A survey released in February by TIAA-CREF found that most retirement plan participants are happy with their investment choices, even if they aren’t familiar with all of them. The survey found 85% said they’re comfortable with their choices, while only 61% said they were familiar with all the options available in the plan.
Ed Moslander, senior managing director and head of institutional client services for TIAA-CREF, believes that’s at least in part due to participants’ trust in their employer and plan sponsors.
“I think employees trust the employer to have done due diligence around the products on the investment menu,” he told ThinkAdvisor on Thursday. “To some extent, I think they’ve ceded that to the employer and whatever fiduciary the employer signed up with to select appropriate investment products for their retirement plan.”
More than half of respondents in the TIAA-CREF Investment Options Survey said the number of investment options available in their plan is just right, but one in five said there are too many. Although almost the same percentage said there were not enough options, Moslander said that in his experience, participants are more likely to be overwhelmed by choice, not underwhelmed. “I doubt there’s very frequently too few [choices]; that may be an education issue. People may just not know what the funds on the plan menu are, but certainly there’s been an issue out there with too many.”
He said the ideal target for sponsors is between 10 and 20 options that cover the primary asset classes. That level of choice is “absolutely enough,” Moslander said. “You don’t need more than that, and I think you can do very well with 10.”
He attributed sponsors’ tendency to add more options to a desire to “mitigate some level of fiduciary risk,” but that’s changing. “It’s taken some time, but we’ve seen that in our marketplace, that menus have gone from too many down to a more reasonable number that people can actually digest,” he said.