A survey conducted by Cerulli Associates revealed that only 7% of defined contribution plan advisors would recommend actively managed target-date funds (TDFs) to clients, with a majority preferring passive or blended management styles. The consultancy suggests that asset managers emphasize the success of active strategies within blended TDFs to meet fiduciary obligations effectively. Additionally, advisors are inclined to recommend features from the SECURE 2.0 Act of 2022, with student loan matching and Roth contributions being the most favored provisions, signaling a shift in retirement plan preferences towards more innovative savings approaches.
Regarding TDF management styles, the survey found that 47% of advisers prefer passive management, 47% favor blended approaches, and only 7% opt for actively managed funds, which typically entail higher fees. Meanwhile, 54% of advisors are likely to recommend incorporating a student loan matching feature, and 38% suggest enabling Roth contributions, both introduced by SECURE 2.0. Regulatory clarification is deemed necessary for these provisions, especially regarding Roth contributions and student loan matching, as IRS guidance has been issued for Roth contributions but not for the latter, despite its effective implementation from January 1. Additionally, insights on retirement rollovers suggest varied motivations among plans for retaining or transferring former employees’ assets, with potential implications from proposed regulatory changes aiming to enhance retirement security.
To read more, visit www.wealthmanagement.com, where Fred Barstein lists this story in this week’s Real Talk among the five most important and interesting stories of the week.
