Wilmington Trust Focused on CIT Education Push

Collective investment trusts are slated to become the most popular target-date investment vehicle in coming years, according to research. Even so, many advisers and plan sponsors still don’t know what they are, according to Wilmington Trust’s CIT division, which manages about $115 billion in CIT assets for 550 funds.

“Clearly, CIT education needs to evolve, and we need think about the conversation the adviser should have with the plan sponsor about CITs so they can understand them as well,” Rob Barnett, head of retirement services at Wilmington Trust, said on the sidelines of the National Association of Plan Advisors conference on Tuesday.

CITs, which are only available for qualified retirement plans, have been growing in popularity due to the lower fees brought to participants by the pooled investment design. The investment vehicles made up 47% of target-date strategy assets by the end of 2022, according to Morningstar, as led by providers such as Vanguard, Fidelity Investment, T. Rowe Price, BlackRock and American Funds.

Wilmington Trust is approaching the business with new life after a deal was announced in December for Wilmington Trust’s CIT business to be sold  by parent M&T Bank Corp. to private equity firm Madison Dearborn Partners LLC. That deal is slated to be complete in mid-2023, with Barnett becoming CEO of the independent company with a new brand name owned by funds affiliated with MDP.

Barnett and his team have been working on the sale of CITs into investment menus through Wilmington Trust’s digital onboarding platform, BoardingPass, designed to help plan advisers and sponsors select CITs for investment menus. By giving an easier, automated process to CITs and adjusting it to user needs over time, the firm believes it can help boost the use of CITs.

Bet on Low Fees

But in going to market with the digital tool, what the retirement head and team have found is that many people still do not understand the potential of choosing it over mutual-fund-driven TDFs.

“You can’t bet on performance,” Barnett said of investing, “but you can bet on fees and the savings you get if they’re lower.”

In creating BoardingPass, Barnett said his team interviewed more than 200 advisers and plan sponsors with the goal of getting as much unvarnished feedback as possible. He said they will continue to hone the product as feedback comes in, and he wants to get the most honest feedback possible to make understanding and selecting CITs as simple as possible.

“I want honest and direct feedback,” he said. “I can take those bullets.”

There are marketing challenges to selling CITs. Because they are only available to qualified plans and not retail investors—as mutual funds and exchange-traded funds are—they can only be marketed to eligible plan fiduciaries.

Wilmington Trust has been working to increase transparency within those barriers, in 2019 announcing a partnership with the Nasdaq Fund Network to show searchable tickers for CITs—giving them six letters instead of the five usually used for mutual funds.

Getting to 403(b)

When the SECURE 2.0 Act of 2022 was in negotiation, many industry actors were pushing for regulators to allow CITs to be used in not-for-profit 403(b) plans. That change, however, did not happen, and they are still only available for 401(k) plans.

Barnett says Wilmintgon Trust is working on an education tour for Congress that will include not-for-profit plan sponsors advocating for availability in 403(b) plans. They will not be alone, as the push for CITs in 403(b) plans is also on the agenda for the lobby association NAPA, leaders said at their national conference on Sunday. Barnett noted that his firm will be looking to have universities and hospitals advocate for the inclusion of CITs for their participants.

“It’s so important for these organizations to have access, because their workforces tends to have lower compensation,” he said.