Charlie Cote, Head of Retirement LinkSM
J.P. Morgan Asset ManagementPA: Let’s talk about the retirement plan landscape. What
changes are you seeing?
COTE: The retirement plan landscape has shifted dramatically
since I first started in the business 20+ years ago. First, we’re seeing
advisors widen the services they provide to clients, going beyond fund
selection and monitoring to also offer guidance around financial wellness. Our
2015 Defined Contribution Plan Sponsor Research and 2016 Plan Participant
Research have shown that participants want help and that plan sponsors want to
help them. For example, our research indicates that the majority of employers
feel responsible for the overall financial wellness of their participants and
the majority of participants feel their employer should help them save for
Second, we’re seeing a shift to a more mindful and
thoughtful process for the selection and monitoring of DC plan investments,
including the plan’s qualified default investment alternative (QDIA). Our
research has indicated that about a quarter of plan sponsors don’t understand
how their target-date funds [TDF] are constructed, yet every plan sponsor is
responsible for the prudent selection and monitoring of their plan’s
investments, including the QDIA. J.P. Morgan’s Target Date CompassSM
can provide advisors and plan sponsors with an objective, documented and
prudent process for target date fund selection.
Third, we’re seeing a further focus on fees and movement
towards a non-revenue share class, such as R6.
PA: Charlie, how can plan advisers help sponsors in this
COTE: We see an opportunity for advisers to be proactive
with clients by sharing with them thought leadership and innovative practices
around plan design and investment selection that can help place participants on
a path to a better retirement outcome. In our 2016 Plan Participant Research,
we found that seventy-five percent of participants think they should be saving
10% or more to be on track toward a secure retirement, of those seventy-six are
missing their savings targets.
Advisers can help sponsors by making a recommendation to
implement automatic features into the plan. For example, automatic enrollment
benefits participants by putting them in the plan and placing them on a path towards
Our research also indicates that less than a third of
participants are confident about which of their 401(k) investment options to invest
in. A plan re-enrollment can help position these participants for retirement
success by defaulting them into the plan’s qualified default investment
alternative (QDIA), usually an age appropriate TDF, while still allowing those
who want to take a more active role in choosing investments to opt out.
Furthermore, our research shows that 82% percent of participants are in favor
of or at least neutral on the concept of re-enrollment, and 99% of those who
have gone through a re-enrollment and had their funds invested in a TDF were
satisfied2. In addition to helping participants, if their default programs
satisfy certain requirements, plan sponsors may gain safe harbor protection for
assets defaulted into a QDIA.
PA: What is J.P. Morgan doing to help advisers build
stronger plans with their plan sponsor clients?
COTE: J.P. Morgan Retirement Link is our fee-based
adviser-sold, full-service solution for 401(k) plans with $500,000 to $50+
million in assets. We bring the full breadth and depth of J.P. Morgan Asset
Management to advisers’ fingertips in three ways: competitive fees over similar
solutions; investment flexibility and open architecture including access to
J.P. Morgan Funds and our active managers with over $1.5 trillion in assets under
management3; and best-in-class service4 driven by relationship managers with over
25 years of industry experience5.
PA: You mentioned competitive fees. Can you tell me what you
mean by this?
COTE: We introduced a new pricing grid this year to be as
transparent and competitive as possible with our fees. We offer two prices. The
first is our cost for recordkeeping and administration only, and the second is
for re-enrollment into a J.P. Morgan QDIA solution. Plans that choose to
re-enroll into J.P. Morgan’s QDIA solution can achieve substantial cost savings
with Retirement Link. To further assist advisers in pricing plans we offer a 401(k)
fee comparison tool that helps advisers do three things. First is to compare
their client’s current fees with the industry averages; second, advisers can
determine if there are potential cost savings by moving a plan to Retirement
Link and third is to document their process around fees for their client.
1J.P. Morgan Plan Participant Research 2016 and J.P. Morgan Plan Sponsor Research 2015.
2J.P. Morgan Plan Participant Research 2016.
3J.P. Morgan data as of 9/30/16.
4Chatham Partners Satisfaction Survey, 2015. When evaluating DC providers, a top 2 box rating of 85% or
greater corresponds to best-in-class rating. 8 out of the top 14 DC providers
are incorporated into this survey. Best-in-class rating for Overall
Satisfaction, Relationship Management, Account Management, Good value for the
5Relationship Managers average 25 years of industry
experience; 15 years with J.P. Morgan, 2016. There can be no assurance that the
professionals currently employed by J.P. Morgan Asset Management will continue
to be employed by J.P. Morgan Asset Management.
TARGET DATE FUNDS. Target date funds are funds with the
target date being the approximate date when investors plan to start withdrawing
their money. Generally, the asset allocation of each fund will change on an
annual basis with the asset allocation becoming more conservative as the fund
nears the target retirement date. The principal value of the fund(s) is not
guaranteed at any time, including at the target date.
J.P. Morgan Asset Management is the marketing name for the
asset management business of JPMorgan Chase & Co., and its affiliates
JPMorgan Distribution Services, Inc., member FINRA / SIPC.