Defined contribution (DC) specialist financial advisers
managing at least $50 million in DC assets show an increasing inclination
toward use of custom target-date funds (TDFs), according to a new analysis
published by Cogent Reports.
The analysis shows roughly 15% of advisers in this market
segment are recommending some type of customized TDF product for at least some
clients. While 38% in this segment still recommend proprietary fund offerings
from the plan provider, and 46% recommend TDFs provided by external third-party
managers, Cogent suggests this is a clear sign of market evolution toward
greater use of customization.
According to the firm, the growing number of advisers who advocate
for using an external manager for target-date funds rather than the proprietary
offering from the current plan recordkeeper is “further evidence that incumbent
recordkeepers must continue to up their game in this increasingly competitive
Across all DC advisory market segments, proprietary TDF
offerings established by the plan provider are recommended by 48% of advisers,
while target-date funds offered by an external asset manager are recommended by
42%. Much of the remainder, or about 8%, commonly recommend customized TDFs.
Full-service plan providers and DC investment managers must understand the
specific nuances that exist across plan adviser producers and channels in order
to retain and win business.