Plan Sponsors Need Redirected Focus on Target-Date Fund Evaluation

December 1, 2008 ( - Three-fourths of financial advisers polled in a new JPMorgan Funds-sponsored survey said that when evaluating target-date fund options, plan sponsors lack clear and objective criteria for selecting the most appropriate fund.

Seventy-six percent of advisers surveyed said they believe plan sponsors only sometimes, rarely, or never recognize the differences in glide paths among target-date funds, requiring them to spend more time educating plan sponsors on these significant differences, according to a JPMorgan Funds press release.

Advisers said plan sponsors’ biggest mistake was “focusing too much on fees and not on other factors that could affect participant outcomes,” followed by “choosing a target-date fund offered by their recordkeeper without considering other options.” (See Target Dates Surge, but Questions Linger ).

Other key survey findings include:

  • 76% of advisers said it was extremely or very important to consider strategies that incorporate broad diversification of asset classes,
  • 67% said it was extremely or very important to manage volatility in the five to 10 years prior to retirement, and
  • 61% said plan sponsors’ objective was to meet income replacement goals at retirement versus 39% who said plans seek to maximize participants’ lifetime savings.

“Considering the dramatic differences between target-date funds and their status as a critical retirement savings tool, it is clearly important for plan sponsors to understand and consider all criteria when choosing a fund,” said David Musto, Managing Director, JPMorgan Funds, in the press release.

In September, JPMorgan Asset Management unveiled its Target Date Navigator, an evaluation tool to help advisers and their plan sponsor clients choose the most appropriate target date funds for their plans (See JPMorgan Announces Target-Date Evaluation Product ).