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READER POLL: Are You Using an 'Ideal' Investment Menu?

Industry Trends and Research

Many factors go into decisions about advisor practices – knowledge, experience, personal preferences, client needs and even organizational guidelines (restrictions?). What are the “norms” for NAPA-Net readers?

We started with investment menus – and asked readers how many different version(s) they used. A plurality (36%) said they relied upon “a handful based on recordkeeper offering/availability,” though a third (and nearly as many) used “one ideal menu, though customizable depending on circumstances.” As one reader noted, “usually by recordkeeper (RK). we try to keep them as consistent as possible...but it isn’t possible with 16 diff RKs.” 

Menu ‘Driven’?

More than a quarter (29%) were, however, “customized for every plan,” with the rest simply using one ideal menu.

“We have a recommended list of funds. But new clients may have slightly different menus with “passing” funds,” explained one reader. Another said, “For each asset class we have a first, second and third string fund preference. We then choose based on availability and circumstance. Most variability is in Stable Value based on coverage and put restrictions.”

“When we take over a plan, we do not replace investment options that pass all IPS criteria. So we end up with different investment menus for almost every plan,” commented another. 

Asked if they were planning to consolidate those menu offerings over the next 12 months, readers were about as evenly divided as they could be; 43% were – 43% weren’t – and the rest (14%) weren’t sure.

Investment Policy

We asked if the investment policy asset allocation was dynamic or static, and found that:

26% - Static

30% - Dynamic

44% - Depends (on the client/situation)

“The IPS is policy level and indicates inclusion of asset classes, but has no language for specific asset allocation. We do not engage as 3(38) or provide managed accounts or do DB work, which would have specific policy allocation language,” explained one reader. 

“Static but we have a few clients where we deviate,” noted another. “Investment policy asset classes offered are static, until a decision is made to change the offerings. For our DB plans, the investment policy asset allocation is dynamic,” said another.

As for whether that policy had changed in the past two years, two-thirds (67%) of this week’s respondents said it hadn’t, and about 15% said it had. However, the remaining 18% said it had “for some, not all situations.” As one reader noted, “Only by plan sponsor request in DC plans. Yes, in DB plans.”

Education Precedents

Another key practice aspect are education/communication materials, and so we asked readers about the source of those materials for their use. Asked to identify their source(s), readers responded:

78% - Use recordkeeper materials

72% - Build their own custom material

53% - Use material provided by home office

46% - Combination of custom and recordkeeper materials

28% - Use DCIO materials

However, asked to identify the primary  source of those materials, just over half (52%) relied on custom materials, while a third used materials provided by recordkeepers, and the rest either used a combination, or drew from “various sources.”

For most (68%) of this week’s respondents, those sources hadn’t changed in the past two years. That said, for 15% they had – and for the remaining 17% they had for some, but not all situations. One reader explained that they are using more material from sources other than the recordkeeper, while others indicated the increased use of video and podcasts.

Thanks to everyone who participated in this week’s NAPA-Net Reader Poll!

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