J.P. Morgan Retirement Insights Compares Custom and "Off-the-Shelf" Target Date Strategies, Outlines Benefits and Challenges for Plan Sponsors and Financial Advisors

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Jul 27, 2015, 11:17 ET

NEW YORK, July 27, 2015 /PRNewswire/ -- J.P. Morgan Asset Management today released its latest Retirement Insights paper outlining best practices for selecting a target date strategy for defined contribution plans (DC). The white paper, "Custom or off-the-shelf target date strategies?," explores several factors – such as asset allocation, management selection and fee structure – that DC plan sponsors and financial advisors should carefully consider when deciding whether a custom or "off-the-shelf" target date strategy is most appropriate for their plan. Key findings include:

Choosing between custom or off-the-shelf target date strategies requires extensive analysis. Plan sponsors and financial advisors need to balance the benefits that custom strategies might offer with the required expertise, time and costs, which can be significant.
Custom target date strategies can be precisely designed to meet specific plan requirements. These strategies can take into account employee demographics and particular plan design features (for example, a prohibition against plan loans or pre-retirement withdrawals).
In a custom strategy, a plan sponsor can consolidate investment managers from defined benefit plans to potentially achieve economies of scale and realize savings on overall fees. But a substantial asset base (greater than $500 million) may be needed to secure those savings. Smaller plans will likely be better served by an off-the-shelf target date strategy.
Effective communications are critical when implementing a custom strategy. While participants in an off-the-shelf target date strategy can access relevant information about their strategy's funds on fund company websites, participants in a custom strategy may have only one source of information about their retirement funds: the communications they receive from their plan sponsor.

"Target date strategies continue to hold a growing share of DC plan assets and, like many in the industry, we expect they will become increasingly popular as both custom and 'off-the-shelf' strategies allow participants to access powerful asset class diversification," said Portfolio Manager Dan Oldroyd, Head of Target Date Strategies, Multi-Asset Solutions, J.P. Morgan Asset Management. "Weighing the pros and cons of these options should never be a simple exercise. Plan sponsors and advisors need to be thorough, careful and thoughtful in their analysis when determining a course of action."

Please view the full J.P. Morgan Retirement Insights paper, including the "Is a custom target date strategy right for your plan?" evaluation worksheet, here.

About J.P. Morgan Asset Management
J.P. Morgan Asset Management, with assets under management of $1.6 trillion, is a global leader in investment management. J.P. Morgan Asset Management's clients include institutions, retail investors and high net worth individuals in every major market throughout the world. J.P. Morgan Asset Management offers global investment management in equities, fixed income, real estate, hedge funds, private equity and liquidity. JPMorgan Chase & Co. (NYSE: JPM), the parent company of J.P. Morgan Asset Management, is a leading global asset management firm with assets of approximately $2.4 trillion and operations in more than 60 countries. Information about JPMorgan Chase & Co. is available at www.jpmorganchase.com.

J.P. Morgan Asset Management is a leading provider of comprehensive retirement solutions and is dedicated to improving individual retirement outcomes. The firm has defined contribution assets under management of nearly $146 billion, as of March 31, 2015.

J.P. Morgan Asset Management is the marketing name for the asset management businesses of JPMorgan Chase & Co. and its affiliates worldwide.

SOURCE J.P. Morgan Asset Management