Be sure to sign the SignInSignOut sheet outside of the room when applying for Continuing Education C

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Be sure to sign the Sign-In/Sign-Out sheet
outside of the room when applying for Continuing
Education Credits for the following
certifications. (Check the appropriate
certification)
Important Reminder!!!

• CFA
• CFP
• CPE

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Managed Accounts,Lifestyle and Lifecycle
FundsTrends, Responsibilities, Communication and
More
Moderator Edward Lilly, New York State Deferred
Compensation Plan Panelists Paul Pfeiffer,
Nationwide Retirement Solutions Wendy Young
Carter , CitiStreet Jamie Ohl, Hartford Life
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Paul Pfeiffer Nationwide Retirement Solutions
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Managed Diversified Investment Funds

• LifeStyle Funds
• Static mapping Investor risk profile
• Static asset allocation
• LifeCycle or Target Date Funds
• Static mapping Retirement year
• Dynamic asset allocation
• Managed Accounts
• Dynamic mapping Multiple factors
• Dynamic asset allocation

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LifeStyle/LifeCycle Funds History

• LifeStyle introduced in 1990
• LifeCycle introduced in 1994
• Rapid Growth
• Today over 120 billion invested

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LifeCycle Funds Recent History

• Driven by inclusion in defined contribution plans
  
• Easier to designate as default investment options
• Expected to get a big boost from the Pension
  Protection Act

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Implications for Plan Sponsors

• Complex decision-making process
• Fiduciary challenges
• Qualifications of the fund manager
• Applicability of the fund(s)
• Appropriateness of the underlying allocation.

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Important Issues to Consider

• Asset allocation
• Investment holdings
• Expenses
• Performance

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Asset Allocation

• Risk factors involved
• Appropriate allocation mix
• Equity (large, mid, small cap)
• Cash
• Other

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Investment Holdings

• Investment strategy
• Actively managed funds
• Index funds and others
• Individual stocks and bonds

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Expenses

• Range of fees
• Influencing factors
• Wrap fees
• Exotic asset classes
• Proprietary offerings

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Performance

• Impact of
• Asset allocation
• Individual securities
• Expense levels
• Other factors
• Philosophy
• Process
• Bull v. bear market
• Benchmarking is difficult

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Jamie OhlThe Hartford
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Participation and Compliance

• Participation rates have increased
• Contribution rates have increased
• Defined Contribution assets have increased by
  orders of magnitude over the last decade

Estimated 457Asset Projections in All Market
Segments (In Billions)
Market Segments Defined by Cerulli Associates,
December 2006 Source Cerulli Associates
December, 2006
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Focus

• Focus should be on how well
• participants invest

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The Challenge

• DC plans are key to retirement security
• Most Americans know little about investing
• 44 of plan participants admit to having little
  or no investment knowledge (John Hancock
  Financial Survey 2005)
• 89 of retirement plan participants have only
  basic, limited or no knowledge of how to invest
  or save for retirement (EBRI 2005)

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The Solution Continuum
Investment Advice
Managed Accounts
Quality of Advice Fit
Model Portfolios
Risk-Based Funds
Age-Based Funds
Balanced Fund
Difficulty of Use
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Features of Managed Accounts

• Dynamic asset allocation
• Professional, active account management
• Desired retirement goals and time horizon
• Contribution rates
• Asset allocation
• Investment selection
• Ongoing, active management
• Voluntary or automatic

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History of Managed Accounts

• 2001 DOL Advisory Opinion
• Independent financial expert to generate
  investment advice
• Permits delivery of the investment advice by a
  facilitator
• Requires annual update of the investment advice
• Permits ongoing asset management

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History of Managed Accounts

• Pension Protection Act
• Level fee arrangement or computer model
• Eligible investment expert certification
• Third party audit
• Written disclosure requirements

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Managed Accounts Benefits to Plan Sponsors

• Answers participants request to have someone
  invest for them
• PPA Qualified Default Investment Account (QDIA)
• Focuses on participants needs rather than age,
  etc
• Helps sponsor ensure there are suitable
  investment choices, education, investment strategy

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Managed Accounts Expense Structure

• Based on assets
• More costly than lifecycle and lifestyle funds
• Approximately .5 - 1 more
• Fees are getting lower because more efficient
  models are being developed

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Wendy Young CarterCitiStreet
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Communications to Participants

• Good communication principles hold true
• Ideal to focus on
• Knowing and meeting retirement goals
• Measure results against goals
• Tailor efforts to different personalities
• Engaged
• Uncertain
• Reluctant

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Adding Lifestyle/Lifecycle or Managed Accounts

• Determine rollout campaign
• Create a buzz
• Use many touch-points
• In-person
• Print
• Internet
• Web site
• DVD

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Adding Lifestyle/Lifecycle or Managed Accounts

• Appeal to different groups
• Lifecycle funds for one stop shoppers
• Managed accounts choice not to choose
• 50 of plans with managed accounts already have
  lifecycle funds

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Fund Change from Lifestyle to Lifecycle

• Adding lifecycle funds
• Eliminates need to map
• Increases number of investment options and
  possible confusion
• Replacing Lifestyle with Lifecycle funds
• Lifecycle arent static
• Risk profile determination unnecessary
• Requires mapping
• Needs more communication efforts

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Enrollment

• Target non-participants and under diversified
  participants
• Profile who it is right for

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Enrollment

• Lifecycle/Lifestyle funds
• Promote convenience
• Help avoid misuse
• Address underlying investment

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Enrollment

• Managed accounts
• Promote personalization
• Trial period to motivate action
• Ensure participants understand fee structure

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Funds as a QDIA

• Interesting development even if your plan doesnt
  have a QDIA 
• Demonstration of belief that participants need
  investments that do more than provide safety 
• PPA -- while this is ERISA relief most
  governments look to ERISA/DOL for guidance

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Selection and Review

• Prudent selection includes looking at
• Experience and qualification of advisor
• Willingness of adviser to assume fiduciary status
• Advice based upon generally accepted investment
  theories
• Process avoids self-dealing or conflicts of
  interest

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Selection and Review

• Monitoring includes looking at
• Changes to information upon which adviser was
  originally selected
• Compliance with contractual provisions
• Usage of services in relation to cost
• Participant feedback

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Investment Advice or Managed Accounts

• Fiduciary relief if certain conditions met
• Model certified by an Eligible Investment Advice
  Expert
• 3rd party audit of services

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QA