That was the finding of a new research study released by Chatham Partners, which suggests there are multiple opportunities for investment managers to differentiate themselves vis-à-vis incumbent managers. Among these are participant communication, QDIA product education, and investment manager thought leadership, all of which received substantially lower satisfaction ratings from plan sponsors than overall investment manager satisfaction.
Further, the study found there are clear divergences between what plan sponsors regard as optimal QDIA investment approaches and strategies and the actual QDIA structures they hold.
“When we asked plan sponsors what asset management style was the most appropriate for a QDIA, 17% responded with primarily active management, 29% with primarily passive management, and the remaining 54% with a hybrid approach,” said Vice President and Study Director Luis Fleites. “This is in stark contrast to the 56% of plan sponsors that did not utilize a passive investment strategy with their current QDIA. Eventually, plan sponsors’ optimal QDIA structures will converge with the QDIA option they offer.”
Participant education and communication may also become particularly important areas of differentiation in the future, according to Chatham. Ironically, while intermediaries cite participant retirement readiness and savings rates as pressing issues facing the DC industry, motivating and educating participants about their investments were not ranked highly in importance by intermediaries.
“Auto-enrollment and other strategies were seen as vehicles by which to engage participants in their retirement security, yet surveyed participants reported having low knowledge levels about their investment options and also expressed low satisfaction with those options,” said Fleites.