Skip to main content

You are here

Advertisement

J.P. Morgan Profiles Best Practice TDF Strategies

J.P. Morgan Asset Management released its latest Retirement Insights white paper July 27 outlining best practices for selecting a target date strategy for DC plans.

The white paper, “Custom or off-the-shelf target date strategies?,” explores several factors — such as asset allocation, management selection and fee structure — that DC plan sponsors and financial advisors should carefully consider when deciding whether a custom or off-the-shelf target date strategy is most appropriate for their plan.

Key findings include:


  • Choosing between custom or off-the-shelf target date strategies requires extensive analysis. Plan sponsors and financial advisors need to balance the benefits that custom strategies might offer with the required expertise, time and costs, which can be significant.

  • Custom target date strategies can be precisely designed to meet specific plan requirements. These strategies can take into account employee demographics and particular plan design features (for example, a prohibition against plan loans or pre-retirement withdrawals).

  •  In a custom strategy, a plan sponsor can consolidate investment managers from defined benefit plans to potentially achieve economies of scale and realize savings on overall fees. But a substantial asset base (greater than $500 million) may be needed to secure those savings. Smaller plans will likely be better served by an off-the-shelf target date strategy.

  •  Effective communications are critical when implementing a custom strategy. While participants in an off-the-shelf target date strategy can access relevant information about their strategy's funds on fund company websites, participants in a custom strategy may have only one source of information about their retirement funds: the communications they receive from their plan sponsor.


For more on J.P. Morgan Asset Management’s value-adds for advisors, visit their NAPA Partner Corner page.

Advertisement