DCIO Assets to Grow to 60% of 401(k) Assets by 2017

Assets are slated to expand from $2.3 trillion at the end of 2011 to $3.5 trillion, Strategic Insight projects.

Driven by the increasing interest in open architecture and transparent fees, defined contribution investment only (DCIO) assets are set to expand by more than 52% from $2.3 trillion at the end of 2011 to $3.5 trillion by 2017, according to Strategic Insight, an Asset International company.

The growth of DCIO over the next five years will mean a shift of market share from “proprietary,” or recordkeeper/administrator-run DC assets, to “open architecture” models, according to the Strategic Insight report, “DC Market Sizing and Outlook 2012.”

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“Fee disclosure regulations will be a primary driver of investment-only growth, as the new transparency will undoubtedly shed light upon what have often been considered ambiguous fee arrangements,” said Bridget Bearden, a research analyst at Strategic Insight and author of the report. “The availability of external managers on proprietary recordkeeping platforms has already gained in prominence in recent months.”

More than half of DCIO mutual fund managers that Strategic Insight surveyed said that their median number of DCIO-focused salespeople had doubled, from three in 2010, to six by March 2012. Asked what the two best opportunities are in the DCIO market, the managers said custom target-date funds and the growing registered investment adviser (RIA) presence in larger plans, as opposed to the traditional, large employee benefits providers such as Callan and Mercer.

The report also includes an outlook on challenges and opportunities for the DCIO market. More information is at www.sionline.com.

 

Paper Addresses How to Improve Retirement Plan Enrollment

Diversified has released a white paper about improving retirement plan enrollment.

 

“10-Minute Enrollment: Scaling Back Meeting Content to Drive Higher Enrollment Rates” focuses on how simplifying the retirement savings plan enrollment process can help increase participation rates.  

Traditional enrollment meetings are typically scheduled in 45- to 60-minute blocks, with time allotted to suitably review an employer’s retirement savings plan, including eligibility rules, employer match formulas, loan availability—even distribution options.  During this comprehensive review of plan benefits, enrollment can become a secondary focus, and as a result, the objective of enrolling employees is not always achieved, Diversified contends.  

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“We’ve witnessed firsthand the higher success rates that occur when enrollment meetings are shortened to 10 minutes—focused only on why employees should be in the plan, not on a comprehensive review of plan benefits,” ” said Patricia Advaney, senior vice president, participant solutions at Diversified, and the author of the white paper. “Subsequent targeted communications can address the retirement savings needs of specific employee segments, and are most effective when they get the right message to the right person at the right time.”

 

Suggestions from the paper include:  

  • Keep easy-enroll cards within reach at all times – A return to paper might be “old school,” but easy-enroll cards can get the job done quickly and efficiently.  Consider keeping a supply of cards in the cafeteria kiosk, the HR waiting area, and in the offices of all those who provide retirement plan information and education.  These cards allow participants to take action immediately as opposed to enrolling online at a later time.  Employees should be required to complete an easy-enroll card even if they decide not to enroll, as sometimes having to document that they declined a benefit is enough to get them to reconsider. 
  • Create a sense of urgency – Asking employees, “Who is responsible for your retirement?,” positioning  matching contributions as an integral part of an overall compensation package, and educating employees on the average deferral rate in their plan are all effective steps for creating a sense of urgency that can help spur enrollment. 
  • Follow up with education – Education remains a critical component of retirement planning.  If possible, new enrollees should have an opportunity for one-on-one sessions—onsite, online or over the phone— that can be used to focus on fine-tuning the employee’s retirement strategy. 
  • Measure success – Enrollment success can be measured in three stages by the following goals: get 70% of new employees to enroll at the initial enrollment meeting, get 50% of the remaining 30% to enroll when they become match-eligible, and get 50% of the remaining 15% to enroll if/when they receive an automatic employer contribution.  This equates to more than a 92% enrollment rate over time – a goal that’s within reach of those implementing a 10-minute enrollment process.

To request a copy of “10-Minute Enrollment: Scaling Back Meeting Content to Drive Higher Enrollment Rates,” e-mail RetirementResearchCouncil@divinvest.com.

 

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