Mixing the Old With the New

Advisers still use traditional criteria for fund selection, but retirement income products raise new questions.

While consideration about the actual investments included in defined contribution plan menus change over time—alternative assets and retirement income solutions are hot topics at the moment, for example—certain criteria for fund selection are likely to remain the same.

Beryl Ball, a principal in and financial adviser at CAPTRUST, says it is a challenge for DC plan sponsors to implement an investment menu that serves the needs of a diverse participant population. Some participants are just beginning their careers and savings journey, while others are approaching or in retirement.

“When selecting [investments] in this context, we focus on three areas: people, process and performance,” she says.

Starting with “people,” Ball explains that her team looks for depth and breadth among the members of the investment team at the asset management firm; continuity within that group; and incentives and compensation aligned with positive outcomes for investors.

Regarding “process,” Ball looks for a well-defined investment approach; sustainable advantages relative to peers; consistent application of investment style and strategy; and appropriate risk management.

For “performance,” she looks for a history of adding value relative to benchmarks, appropriate risk/return characteristics, and a strategy that is well-positioned for the future.

Steven Gibson, a wealth management principal in Rehmann, says that when his firm members are selecting or recommending funds, “three of the top criteria we look at are performance, consistency and cost.”

This approach falls in line with the findings of the 2025 Retirement Plan Adviser Survey, which sheds light on the criteria that advisers prioritize in fund and recordkeeper selection. According to the survey, the three most important criteria used by advisers in deciding on funds for their plan sponsor clients are “performance vs. benchmarks or peer groups” (63.6%); “pricing and fee structure” (56.2%); and “total performance (5-year return)” (47.9%).

Gibson says performance is critical, but process matters, too.

“We’re looking for funds that have demonstrated strong, risk-adjusted returns over time. But it’s not just about chasing the highest returns; we’re equally concerned with how those returns are achieved,” he says. “A fund that delivers strong performance by taking on excessive risk isn’t aligned with our investment philosophy.”

Gibson says his team digs into data to understand a fund’s volatility, downside capture and how it performs in different market environments.

“We want to ensure that participants have the potential for solid returns without being exposed to unnecessary risk,” he says.

Consistency is about how reliably a fund behaves over time, Gibson says.

“We want to include funds that maintain a stable risk profile and deliver exposure to the asset class or style they’re meant to represent,” he says. “For example, if a fund is labeled as a large-cap growth strategy, we expect it to stay true to that mandate—not drift into other styles or asset classes.”

Gibson says predictability is also key, especially when participants are building diversified portfolios.

“If a fund’s behavior is erratic or its style box shifts frequently, it can undermine the integrity of the overall investment lineup,” he says.

Regarding cost, Gibson notes that every dollar spent on fees is a dollar not working toward a participant’s retirement.

“We’re very mindful of the impact that expenses can have on long-term outcomes. That’s why we tend to favor lower-cost solutions and avoid funds with above-average fees unless there’s a compelling reason to justify the premium,” he says. “In today’s environment, there are many competitively priced options that don’t sacrifice quality, so we make it a priority to find those.”

Relationships Matter

While Ball’s focus is on asset managers that deliver strong, consistent performance for investors, in terms of service, her team appreciates asset managers that are responsive to questions about the investment strategy and its operations.

“We also look for access to portfolio managers and firm leadership to make sure that we—and plan sponsors—have a strong understanding of investment strategy, team structure, compensation, etc.,” Ball says. “We want to have full transparency of all investment vehicles and opportunities that could benefit plan participants.”

Gibson says the relationship between advisers and asset managers goes far deeper than just performance metrics.

“For us to conduct thorough and responsible due diligence, we need meaningful access to the investment team behind the fund,” he says. “Reasonable access allows us to understand not just what a manager is doing, but why it’s doing it. That insight is critical when we’re evaluating whether a strategy aligns with our clients’ needs.”

Gibson also says his team expects asset managers to be transparent and communicative.

“That means being available to walk us through their investment process, articulate their unique value proposition and explain how they differentiate themselves from peers,” he says. “It’s not enough to read a fact sheet or quarterly commentary; we want to hear directly from the people making the decisions.”

According to Gibson, that dialogue helps his team assess the depth of the asset manager’s conviction, the rigor of its process and the consistency of its philosophy.

“We expect ongoing engagement with the investment team to stay informed about performance drivers, portfolio positioning and their outlook on markets,” Gibson says. “This continuous flow of information helps us interpret results in context and communicate effectively with our clients.”

Guaranteed Retirement Income Recommendations

As the focus of those in the retirement plan industry has expanded from just accumulating savings to both accumulation and turning that savings into retirement income, there has been increased considering of so-called “guaranteed retirement income” solutions for inclusion in DC plans.

According to the 2025 Retirement Plan Adviser survey, advisers mostly see a little (32.6%) to some (31.0%) interest from plan sponsor clients in investment options that guarantee lifetime income for participants. Asked to guess, advisers indicated that about one-third (34.6%) of participants have some interest in these options, while 28.8% have a little interest, and 23.1% have a fair amount of interest.

Ball says while her team has seen some plan sponsors seeking retirement income options for their participants, “ the retirement income conversation in general is not a one-size-fits-all endeavor,” she says.

“We have plan sponsors interested in in-plan options and others looking for out-of-plan options. Some prefer guaranteed options, while others prefer non-guaranteed options,” Ball adds. “We view the decisionmaking as very similar to selecting the proper qualified default [investment alternative] for a retirement plan.”

Ball explains that there are several factors that qualify a fund to serve as a plan QDIA, and plan sponsors’ most important consideration is selecting the option that best fits their employee population.

“The same approach applies for retirement income,” she says. “There are merits to the different styles of retirement income investments [or] services, and there are pros and cons associated with each. We advise plan sponsors to evaluate the needs of their employee population to make sure they are offering the options that best fit those needs.”

According to the 2025 Retirement Plan Adviser Survey, most advisers (64.6%) recommend systematic withdrawals as a DC plan feature to clients as a drawdown strategy for participants. About one-third recommend each of: in-plan, stand-alone, insurance-based products that guarantee monthly future income (33.3%); in-plan, insurance-based products that guarantee monthly future income but are integrated into other diversified funds (31.3%); and in-plan managed accounts that also help with retirement income (35.4%).

Gibson says his team includes guaranteed retirement income options in its conversations with plan sponsors.

“There’s a natural appeal to the concept. After all, who wouldn’t want the security of guaranteed income in retirement?” he says. “When clients first hear about these solutions, there’s often genuine interest. The idea resonates, especially in today’s environment where longevity risk and market volatility are top of mind.”

That said, Gibson notes that the enthusiasm tends to be tempered once his team digs into the practicalities.

“One of the biggest challenges we face is participant education,” he says. “Many participants are still trying to grasp foundational concepts, like how to maximize their employer match or understand basic asset allocation. Introducing complex products that involve terms like ‘watermarks’ or ‘transferability’ can be overwhelming when the basics haven’t yet been mastered.”

Gibson sees a significant education gap between where participants are and where they need to be to make informed decisions about retirement income products.

“So we find ourselves asking, ‘Do we skip over the foundational education and jump straight into specialized solutions designed for a specific retirement phase?’ That’s a tough call,” he says. “In most cases, after discussing the pros and cons of these products and the broader context of participant readiness, plan sponsors aren’t rushing to implement them. They recognize the value, but they also see the hurdles, especially around participant understanding and engagement.”

That leaves guaranteed retirement income as not yet a widespread solution among Rehmann’s clients.

“We’re focused on building the educational foundation first, so that when the time is right, participants and sponsors can make confident, informed decisions,” Gibson says.

—Rebecca Moore