ARLINGTON, Va.--(BUSINESS WIRE)--In the midst of historic market volatility, a new survey of retirement plan sponsors and financial professionals reveals gaps in focus - and perception – about the role of fixed income investments in a fully diversified 401(k) menu.
“Plan fiduciaries have long understood the need for a diversified portfolio. However, survey data consistently show that fixed income options have received neither the attention nor prominence of equity alternatives in most defined contribution plan menus,” noted Nevin Adams, Chief Content Officer of the American Retirement Association, and head of the organization’s research team.
The new survey - sponsored by Janus Henderson Investors, conducted jointly by the Plan Sponsor Council of America (PSCA) and the National Association of Plan Advisors (NAPA) - found that equity options outnumber fixed income by approximately 3:1 on plan menus, regardless of plan size. Moreover, while nearly three-quarters (71.9 percent) of financial professionals incorporate a style box in their Core equity recommendations, less than four-in-ten (39.9 percent) do so for fixed income investments.
“As plan sponsors and participants are confronted with extreme market volatility in the wake of concerns about the COVID-19 pandemic, it is more important than ever that plan sponsors provide a well-diversified subset of fixed income options to help participants meet their goals,” said Russ Shipman, Head of Retirement Strategy and Sales at Janus Henderson Investors.
Among the survey’s key findings:
- Plan sponsors offer an average of 3.7 fixed income options compared to an average of 10.3 equity options.
- When selecting fixed income options, plan sponsors and financial professionals frequently prioritize the same demographic criteria — risk tolerance (44.3 percent among sponsors, 56.3 percent among financial professionals) and retirement age (34.6 percent among sponsors, 40.8 percent among financial professionals) – but largely ignore key aspects such as gender, education, and existence of a defined benefit plan.
- Risk/reward (94.6 percent), performance (98.5 percent), and fees (95.1 percent) dominate the focus of financial professionals as "essential" or "preferred" factors in recommending fixed income options.
- Stable value (67.4 percent) and index (61.1 percent) funds dominate plan sponsors’ core fixed income investments.
- While a third (34 percent) of financial professionals said the education and support they receive from asset managers on fixed income investments is “outstanding,” 14.4 percent said it needs improvement – more than twice the percentage (6.2 percent) cited regarding equity investments.
“A truly diversified portfolio can only be developed from a fully diversified plan menu,” commented Matt Sommer, Senior Managing Director of Defined Contribution and Wealth Advisor Services from Janus Henderson. “Better choices flow from better information, more complete demographic data, and a heightened sensitivity to the options available in the marketplace. The insights from this survey highlight both the need and the opportunity to do so at a critical time, particularly as so many Americans approach and enter retirement.”
For a full copy of the research or to talk with someone about the study, please contact Matt Sommer or Jody Lowe.
About the Survey
PSCA and NAPA, with sponsorship by Janus Henderson Investors, surveyed plan sponsors and retirement plan advisors (separately) between January 21 and February 21, 2020, regarding current plan menu designs and investment trends. The survey responses were obtained as various equity market indices were still climbing to record levels – the S&P 500 and NASDAQ composite rose to record highs on February 19, 2020 and the COVID-19-driven declines started the very next day. Responses were received from nearly 100 plan sponsors representing a wide range of plan sizes and industries, and separately from 200 retirement plan financial professionals who are primarily focused on 401(k) plans. For more information visit: https://www.psca.org/research/2020/InvestmentTrends
About the Plan Sponsor Council of America and the National Association of Plan Advisors
The Plan Sponsor Council of America (PSCA) is a diverse, collaborative community of employee benefit plan sponsors, working together on behalf of millions of employees to solve real problems, create positive change and expand on the success of America’s voluntary, employer-sponsored retirement system. The National Association of Plan Administrators (NAPA) is the only advocacy group exclusively focused on the issues that matter to retirement plan advisors. Both PSCA and NAPA are part of the American Retirement Association, a non-profit professional organization established to empower retirement plan professionals who are dedicated to building a better retirement for Americans. The American Retirement Association is comprised of five premier retirement industry associations; the American Society of Pension Professionals & Actuaries (ASPPA), the American Society of Enrolled Actuaries (ASEA), the National Association of Plan Advisors (NAPA), the National Tax-deferred Savings Association (NTSA), and the Plan Sponsor Council of America (PSCA).
About Janus Henderson Investors
Janus Henderson Group (JHG) is a leading global active asset manager dedicated to helping investors achieve long-term financial goals through a broad range of investment solutions, including equities, fixed income, quantitative equities, multi asset and alternative asset class strategies.
Janus Henderson has approximately $294.4 billion in assets under management at 31 March 2020, more than 2,000 employees and offices in 27 cities worldwide. Headquartered in London, the company is listed on the New York Stock Exchange (NYSE) and the Australian Securities Exchange (ASX).
Learn more about Janus Henderson Investors at janushenderson.com.
Janus Henderson is a trademark of Janus Henderson Group plc or one of its subsidiaries.
© Janus Henderson Group plc