Defined-contribution chief investment officers play a key role in improving retirement income security. Yet plan investments have taken a back seat to increasing participation and deferral rates, with the emphasis on target-date funds.
But the first-ever industry event for DC CIOs highlighted their roles and the value they provide to advisers, plan sponsors and participants, along with the issues they see on the horizon.
The RPA Convergence CIO Roundtable and Think Tank, held last Thursday and Friday, included investment professionals from 17 firms — DC aggregators, record keepers, broker-dealers, advisory firms and money managers among them — representing almost $2 trillion in DC assets under advisement.
Though CIOs are not at the front lines like advisers and wholesalers, they are the scientists and mapmakers who create the tools to guide their colleagues and clients.
That once meant helping people explore their own country — selecting mutual funds, for example. Now, a better metaphor is exploring the world — evaluating target-date funds — or even roaming the entire galaxy, with personalized advice. Without the right tools and maps, there’s little hope participants will arrive safely. And the desired destination has moved from saving for retirement to now encompassing all financial needs, including funding health savings accounts and emergency savings, and managing outside assets and debt counseling, each requiring different tools.
There are lots of challenges.
First, the data, even at the plan level, are not standardized — never mind getting access to participant information, CIOs said. Without having good data available to them, artificial intelligence and even the use of behavioral science will have limited efficacy.
Second, with the convergence of wealth and retirement, CIOs’ reporting tools are clearly inadequate.
Finally, it’s hard to help participants who can’t afford traditional personalized advice make good choices.
CIOs are concerned that fees are going so low that their firms will be unable to offer high levels of service. And in the current environment, low interest rates mean low yields, which could cause investors to make the wrong decision or work longer.
Additionally, the lack of transparency when it comes to stable value funds, annuities and even collective investment trusts makes the CIO’s job harder.
Though there was cause for concern, there was just as much hope. Helping investors with their spending or decumulation phase remains an issue. Retirement income products still have a long way to go, and automatic plans helping investors save have built muscle for the next phase, not to mention assets.
Data, technology and behavioral economics show great promise in assisting CIOs to help people invest more wisely for all needs.
And though consolidation has taken a toll on some firms, CIOs at record keepers, broker-dealers and aggregators with scale said they have more resources and data than ever.
CIOs know they have an opportunity to help improve financial wellness, with access to 90 million workers.
Attendees at the RPA Convergence CIO Roundtable and Think Tank were optimistic but realistic. It was enlightening to see these scientists and mapmakers explain their role in helping people make the journey safely from their first job until and through retirement. It is quite the awesome responsibility.
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As our second lead editor, Cindy Hamilton covers health, fitness and other wellness topics. She is also instrumental in making sure the content on the site is clear and accurate for our readers. Cindy received a BA and an MA from NYU.