Michael Falcon

Managing director and head of Retirement for J.P. Morgan Asset Management

PA: What’s driving J.P. Morgan Asset Management’s thinking and approach today?

Falcon: Professionally managed solutions are at the core of our position in the retirement space, particularly in the defined contribution (DC) area. Our commitment to target-date funds (TDFs) with our Smart Retirement Series is longstanding and built—like all of our investment solutions—starting from the end client’s point of view.

For that client, the plan participant, the solution needs to be simple. Individuals continually tell us they’re unable to make these types of decisions. They want to be in a product that can meet their needs; and the professionally managed, diversified and rebalanced products and programs can do that.

Plan sponsors need a solution; they need to increasingly make these fiduciary-dependent decisions. More and more money is flowing into target date as the qualified default investment alternative (QDIA), as the default option, so these vehicles that even a decade ago held relatively few assets and maybe less interest now lead the field of what sponsors are driving.

I think, finally, and relevant to your audience, we think about how these professionally managed solutions meet adviser needs. At one time, traditional thinking was that the adviser would create investment menus and lineups, then manage them. We’ve moved beyond that. The role of the adviser in today’s plans is much more complex and demanding.

Advisers need solutions they can understand, that are well-supported and perform well to meet their needs their clients’. 

PA: How has that feedback from the plan adviser community informed your business model at J.P. Morgan?

Falcon: We see the adviser at the center of almost everything we do. Our plan sponsor survey found that only 14% of plans say their advisers proactively bring them ideas and issues.

That speaks to the opportunity still ahead for these specialized plan advisers. We want to be there to support them. We’re already doing that with relevant, timely research and information they can use, both to better improve their practice and their value offering.

We’re there with tools like the Target Date Compass and Plan Design Guide, and with events and communication.

PA: What trends do you anticipate in the DC space over the next three to five years?

Falcon: First, I would say that target-date funds are becoming ubiquitous. They’ll be solidified as the predominant default choice. We see them in more than 80% of plans now. A large proportion of participant- and sponsor-directed flows are moving into them.

You’ll see more re-enrollments of plans—even absent of plan design or recordkeeping change—every two to four years, on a systematic basis. And that leads itself, increasingly, to an outcomes orientation: What level of retirement preparedness do they have? Are they getting there? I think that’s how sponsors will increasingly measure their plans. I think the plan adviser is the one that will bring them there—that’s where the best advisers add the most value in terms of driving a plan’s overall performance.

The last piece is that the move toward automatic enrollment and investment selection, combined with this emphasis on outcome and results, will demand more financial wellness information in general. Education is a very important piece of a plan that is valued by both sponsors and participants.

If we use less capacity discussing joining the plan and what to invest in, we can focus more on how people manage their broader financial life—their financial wellness—and maybe that can help increase saving and contribution rates, both inside and outside of the plan.

Heard at the 2013 PLANADVISER National Conference


A focus on participant outcomes is critical for plan health, and this focus can be aided by proper benchmarking, according to John Galateria, managing director and head of defined contribution (DC) investment solutions at J.P. Morgan Asset Management, speaking on the CEO Roundtable session. “When you see the opportunity out there to drive plan design and innovation around outcomes versus pure benchmarking, it’s very significant,” he said, adding that good dialogue is key to successful outcomes.

Regarding target-date funds (TDFs), Galateria noted the importance of understanding and defining risk in the target-date space, as well as what a sponsor defines as the best option. Again, communication is key when helping sponsors and participants understand these funds.

Galateria discussed the importance of helping sponsors trim down their investment menus. “When you look at participant behavior and what they’re able to grasp, one behaviorist said that the categories have to make sense to the choosers, not to the people who build the categories.” When your participants go to make a decision, they need options they can understand.

“The role of the adviser is to drive the dialogue, in some cases to some really uncomfortable places, but the best advisers in the industry are going to have to drive sponsors to these innovative solutions to produce better outcomes,” he noted.