New offering features simplified investment options, helping employees receive the personalization they need, when they need it
Empower Retirement and American Funds are collaborating to offer the next evolution in retirement investing.
Empower has designed an offering within its Dynamic Retirement Manager (DRM) offering that integrates the American Funds Target Date Retirement Series.
Empower’s DRM is designed to apply existing retirement investing regulations to automatically transition an individual’s retirement deferrals from a professionally managed investment option, such as a target date fund, to a managed account, which offers a more personalized investing experience.
In this offering, plan sponsors start with a target-date series in American Funds, a family of mutual funds from Capital Group. When the time is right for participants, their savings will transition into a customized managed account solution, managed by Advised Assets Group, LLC (AAG), a registered investment adviser, using many of the same investments offered by American Funds.
In this first-of-its-kind solution, plan participants get access to a target date series — that was voted best-in-class in a 2017 Cogent survey1— and a personalized managed account solution in one consistent investment plan with the goal of improving employees’ retirement income.
“As employees approach retirement, they each have unique circumstances. By transitioning into a managed account they will get the personalized attention they need at the time they need it,” said Edmund F. Murphy III, President and CEO of Empower Retirement. “We believe that personalized strategies help employees stay engaged with the retirement planning process and can give them better income replacement results.”
The firm introduced the dynamic qualified default investment alternative (QDIA) concept to the retirement market three years ago, and launched DRM in 2017. More than 300 plan sponsors across the U.S. with over $2.5 billion in total plan assets are enhancing their plan’s default option with DRM, including large and small corporations, and public and not-for-profit employers.
“We are excited to be working with Empower on this new and innovative solution for plan participants,” said Brendan Mahoney, Head of Insurance and Intermediary Sold Retirement Plan Distribution at American Funds. “The American Funds Target Date Retirement Series and its underlying funds have provided plan participants with strong results at a low cost over time. We are excited that Empower has selected our target date series and underlying funds for the Dynamic Retirement Manager program.”
With this solution, advisors no longer have to choose between target-date funds and managed accounts. DRM provides employees a glide path in the target-date series. Then, when the employees reach a certain age, they easily transition into a more personalized managed account based on their individual circumstances while still using the investment options that they already know and trust.
“Investment options matter and as employees get closer to retirement they need more help making decisions,” Murphy said. “It’s not just about investment. It’s also taking in to consideration when to retire, how much to save, how and when to start claiming Social Security and having someone to talk to about all of these issues.”
Along with American Funds, Empower is working with other asset managers to offer DRM using their investment products.
1 Cogent Wealth Reports, Retirement Plan Advisor Trends, September 2017, Market Strategies International. Methodology: There were 514 respondents to a web survey conducted July 21 to August 11, 2017. The respondents consisted of financial advisors managing defined contribution plans. Learn more about Cogent Wealth Reports, Retirement Plan Advisor Trends.