Great-West Investments pioneers a new solution to help blend default options and managed accounts
Two investing approaches to help individuals manage financial realities over a lifetime
Empower Retirement today announced the launch of a new qualified default investment alternative (QDIA) for retirement plans that is designed to help plan participants whose retirement planning needs change over time.
A first-of-its-kind offering, Dynamic Retirement Manager™ is intended to serve participants who do not prioritize retirement investing early in their working years. The solution makes use of QDIA regulations to direct their retirement deferrals into a competitive investment option, such as a target date fund, in the early portion of a participant’s working years.
Later on, when a pre-determined set of criteria are triggered, the participant’s assets will automatically shift into a managed account, thereby offering the opportunity to receive a custom, personalized retirement income strategy as they begin to focus on the transition to retirement.
Dynamic Retirement Manager will be offered to participants in Empower Retirement plans whose employers agree to make the new solution available as a plan offering.
“The goal of Dynamic Retirement Manager is to meet people where they are today and help get them to where they need to be tomorrow,” said Edmund F. Murphy III, President of Empower Retirement. “There’s no question that engagement with the retirement planning process develops over time for some participants.”
Murphy explained that in an ideal world everyone in their first job would make all the correct and necessary decisions about investing for the future and would continue to do so throughout their careers.
“The reality is that retirement isn’t top-of-mind for many workers until later in life and by then their needs and goals are more acute and likely in need of customization. We want to serve those participants in a way that makes sense,” he said.
Triggering criteria for the shift to managed accounts within Dynamic Retirement Manager are designated by the plan sponsor. Criteria can include such factors as age, years of service, or years to retirement. Dynamic Retirement Manager’s participant interface is centered on a multi-stage, multi-touch engagement model designed to capture a participant’s interest in their retirement plan at a point when they are ideally more receptive to saving for retirement.
As the participant nears the shift to a managed account Empower will increase communication through more frequent and direct points of contact. At any time, the participant may opt out of Dynamic Retirement Manager and switch to other investments offered on the employer’s plan menu. In the event that a participant remains unengaged even after the shift to a managed account, the Empower recordkeeping system contains sufficient personalized data to make automatic investments on their behalf, unless the worker chooses to opt out.
“Dynamic Retirement Manager offers a true opportunity for plan participants to receive a much more robust investment offering than an off-the-shelf product built for an average retirement plan participant — but there is no such thing as an average participant,” said David Musto, President of Great-West Investments, which developed the new offering. “Everyone has unique needs for which customizable solutions can be crafted.”
Musto explained that the Pension Protection Act of 2006 was effective in establishing the QDIA and presenting viable options for use in retirement plans. However, in the ensuing decade advances in behavioral finance research, financial planning models and investment solutions create an opportunity for new models to help participants who do not take an active posture toward retirement planning.
A key component to Empower’s new QDIA solution are plan sponsors who have expressed a desire for better engagement models to serve participants who do not make investing decisions.
“The time is right for the industry to develop innovative QDIA approaches that can address the modern realities of retirement investing. Leading providers have the tools, the data and the accumulated knowledge to deploy a significantly better experience,” said David Blanchett, CFA, CFP, Head of Retirement Research at Morningstar Investment Management LLC.
Lew Minsky, President and Chief Executive Officer of the Defined Contribution Institutional Investment Association said, “There’s no question that there is a great demand to help participants who need advice tailored to their specific goals. The challenge for plan sponsors and advisors is how and when to engage at the right time and right place,” he said.
“Ten years of experience tells us that a fresh approach to this problem should be widely considered,” said Minsky.
In 2016, Empower and Great-West Investments published a joint white paper “In Search of a More Dynamic QDIA” explaining the new default model and making a broad argument for the benefit of new considerations in default investing.
Great-West Investments and Empower Retirement operate as units of Great-West Financial. Great-West Investments develops and delivers innovative investment solutions for individual and retirement investors, with over $93 billion in assets under management and supervision. Empower Retirement, formed in 2014, is the nation’s second-largest retirement plan recordkeeper with more than 8 million plan participants.
About Empower Retirement
Headquartered in metro Denver, Empower Retirement administers $450 billion in assets for more than 8 million participants. It is the nation’s second-largest retirement plan recordkeeper by total participants (Pensions & Investments, April, 2016). Empower serves all segments of the employer-sponsored retirement plan market: government 457 plans, small, midsize, and large corporate 401(k) clients, non-profit 403(b) entities and private-label recordkeeping clients. For more information, please visit www.Empower-Retirement.com.
About Great-West Investments
From its headquarters in Greenwood Village, Colorado, Great-West Investments creates and delivers investment solutions for investors, advisors and the retirement market. Great-West Investments includes Great-West Funds, Inc., Great–West Capital Management, LLC, and Advised Assets Group, LLC, the latter two being registered investment advisers. Great West Investments has more than $93 billion under management or supervision in mutual funds, managed accounts, capital preservation products, and retirement income solutions. For more information please visit GreatWest.com.
Morningstar Investment Management LLC, a registered investment adviser and subsidiary of Morningstar, Inc., has been engaged by units of Great-West Financial to provide various advisory services. Morningstar Investment Management is not affiliated with Great-West Financial or its affiliates.
Stephen Gawlik – 303-737-0899 (office), 617-417-4408 (cell)
To learn more about how we’re empowering plan sponsors and their participants to be more engaged in their retirement plans than ever before, call us at 800-719-9914.