Target Date
Annual plan reviews are an essential part of supporting your plan sponsor clients and their participants. But they don’t have to be an overly onerous task to check off your New Year’s to-do list.
Instead, use a combination of art and science to showcase the value you bring throughout the year. One common pitfall financial professionals often experience is to focus the review on the science — plan costs and the funds by the numbers. Anyone can plug numbers into a computer and obtain an output. In many ways you, as the financial professional, bring the “art” by tying the numbers to your clients’ human needs.
Successful plan reviews start with thinking about a client’s point of view and the plan’s objectives. That enables you to personalize the review process, so the client feels any challenges have been understood and addressed.
As you head into planning for annual plan reviews, it’s worth taking a look back at the year that just ended. While the past several years were beset by challenges brought on by the pandemic, there now seems to be somewhat of a return to normalcy – whatever that means for your clients and their business. Still, some influences from the past few years may still exist. Consider:
The answers to the questions above may help inform how you address plan needs by using the levers of thoughtful plan design.
Here are several plan design best practices you should consider discussing with your client if they are not already in place:
Your clients’ employees are not all the same, and neither are their investing styles. That’s why the core investment menu should be evaluated from the standpoint of how it serves the needs of what I consider the three different types of retirement plan investors:
A common investor is, of course, the “do-it-for-me” variety. That’s a big reason why the selection of a QDIA is arguably the most important investment decision a plan sponsor makes. The ease and simplicity of target date funds (TDFs) makes them good potential solutions for the “do-it-for-me” investors. But the diverse nature of TDFs makes them difficult to compare across different managers’ series. There are tools that can help, such as Target Date ProView, which uses Morningstar data to objectively compare series.
You don’t want to make the conversation all about costs, but you can focus on fees relative to the value of services received and the expected benefits of any additional fees incurred. While lower fees make sense, you can add value by determining whether the current fee structure meets your client’s specific needs and objectives.
Here are some cost-related questions you might ask:
There is a lot to cover during annual plan reviews, but we offer the following resources that may make the process as efficient and effective as possible:
Reach out to me or your American Funds representative for assistance with any of these resources.
Target Date
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Practice Management
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