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Goldman Sachs Asset Management, L.P. and NextCapital Software, LLC are part of The Goldman Sachs Group, Inc. All information relating to periods before August 26th, 2022 shown herein are not from Goldman Sachs Asset Management, L.P. or The Goldman Sachs Group, Inc.

Hybrid Retirement Solutions: Dynamic, personalized, cost-effective, and growing

11/22/2021

 
Michael Sebastian, Chief Investment Officer

The hybrid qualified default investment alternative (hybrid QDIA) is a retirement readiness innovation that is growing rapidly in adoption. Here’s a quick overview, a discussion of how hybrid QDIA is gaining momentum with plans, and some next steps.

Overview
Hybrid QDIA is a holistic, dynamic, personalized retirement solution that utilizes two investment options: (1) a low-cost target date fund (or customized target date portfolio) investment, and (2) a managed account. Participants begin in the target date fund investment solution before automatically adding on managed account services when they reach a specified milestone, such as a certain age (or choose on their own to upgrade to managed account services.)

When Hybrid QDIA serves as the default investment option for a retirement plan, it provides planning for everyone regardless of the investment option. Being the default maximizes value added potential for all participants, enabling mass enrollment and engagement. In this way, it reaches all participants--early-, mid- and late-career, everyone has a plan. Additionally, the methodology and user experience are consistent throughout the participant’s career. 
​Managed accounts provide personalized investment and savings advice, leading to greater expected income at the right level of investment risk, and encourages improved savings and investment habits that are key to successful retirement outcomes. It provides these benefits uniquely among QDIA options.

Growth
Managed accounts are now offered by over 50% of defined contribution plans, and are offered as the QDIA (hybrid or otherwise) by over 13% of plans and growing--more than double the rate compared to five years ago. More default means more scale, with the potential of reducing costs further.
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More recordkeepers are deploying, or planning to deploy, this functionality. More advisory firms are finding a hybrid solution attractive as their primary default QDIA; hybrid QDIA helps increase the strength of the plan sponsor-advisor relationship while improving participant outcomes. 

We see anecdotal evidence among leading recordkeepers and plan advisors that hybrid QDIA represents one-third or more of new plan sales, and is trending higher.

Next Steps
Hybrid QDIA unlocks full value for participants, providing retirement awareness, the benefits of personalization, and a plan for everyone, in a cost-effective way.

A few common questions to consider: 
  • Would the participants I serve benefit from access to personalized advice?
  • What trigger is best to shift participants from a target date option to managed accounts? (See our recent research on this topic)
  • Would an off-the-shelf target date fund, or a customized target date portfolio, be the most appropriate product pre-trigger?
​
Interested in learning more about Hybrid QDIA? Reach out to hello@nextcapital.com
View my profile on LinkedIn

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Goldman Sachs Asset Management, L.P. and NextCapital Software, LLC are part of The Goldman Sachs Group, Inc., a public company that is a bank holding company, financial holding company and a world-wide, full-service financial services organization.
 

THIS MATERIAL IS FOR INFORMATIONAL PURPOSES ONLY AND IS PROVIDED SOLELY ON THE BASIS THAT IT WILL NOT CONSTITUTE INVESTMENT OR OTHER ADVICE OR A RECOMMENDATION RELATING TO ANY PERSON’S OR PLAN’S INVESTMENT OR OTHER DECISIONS, AND GOLDMAN SACHS IS NOT A FIDUCIARY OR ADVISOR WITH RESPECT TO ANY PERSON OR PLAN BY REASON OF PROVIDING THE MATERIAL OR CONTENT HEREIN INCLUDING UNDER THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974 OR DEPARTMENT OF LABOR REGULATIONS. PLAN SPONSORS AND OTHER FIDUCIARIES SHOULD CONSIDER THEIR OWN CIRCUMSTANCES IN ASSESSING ANY POTENTIAL COURSE OF ACTION.

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