Claiming that TDFs are the biggest prospecting opportunity in today’s DC market, Glenn Dial, head of Allianz’s DCIO team, highlighted questions plan advisors should be asking when evaluating TDFs at this week’s CUNA Mutual/CPI Retirement Academy in St. Louis.
The first — and probably most revealing — question is whether the plan sponsor has a documented process to select and evaluate TDFs. The answer is almost always no, Dial noted. And even if they have one, prevailing circumstances have changed over the past three to five years, with new QDIA regs and more products passing their three-year date. But the most important question is whether the plan sponsor wants a “to” retirement and “through” TDF — which, according to recent DOL guidance, should be based on the profile of the participants in the plan.
Dial listed a number of other questions that are part of Allianz’s tool to help with TDF evaluation, including:
• What do plan participants generally do when they retire?
• What does the plan sponsor want them to do?
• Is a DB plan available to most participants?
• Does the record keeper have the ability to provide monthly income?
• Are the participants savvy enough to set up a withdrawal plan?
Evaluating TDFs is very different than looking at traditional mutual funds, primarily because the TDF manager performs different tasks. The criteria used are also different — glide paths, diversification by asset class and investment type, and hedging vs. inflation risk. Additionally, an advisor might use one small cap growth fund for all clients but will need at least one “to” and one “through” TDF.
Some experts suggest that picking the TDF is now more important than selecting the record keeper, with many offering few options, especially if they have a proprietary TDF. With so much focus and money flowing into TDFs, developing the skill set and leveraging the tools from firms like Allianz is a requirement for advisors that want to play and succeed in the corporate retirement market.
