Managed accounts offer DCIOs the opportunity to be a more active and important part of the DC ecosystem. It moves them from being dependent on record keepers, advisers and plan sponsors to create the strategy to help participants, to being an advice provider of customized investment solutions.
The recent announcement of Franklin Templeton’s Goals Optimization Engine, initially in partnership with Vestwell, may mark the next evolution for defined-contribution investment-only providers searching for a new role and identity in the DC world.
The role of mutual funds in the DC market has evolved. In the 1990s, they were dominant, and providers’ relationships with advisers helped get products into smaller and midsize plans. Now fund providers have to curry favor with the record keepers, advisers, broker-dealers and aggregators that control plan sales. Add the move to indexing and packaged products like target-date funds, many of which are propriety and emphasize asset allocation and not securities selection, and it’s no wonder that all but the top 10 DCIOs have been doing some serious soul-searching.
“We have to de-commoditize our business,” said Yaqub Ahmed, Franklin’s head of U.S. retirement and insurance. “We have to move from chasing returns to goal-based products.”