The benefits manager at a mid-size tech organization found that the majority of its employees who had started with all their investments in target-date funds (TDFs) now had only a portion of their assets in TDFs. Some had allocations in multiple TDFs. The client was concerned that its employees were not using TDFs appropriately.
Our Consulting Strategies
Based on a preliminary analysis, Sibson observed that this problem largely affected certain segments of the population. Interviews with employees from these groups uncovered that many did not understand that TDFs are designed to hold all of their assets in a diversified fund. They had assumed it was better to spread their assets across different investment vehicles and not “put all of their eggs in one basket.”
Sibson worked with the organization to implement a two-part strategy:
A few months after the implementation, Sibson worked with the organization to conduct a survey. It found that almost all employees had a sufficient understanding of TDFs. Employees began allocating their assets into a single TDF and the number of employees with investments in multiple TDFs fell by more than 50 percent.
Sibson’s analysis and subsequent interviews helped our client identify employees’ knowledge gaps. This allowed human resources to educate them about the importance of asset allocation and choosing the appropriate TDFs. Ensuring employees invest in the appropriate funds will improve their chances of retiring with sufficient income.
Share this page