coping with change - p&i events · reframing “change” • rather than “coping” with...
TRANSCRIPT
Moderator:
- Jim Danaher, Managing Director of Defined Contribution Solutions, Northern Trust
Speakers:
- Robert Capone, Head of BNY Mellon Retirement, BNY Mellon Investment Management
- Kevin Hanney, Director Portfolio Investments, United Technologies Corporation
- Keith Overly, Executive Director, Ohio Deferred Compensation
- Kelly Wapp, Portfolio Administrator, Koch Industries, Inc.
Coping with Change
Coping with Change
• Today’s key topics
1. Selection and monitoring process of DC
investment options
2. Dealing with plan mergers
3. Changing providers
4. Institutionalization of DC fund lineups
1
Reframing “Change”
• Rather than “coping” with change, consider
the opportunity change presents to evolve
1. Focus solely on current participant savings and
accumulation, or
2. Focus more broadly on future participant
outcomes at retirement
• Relate plan design to plan objectives
– What best describes your participant population
– What best describes your 401(k)/DC plan
2
Special thanks to our Diamond Sponsor
Which description best fits the people enrolled in your 401(k)/DC plan
1. Savors
2. Investors
3. Employees & Retirees with limited knowledge on either saving
Special thanks to our Diamond Sponsor
Which term best describes your 401(k)/DC plan
1. Retirement Benefit
2. Investment Portfolio
3. Savings Account
Special thanks to our Diamond Sponsor
Are the answers to these questions in sync?
1. Yes
2. No
Special thanks to our Diamond Sponsor
Did they surprise you?
1. Yes
2. No
Reframing “Change”
• Integrate current participant understanding
– Establish baseline retirement knowledge
• Perceptions and concerns
• (Re)align to harmonize with plan objectives
– Potentially promote more automatic plan features
• The “fuel” of savings is a primary determinant of
outcomes
• Strategically optimize the “user” experience
– Participant communications and education
3
Selection and Monitoring Process of
DC Investment Options
• Post-2008 key themes
– Manage volatility
– Manage downside risk
– Address future impact of inflation
• Menu design that is flexible enough to meet
a majority of participant needs
– Proactively address participant indecision
4
Selection and Monitoring Process of
DC Investment Options
• Evolve from a style box to an objectives-
based, approach
– Participants often don’t understand differences in
asset classes, but they can understand objectives
linked to an outcome
• Advent of target date was a good first step
• Explore a “less is more” approach
– Fewer options that maximize the opportunity for
diversification, arranged by investor type
5
Selection and Monitoring Process of
DC Investment Options
Tier 1: Pre-Mixed Options
Tier 2: Core Funds
Tier 3: Extended Core Funds
Tier 4: Self-directed Brokerage
Pre-Mixed Options Core and Extended Core Fund Options
… Less Participant Involvement … More Participant Involvement
Participant Guidance, Advice and Managed Account Programs
6
Selection and Monitoring Process of
DC Investment Options
• Process of Selection
– Generally consultant-lead
– Issues for consideration
• Impacting the lineup, existing or evolving
• Engaging participant understanding
• Understanding total costs
• Mapping assets
• Determining wrapper and bearing on recordkeeping
and custody services
7
Dealing With Plan Mergers
• Integrating plan objectives and philosophies
• Combining employee/participant cultures
• Evolving the combined plan
• Seizing opportunity for enhancement to:
– Plan design
– Fund menu construction
– Participant engagement
8
Changing Providers
• Maintaining like services or seeking greater
capabilities
• Matching the delivery of services and
identifying potential differences
• Understanding the opportunity for evolution
• Confirming itemized costs, regardless of
arrangement
– Is there such a thing as “bundled” anymore?
9
Institutionalization of DC Fund Lineups
• Reasons for change
• Benefits and challenges to “white-labelling”
• Transition
• Fees
– Combined net impact to investment management,
recordkeeping and custody costs
• Communicating benefits, ongoing access
and transparency to participants
10