Chief investment officers critical to success of DC plans, participants

Though the chief investment officers at defined-contribution record keepers, aggregators and broker-dealers operate mostly in the background, they play a crucial role in creating the right products for advisers and their clients. CIOs from the leading firms gathered virtually last Wednesday and Thursday at the RPA Convergence CIO Roundtable and Think Tank and discussed their greatest opportunities and challenges, what keeps them up at night and their plans for the future, as well as more fertile areas for the DC industry to collaborate.

Of note at the meeting were two new CIOs – Brian Collins, who joined Hub International from Harbor Funds, and Saumen Chattopadhyay, who recently joined OneDigital from Carson Group. They bring a fresh perspective to their companies and this burgeoning profession.

Here some comments from the participants:

• Vern Cushenbery, CIO at GoalPath Solutions, wants an integrated tech stack, a sentiment echoed by Captrust CIO Mike Vogelzang. It ideally would include independent apps that are incorporated by record keepers that can be customized with single sign on.
• Steve Kofkoff, vice president of strategy, product management and innovation at OneAmerica, said providers and advisers need to collaborate, not compete, especially when serving all participants. Luke Vandermillen, managing director at Principal Financial, agreed that providers must become better partners.
• Pensionmark CIO Ronnie Cox noted that with more provider-manufactured collective investment trusts, the need for transparency is critical. CITs help larger RPAs leverage their scale to get better pricing for clients, Captrust CIO Mike Vogelzang said.
• The migration to more personalized portfolios will be critical to go beyond commoditization, Chattopadhyay said. Collins focused on the need for retirement income and managing participants’ outside assets.
• Vandermillen raised the issue of how to package retirement income products, whether as stand-alone options or parts of target-date funds or managed accounts. Cox wasn’t excited about how bundling raises questions about how to benchmark. Cushenbery said he was excited about new income products, like one introduced by Allianz Life.
• Keith Holden, John Hancock’s head of retirement platform development and management, noted that retirement income is a global challenge. Clients aren’t proactively asking for it, but most would want it if offered. The group agreed that there’s a need for simplification and education, not only for retirement income but also managed accounts and ESG funds.
• Chattopadhyay noted that ESG could be a factor, not a segment, and that each part may need to be analyzed separately. Collins said that ESG funds are hard to define and measure, with disparate ratings systems. ESG companies tend to be newer and may be growing faster than other stocks, which isn’t sustainable, Vogelzang said.
• With the introduction of more personalized portfolios using managed accounts and retirement income, there’s a new era of responsibility and perhaps fiduciary liability for RPAs, said Chris Karam, CIO at Finspire.

Other opportunities and challenges discussed during breakout sessions included:

• The challenge of integrating wealth tech into DC plans given antiquated platforms, regulations and limited access to data.
• The question of who owns data, according to agreements with plan sponsors, and their growing sensitivity about cross-selling to participants. Some people have been burned by bad data misallocating portfolios, and Charles Schwab was fined because of its lack of relationships with clients using its robo-adviser.
• The need for advisers and providers to work with participants to improve both their top and bottom lines, which means collaborating and deciding who does what best for the client.
• Moving from retirement plan service to wealth management, which relies on creating an intimate experience, isn’t easy. It’s like the experience of switching from a Blackberry to an iPhone, but there is a path.

Areas where CIOs agreed there was a need to collaborate with others included:

• Data. The group emphasized the need for a data warehouse that could sustain itself by selling access, with permission.
• Retirement income. Along with data and transferability issues, there is a need for advice integrating other sources of income, like Social Security.
• Allocating benefits resources. Helping each participant decide how to wisely allocate discretionary dollars among the benefits being offered at work.

Overriding was the notion that no one group, record keeper, adviser or money manager can or should service participants, if we are truly client-focused. Traditional asset allocation must be reexamined, given recent equity and bond markets.

Most important is the critical role these CIOs play as we move from simple investment menu design and due diligence to helping plan sponsors offer their employees tools, services and products to manage their own personal defined-benefit plans.

Fred Barstein is founder and CEO of The Retirement Advisor University and The Plan Sponsor University. He is also a contributing editor for InvestmentNews’​ RPA Convergence newsletter.