As interest and use in target date funds (TDFs) continues to grow, plan sponsors are placing a higher priority on this investment strategy.

This presents retirement advisors with two key opportunities:

  • To leverage their knowledge to help clients sort through the landscape and help them understand TDF philosophies and strategies.
  • To distinguish themselves as TDF specialists and to build and develop a TDF consulting practice.

Here, we present 10 ways advisors can leverage their TDF knowledge to build their business.

  1. Position teams as target date specialists

    One of the first ways advisors can leverage their knowledge and build their TDF business is to identify and communicate how their expertise differentiates them in the marketplace.For example, they can ask about the strategy decisions that guide TDF selection and why they are important, and the different approaches and for what type of plans they are best suited.

  2. Incorporate sponsor education about TDFs into the sales process

    Sponsors will be more inclined to work with advisors when they help them understand the hidden risks to arrive at the solutions.

    Cutting edge research analysis, such as both quantitative and qualitative analytics on the target date fund and the construction of its glidepath, can also help sponsors make good decisions when choosing among TDF options.

    It will help them understand how to think about "to" funds, that is, funds that manage to retirement, or "through" funds, that manage through retirement.

    It will also help them make decisions about diversification and implementation, including whether they are best served by an index, active, or hybrid management approach.

  3. Show prospects how the TDF consulting process works

    Advisors can educate sponsors about the consulting process—to demonstrate what makes it different. This can be achieved by discussing the consulting model and supporting it with clear, tangible examples of the type of assistance and expertise that consultants can provide—and why it's important.

    This means explaining the steps, decision points, tools and deliverables for every stage of the process, beginning with sponsor education, and then strategy, selection, monitoring and implementation.

  4. Demonstrate examples of lessons learned for other clients

    Advisors should provide examples of how they have made a difference for other clients. One way to do that is by discussing how they have worked with the investment committee, including their role in onboarding new committees and coordinating and attending meetings.

    Another way is discuss the manner in which they have developed and maintained the Investment Policy Statement (IPS). If the client does not have an IPS, advisors can discuss how they can develop one that clarifies the search parameters for a new provider and sets expectations around performance, cost and retirement replacement ratios.

  5. Set a call to action

    Before a prospect meeting is closed, consultants need to create a plan for how they will reconnect with prospects and the type of strategies and tactics that will be used in the follow up meetings.Here are some examples of follow up tactics to use with prospects:

    ·  Conduct TDF education sessions for the investment committee
    ·  Provide an assessment of their IPS
    ·  Facilitate an objective-setting workshop for target date funds
    ·  Consult on the types of solutions available and the pros/cons of each option
    ·  Provide a summary of participant education best practices for target date funds

  6. Provide prospects with a list of target date questions they should ask their consultants and fund managers

    Some ideas include:
    · Is it more important to evaluate the fund category, i.e., the series, or the underlying sleeves, or both?
    · Is a custom or off- the-shelf the right approach?
    · Should there be a tactical overly to the asset allocation? Or is that another version of market timing?

  7. Allocate more time in committee meetings to target date funds to educate, inform and establish objectives

    Target date funds carry a much different weighting and fiduciary significance than other investments.

    Given this complexity, advisor knowledge is critical in helping plan sponsors reframe target date evaluation according to the right key set of drivers and priorities, such as the plan's objective, philosophy, and risk tolerance.

  8. Revisit the sponsors' target date fund objectives at least every other year

    Advisors should devote time at least every other year to review the TDF selection with the plan's investment committee.

    Use this time to focus on and revisit plan goals, workforce demographics, and external factors such as the economy and regulatory environment that can impact the plan's strategy.

  9. Establish mutually agreed upon measures of success for your work

    To establish success, advisors should consider the value they provided in each of the tasks delivered in the assessment, and implementation process.

    For example, did they customize the investment policy? Establish the criteria for selection?

    Establish a communication program for participants?

  10. Take advantage of BlackRock consulting tools

    As a leader in the target date space, BlackRock offers a range of practice management resources you can use to help educate sponsors about the changing nature of the TDF landscape so they can make the most appropriate selection for their plans and make measurable differences for their participants.

    The Target Date Fund Edge program, a collection of research and practice management materials designed to help you showcase your TDF knowledge and build your role as a TDF consultant.

    As retirement plan advisors address this need for specialized expertise, they have the opportunity to fundamentally change the nature of their roles, as well as the foundation of their practices. To achieve that, they will need to demonstrate their product information as well as their understanding of benchmarking, fees, communications and other success measures.

Here is an example of what a TDF consulting framework looks like:

Consulting Opportunities

Investing involves risk, including possible loss of principal.

Diversification and asset allocation may not protect against market risk or loss principal.

Strategies may include bank collective investment funds maintained and managed by BlackRock Institutional Trust Company, N.A., which are available only to certain qualified employee benefit plans and governmental plans and not offered or available to the general public. Accordingly, prospectuses are not required and prices are not available in local publications. To obtain pricing information, please contact your local service representative. Strategies maintained by BlackRock are not insured by the Federal Deposit Insurance Corporation and are not guaranteed by BlackRock or its affiliates. There are structural and regulatory differences between collective funds and mutual funds that may affect their respective fees and performance.

Investment strategies such as diversification do not ensure a profit and cannot protect against losses in a falling market.

This publication is not an offer to sell, not an invitation to apply for any particular product or service.

Prepared by BlackRock Investments, LLC, member FINRA

DC-1054