Outsourced CIO (OCIO) for defined contribution plan sponsors
Making the right choice
Defined Contribution (DC) plans are becoming more crucial to the retirement welfare of workers. But with all the demands you and your staff face, your company may lack the time and resources to confidently keep up with investment oversight and the changing regulatory requirements. As fiduciary specialists, we can help.
Plan sponsors: maintain control of what's important to you and delegate the rest
Outsourcing your DC plan allows you to retain control of strategic decisions about plan design, qualified default investment alternatives (QDIAs), asset class choices, and active/passive styles. ERISA allows you to delegate functions such as investment manager selection, monitoring and replacement, and recordkeeper management and oversight.
What types of outsourcing functions can be delegated?
Delegates authority for decisions on plan investments.
- Target date series
- Stand-alone menu
- All investments
- Asset allocation, e.g. custom target date funds or managed accounts
Independent Plan Advisor
Reduces your fiduciary liability and can also help alleviate time-consuming and complex plan administrative duties.
- Traditionally hired to assume certain reporting and disclosure responsibilities (Form 5500, etc.).
- Can perform service provider selection, oversight, and other administrative duties as agreed.
Strategic Investment Advisor
Makes decisions about managing the plan or its investments.
- Advises on plan investments
- Scope varies to fit plan needs
- E.g., plan consultant
Selecting an OCIO provider for your defined contribution plan
Outsourcing for a DC plan can take many forms, from limited scope duties such as investment manager selection and monitoring to full plan management and administration. If you’ve decided that outsourcing certain fiduciary duties to a third party is the right decision for your plan, you must now select a provider. There are generally three types of firms providing outsourcing services.
How do you choose among them?
Consulting firms have made the foray into outsourcing, requiring a build-out of the infrastructure and expertise to offer new services and products.
Considerations for consultants:
- Track record in the outsourcing business
- Willingness to provide fiduciary services beyond advice
- Strength in and experience with investment implementation
- True focus on investment outsourcing
- Dynamic, real-time management of client portfolio
Investment managers have experience making investment decisions and providing investment-related services, but their focus is not necessarily on an entire portfolio.
Considerations for investment managers:
- Broad asset management experience
- A strong manager research capability
- Willingness to offer a customized approach
- Ability to manage risk across asset classes
- Measurement of goals that matter to me
Multi-managers seek to provide small-to-medium sized plans with greater diversification and access to money managers who are typically available only to large plans. Multi-managers generally focus on managing overall exposures within the entire portfolio rather than narrow security selection within specific asset classes.
Considerations for multi-managers:
- Willingness to provide fiduciary services beyond manager selection oversight
- Able to provide broad set of investment options
- Moving from single to multi-managers may require more transition
- Strength and experience in consulting
Fiduciary duty, expertise, alignment and accountability
Benefit from a customized approach
Delegating some responsibilities to an independent third-party fiduciary like Russell Investments can potentially save you time so you can focus on what you do best and reduce your risk of fiduciary liability.
For more than 30 years, we have provided fiduciary management services to corporate retirement plans.
You can trust us to:
- Help you select and monitor investments suited to your participant demographics.
- Demand the best in recordkeeping vendors, finding the right service model, and ensuring fees are reasonable.
- Help you effectively educate and communicate with your participants.
Explore our related research, articles, and more:
Public DC plan implements OCIO
Adding retirement income options to a DC plan
Case studies are problem-solving stories. We select a situation that is indicative of problems clients in this category are facing. The recommendations described do not represent a standard strategy or set of recommendations made for all advisory clients with similar issues. Each client has unique requirements, challenges, and constraints, and our advisory solutions are tailored to each client’s specific needs.
The shortsightedness of investing in silos
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