Advisers have weighed in on their favorite lifecycle and risk-based target date fund suites and their favorite fund families in general. Taking top honors in the lifecycle (age-based) category was AllianceBernstein Retirement Strategy; top billing in the lifestyle (risk-based) category went to John Hancock Lifestyle; and favorite overall fund family was awarded to American Funds. The study was conducted by PlanAdviser magazine.

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PLANADVISER magazine’s second annual national survey of financial advisers finds that, among the 86.4% that recommend asset allocation funds for 401(k) plans, more than two-thirds favor target-date funds compared with 29.3% who prefer risk-based funds.

This is a dramatic change compared to last year’s survey, in which the majority financial advisors preferred risk-based funds, also known as lifecycle or lifestyle funds. “This shift may be attributable to the Department of Labor’s focus on date-based solutions as qualified default investment alternatives, or QDIAs,” according to Alison Cooke, managing editor of PLANADVISER.

The PLANADVISER Survey also revealed that 70% of advisers look to nonproprietary funds when recommending a suite of either lifecycle or lifestyle funds to 401(k) plans, rather than those from the plan’s recordkeeper.

Favorite Funds and Fund Families

Of the multitudes of lifecycle (target-date) and lifestyle (target-risk) funds available, Survey respondents appeared to favor more equity-laden target-date strategies. Advisers’ favorite lifecycle fund suites were:

* AllianceBernstein: Retirement Strategy - 26.30%
* T. Rowe Price: Retirement Date Funds - 25.40%
* John Hancock: JH Lifecycle - 20.30%
* Fidelity: Fidelity Freedom - 17.80%
* American Funds: American Funds Target Date Retirement - 16.10%

Financial advisers said their favorite risk-based fund suites were:

* John Hancock: JH Lifestyle - 28.90%
* Russell Investment Group: Life Points Target Risk - 17.50%
* AllianceBernstein: Wealth Strategies - 12.40%
* Vanguard: Vanguard LifeStrategy - 11.30%
* Putnam Investments: Asset Allocation - 7.20%

The nearly 200 Survey respondents indicated that they most frequently rely on consistent fund performance versus benchmarks to make recommendations, followed by manager tenure and style drift. It is not surprising that the five funds most likely to be recommended to plan sponsor clients by the Survey respondents all have strong performance track records:

* American Funds Growth Fund of America (49)
* Davis New York Venture Fund (34)
* American Funds EuroPacific Growth (21)
* PIMCO Total Return (12)
* Thornburg International Value (11)

Perhaps because of their strong returns or the value-added services/tools that investment manager firms give to advisers, advisers have strong preferences in the fund families they choose to work with or recommend. Advisers’ top 10 preferred fund families are (# of mentions in top 5)

* American Funds (63)
* Fidelity (50)
* AllianceBernstein (27)
* MFS (24)
* Davis (24)
* Principal Financial Group (21)
* Columbia (21)
* John Hancock Financial (19)
* Dodge & Cox (18)
* T. Rowe Price (17)

Asked “what kind of support services/tools do you currently rely on from fund families/investment managers,” advisers to 401(k) plans say they are most likely to rely on research (75.6%), followed by marketing collateral (55.10%), conferences (53.50%), practice management support (35.40%), and sponsorship of certifications/designations (26.8%).

The full survey can be found at http://www.planadviser.com/magazine/article.php/1189.

Survey Methodology

PLANADVISER’s list of preferred providers was drawn from 175 advisers that were “personally involved in evaluating and recommending fund choices on behalf of qualified plan clients.” The questionnaire consisted of approximately 20 questions about advisers’ favorite fund providers and fund options, as well as questions about investment evaluation and selection for qualified plans. Survey respondents had a median of $100 million in qualified plan assets under advisement. About 60% of them were affiliated with an independent advisory firm/RIA/financial planner; 32% were a full-time employee of a wirehouse or regional brokerage firm; 1.2% were part of a CPA or accounting firm, and 6.90% considered themselves “other.”

About PLANADVISER

PLANADVISER magazine is the nation's only magazine for financial advisers focused on employer-sponsored retirement programs. PLANADVISER magazine, and its accompanying Web site, PLANADVISER.com, provides news dedicated to helping financial advisers navigate the complex world of retirement plans on behalf of their clients, as well as offering information about building a thriving 401(k) advisory practice. For more information, see www.planadviser.com.

PLANADVISER is headquartered at 1055 Washington Boulevard, Stamford, CT 06901. 

Edited by: Erin Kello


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