There might be a there, there. It could be that TDFs have an Achilles’ Heel that leaves them vulnerable.
Tag "TDF"
The conflicts-of-interest inherent in selecting proprietary funds are apparent. Less so are the criteria used to determine what a suitable process might be.
But that idea contained a flaw. In the early years, limited choices made it easy for employees. The proliferation of the number of options in later years, however, exposed the lack of sophistication within the employee cohort. That can lead to bad decision-making. Alternative solutions were needed.
It’s not just plan sponsors and plan participants that need convincing. The entire retirement plan infrastructure must also get on board. That doesn’t mean the hurdles can’t be overcome.
Most 401k investment menus retain the “style box” mentality of the 1990s. Who doesn’t have a kitchen from the 1990s that they don’t want to remodel? Your 401k investment menu is no different.
There are two strategic paths to use when it comes reducing liability. One approach occurs after the fact – after the target date funds are already in place. The other approach takes place before the target date funds are even placed on the 401k plan menu. Which is more reliable?
Compliance mixed bag, SEC BI DOA? and “Investments: The Sequel”
When considering the potential – if not underestimated – liability associated with TDFs, perhaps it’s best to listen to the warning Cialdini provides regarding Social Proof: “It should never be trusted fully… we need to look up and around periodically whenever we are locked into the evidence of the crowd.”
When retirement industry professionals talk about the impact of the 2006 Pension Protection Act, you might be surprised that this is what they conclude.
Will These Be The Biggest 401k Fiduciary Stories In 2024?
If you have any experience in the retirement plan business, some predictions just write themselves. As in “an incredible feeling of déjà vu.”