Defined contribution (DC) specialist financial advisers
managing at least $50 million in DC assets show an increasing inclination towards use of custom target-date funds (TDFs), according to a new analysis
published by Cogent Reports.
The analysis shows roughly 15% of advisers in this market
segment are recommending some type of customized TDF product for at least some
clients. While 38% in this segment still recommend proprietary fund offerings from
the plan provider and 46% recommend TDFs provided by external third-party
managers, Cogent Reports suggests this is a clear sign of market evolution toward greater use of customization.
across all DC advisory market segments, proprietary TDF
offerings established by the plan provider are recommended by 48% of
while TDFs offered by an external asset manager are recommended by 42%
of advisers. Much of the remainder, or about 8%, commonly recommends
Important to note, with or without
customization, DC plan sponsor clients’
and advisers’ consideration of target-date fund providers remains
on fees and long-term performance. There are also considerations about
the peripheral risks of offering a custom fund—as a growing handful of plan sponsors
have already been sued over the performance of customized funds.
Additional data and analysis is available here.