, according to James
Veneruso, senior vice president with Callan in Summit, New
Jersey. " There are very good arguments for it, " he says. " But,
practically speaking, there also are issues. "
Participants are moved to a managed account as they draw close to retirement
Advantages of Going Hybrid
" [TDFs] are admittedly a pretty blunt instrument, and they
take into account just one aspect about a participant: age, "
Veneruso says. A managed account can incorporate other
factors, such as a participant's outside assets and risk tolerance,
in its allocation. " It can really give participants a more
finely calibrated asset allocation, and that becomes a bigger
issue as a participant ages, " he notes.
The idea behind hybrid QDIAs makes
sense, says
Michael Esselman, director of investments at 401k Advisors
Intermountain, in Sandy, Utah. " When we graduate
college, we are all in the same boat financially. But, as
people get older, the gap in their circumstances and their
finances widens. By the time you turn 55, your financial
picture of where you're heading to in retirement starts to
finally become a little clearer, " he says. " If at that point you
can get a customized asset allocation based on a holistic
picture of your savings, it helps. "
According to Verdeyen, the key is to make the transition
from a TDF to a managed account at a time when the
participant can benefit from it the most. " Pre-retirees have
a shorter time horizon to retirement, and they have a more
complex financial picture than younger participants do, "
she says. Moreover, " pre-retirees' need for additional finan48
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PLANADVISER - March/April 2018
Table of Contents for the Digital Edition of PLANADVISER - March/April 2018
2018 PLANSPONSOR Retirement Plan Adviser of the Year
Battling the Elements
Taking on Discretion
A QDIA In Transition
Working Down-Market
Retirement Income Options
2018 SEC Examination Priorities
Enforcement of the DOL Rule
Duty to Investigate
PLANADVISER - March/April 2018 - C1
PLANADVISER - March/April 2018 - FC1
PLANADVISER - March/April 2018 - FC2
PLANADVISER - March/April 2018 - C2
PLANADVISER - March/April 2018 - 1
PLANADVISER - March/April 2018 - 2
PLANADVISER - March/April 2018 - 3
PLANADVISER - March/April 2018 - 4
PLANADVISER - March/April 2018 - 5
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PLANADVISER - March/April 2018 - 23
PLANADVISER - March/April 2018 - 2018 PLANSPONSOR Retirement Plan Adviser of the Year
PLANADVISER - March/April 2018 - 25
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PLANADVISER - March/April 2018 - 27
PLANADVISER - March/April 2018 - 28
PLANADVISER - March/April 2018 - 29
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PLANADVISER - March/April 2018 - 33
PLANADVISER - March/April 2018 - 34
PLANADVISER - March/April 2018 - 35
PLANADVISER - March/April 2018 - 36
PLANADVISER - March/April 2018 - 37
PLANADVISER - March/April 2018 - 38
PLANADVISER - March/April 2018 - 39
PLANADVISER - March/April 2018 - Battling the Elements
PLANADVISER - March/April 2018 - 41
PLANADVISER - March/April 2018 - 42
PLANADVISER - March/April 2018 - 43
PLANADVISER - March/April 2018 - Taking on Discretion
PLANADVISER - March/April 2018 - 45
PLANADVISER - March/April 2018 - 46
PLANADVISER - March/April 2018 - 47
PLANADVISER - March/April 2018 - A QDIA In Transition
PLANADVISER - March/April 2018 - 49
PLANADVISER - March/April 2018 - Working Down-Market
PLANADVISER - March/April 2018 - 51
PLANADVISER - March/April 2018 - Retirement Income Options
PLANADVISER - March/April 2018 - 53
PLANADVISER - March/April 2018 - 2018 SEC Examination Priorities
PLANADVISER - March/April 2018 - Enforcement of the DOL Rule
PLANADVISER - March/April 2018 - Duty to Investigate
PLANADVISER - March/April 2018 - C3
PLANADVISER - March/April 2018 - C4
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