DCIOs go to and fund a lot of industry and partner meetings but they’re frustrated that their portfolio managers don’t get a chance to interact with advisors and discuss investments. So eight DCIOs created their own meeting, called 401konvergence, which kicked off yesterday in NYC. The opening panel reviewed issues with investment menus, including what choices advisors have depending on the platform and what choices they should make depending on the plan sponsor.
The investment industry is still living in a style-box world, which means less than nothing to participants who are in one of three buckets:
1. Do it for me (professionally managed investments like TDFs);
2. Tinkerers (give me a few choices—maybe 7);
3. DIY (brokerage window?).
So what’s missing from DC menus? Alternatives, which was a theme throughout the conference. Matt Gulselth, a plan advisor, said he was worried that a lot of participants would put money into investments they don’t understand, until he realized that most participants do nothing anyway. Matt said investments should be selected with an eye toward outcomes, not covering all style boxes or solely to satisfy 404(c).
So if we want to expand the investment menu but don’t want to overload participants who choose not to choose when confronted with too many choices, what to do? Gulselth said it’s all about framing—one page about TDFs for the ones who delegate; one page for the tinkerers organizing funds in a way they can understand; and perhaps a disclaimer and warnings like the death sign on poison for brokerage windows (just kidding!). Record keepers have that technology but don’t use it.
Other good thoughts from the opening session at 401konvergence: Why put quarterly returns front and center on participant statements when we want them to think long term? Would re-enrollment of participants in SVF to TDF violate the SVF contract? TDFs should not be evaluated based on to/through but based on risk/equity exposure at the tails.
