Customized Target Date Solutions

Transcription

1 Customized Target Date Solutions Multi-asset class strategies tailored for plan-specific needs and goals J.P. Morgan Asset Management s defined contribution expertise and outcome-focused portfolio structuring capabilities offer a time-tested framework for delivering custom solutions.

2 For more than a century, J.P. Morgan has provided investment management solutions for some of the world s most respected institutions. Through our extensive work with public and private plan sponsors, we have established a reputation for delivering innovative, practical strategies that help participants increase their odds of reaching safe retirement funding levels. Our customized target date framework applies these insights to deliver prudently structured multi-asset class portfolios designed to unique plan specifications.

3 Tailor-made Target Date Portfolios Target date funds continue to grow as the most popular default option for defined contribution (DC) plans. With one investment selection, participants can access a powerful combination of asset class diversification that becomes progressively more conservative as retirement approaches. An increasing number of large plan sponsors and their advisors, however, are finding that a customized portfolio may be more suitable for their particular plan needs. Your plan may benefit from a customized target date fund if: Your participants behavior varies from typical saving and withdrawal patterns You want to leverage the plan s core investment line-up to construct a customized target date solution You have very specific risk/return expectations You have asset class specifications or strong preferences for a particular investment style J.P. Morgan can help develop and deliver customized target date solutions to meet specific investment criteria. Our team of multi-asset class portfolio managers and DC specialists will work closely with you to design and implement the most appropriate strategy for your plan s participants. KEY ADVANTAGES EXPERTISE Strategic and tactical asset allocation Industry-leading behavioral research Fiduciary oversight and guidance FLEXIBILITY Plan-specific investment managers Customized risk/reward parameters Tailored implementation EFFICIENCY Streamlined investment due diligence Scalable cost Evolves with plan changes Target date funds are funds with the target date being the approximate date when investors plan to start withdrawing their money. Generally, the asset allocation of each fund will change on an annual basis, with the asset allocation becoming more conservative as the fund nears the target retirement date. The principal value of the fund(s) is not guaranteed at any time, including at the target date. J.P. MORGAN ASSET MANAGEMENT 1

4 A Rich Depth of DC Resources J.P. Morgan offers a wealth of experience to help plan sponsors deliver a well-constructed target date solution. Our collective expertise in glide path design, portfolio construction, ongoing management, operations and participant communications seeks to maximize the number of participants financially prepared for retirement. We have more than 50 professionals dedicated to constructing multi-asset class portfolios. The investment committee averages more than 20 years of investment experience each, providing the long-term insights necessary for managing portfolios with year time horizons. J.P. Morgan puts the comprehensive resources of one of the world s largest financial institutions to work for you. We manage the complexities of delivering a customized target date portfolio with a transparent, easily accessible process. PARTNERING WITH J.P. MORGAN PROVEN TARGET DATE FRAMEWORK 30+ year history of building and managing custom multi-asset class portfolios for institutional investors, including DC and DB pension plans Industry-leading target date fund provider Deep understanding of participant behaviors ROBUST TECHNOLOGY Enterprise-wide technology solutions Rigorous risk controls Compatibility with all major custodians and recordkeepers Fully transparent and automated system EFFECTIVE PARTICIPANT COMMUNICATIONS Proven, award-winning participant communications program 20+ years of research focused on how participants learn and invest Experienced in participant group and one-on-one meetings 2 CUSTOMIZED TARGET DATE SOLUTIONS

5 Building the Right Glide Path Our customized target date services start with the development of the most appropriate glide path for your plan. You control the level of required customization, whether you use your plan s current investment managers to populate our preconfigured SmartRetirement glide path, use this existing glide path as a starting point and adjust it to meet specific requirements or design a completely customized strategy. J.P. Morgan s glide path philosophy brings the investment characteristics of sophisticated institutional portfolios to individual plan participants. Based on your plan s specifications and participant behavior, we will design a glide path to increase the probability of retirement security. SELECT FROM VARIOUS LEVELS OF CUSTOMIZATION SMARTRETIREMENT GLIDE PATH Employ J.P. Morgan s preconfigured glide path Leverage your plan s current investment managers MODIFIED GLIDE PATH Eliminate or add asset classes to our preconfigured glide path Adjust the risk/reward parameters and/or end point Leverage your plan s current investment managers COMPLETE CUSTOMIZATION Design glide path to address specific plan demographics Specify risk/reward parameters Specify end point Leverage your plan s current investment managers J.P. MORGAN ASSET MANAGEMENT 3

6 Addressing Plan-Specific Needs We will continue to partner with you to ensure that the customized glide path reflects your unique plan dynamics and recommend allocation changes as participant behavior, market opportunities, product innovation and the regulatory environment evolve. CONSIDERATIONS PLAN GOALS Quantify success metrics Establish time horizon PARTICIPANT DEMOGRAPHICS AND PLAN DESIGN Review saving and spending patterns Assess plan design characteristics ASSET CLASS DIVERSIFICATION Adhere to Investment Policy Statement guidelines Evaluate market assumptions Optimize glide path risk/return expectations Your Plan s Customized Glide Path We can help you determine: What is the goal for the target date portfolio? Plan sponsors must consider whether it is more important to help participants ensure income replacement at retirement or strive to manage longevity risk post-retirement. They must also assess if their focus is on managing volatility more efficiently and/or seeking growth. How much volatility is acceptable? Plan sponsors must decide where most participants fall in the risk/return spectrum. Identifying general risk tolerance can be straightforward based on average investor sophistication, age, wealth and access to defined benefit and supplemental retirement programs. There are also more subtle workforce traits to consider, such as participant saving and withdrawal behavior. What level of risk exposure is appropriate at retirement? This depends on a number of factors, including additional sources of participant income (if any), anticipated withdrawal patterns and whether or not the plan offers a professionally managed decumulation option. 4 CUSTOMIZED TARGET DATE SOLUTIONS

7 You Choose the Portfolio Building Blocks, We Provide Seamless Operational Integration Once the glide path is created, you select the underlying managers to populate the asset allocation strategy. This can be based solely on your plan s investment line-up or include additional asset class categories. Either way, you can easily adjust these specifications over time to accommodate plan changes. We then manage the day-to-day requirements of the portfolio to ensure participant contributions are invested quickly and efficiently. Excellence in implementation requires a detailed understanding of all operational components and complexities. Our team of professionals will coordinate these efforts and provide support each step of the way. We will: Manage cash flows and portfolio rebalancing Calculate a daily net asset value (NAV) Partner with all major recordkeepers and custodians Integrate fully automated risk controls to streamline portfolio management oversight SAMPLE GLIDEPATH ALLOCATIONS SIMPLE INVESTMENT LINEUP POTENTIAL ADDITIVE STRATEGIES Percent Age US Large Cap US Small Cap International Equity US Fixed Income Cash Percent Age Cash TIPS US Fixed Income High Yield Emerging Markets Debt Emerging Markets Equity International Equity US Small Cap US Large Cap REITs Direct Real Estate J.P. MORGAN ASSET MANAGEMENT 5

8 Beginning June 4, 2012, we also expect to launch our new Retirement Income solution, which will work much like an annuity that provides you with regular income. This may be of particular interest to those who have retired or who plan to retire within the next 10 years. For more information, please call ING at weekdays between 7 a.m. and 8 p.m. Central time. (Press 0# if you don t have your Password available when you call.) At ABC Company, we believe our success is built on our people. Given that, it only makes sense to regularly review and adjust our benefits offerings when we believe that new services or products may be of interest to you. That s why we re pleased to announce two new offerings in the ABC Company 401(k) Savings Plan Plan (the Plan ) beginning June 4, 2012: Personal Asset Manager If you re like a lot of people, you may not necessarily have the time, interest or knowledge to manage your own investments. That s why we re introducing Personal Asset Manager. This program, powered by Financial Engines, uses sophisticated financial models and the latest research to diversify and monitor your retirement account using the core funds in the Plan s investment lineup. For details, see page 3. JPMorgan Target Retirement funds If you prefer to choose a single, alreadydiversified investment that s managed professionally, you may be interested in the JPMorgan Target Retirement funds. To learn more about these funds, see page 4. Additionally, effective June 4, 2012, JPMorgan Target Retirement funds will become the Plan s default fund investment. This means that anyone who does not specify how to invest their contributions will have their money invested in the JPMorgan Target Retirement fund that aligns with their birth date of an estimated retirement age of 65. do It yourself core funds LINeup Designed for people who want to take a more hands-on approach and select their own mix of funds. Need help choosing investments? You may want to consider signing up for Personal Online Advisor, an easy-to-use online advice service that s available at Personal Online Advisor gives you a step-by-step action plan that helps you choose investments and how much you may want to invest in each one. The advice is objective, clear and customized to your financial goals. Personal Online Advisor is available at no additional cost to you. This service can let you know how your retirement investments are doing today and help you understand how much your account might be worth when you retire. Log on for a personalized forecast showing the estimated amount you may have for your retirement and your likelihood of reaching your desired retirement income goal. Plus, this service may help you stay on track to meet your financial goals with Retirement Updates sent via each quarter. These updates report whether you re on track to meet your goal and prompt you to log on to review your Plan in more detail. When there is something you can do to improve the estimated amount you may have for retirement, you ll receive an Advice Light sm alert with a link to quickly get updated advice. To use Personal Online Advisor Log on to and click your Plan name. Then click the Get Advice button on the Account Overview page and follow the prompts. Your Plan account balance and investment options will be preloaded into the program. You ll need a few minutes to add any other asset and retirement income information that should be taken into account. Then, if you agree with the program s recommendations, simply click a button to execute the changes. ABC Company 401(k) Savings Plan By signing below, I am authorizing the company to deduct the stated percentage from my pay and invest it in the JPMorgan Target Retirement fund based on my age, the default fund for the plan. I understand that there are other investment options offered in the ABC Company 401(k) Savings Plan that I may invest in at any time. I also understand that I may contribute a different amount than the stated percentage. ABC Company 401(k) Savings Plan Customized Participant Communications to Drive Results We offer more than 20 years of experience researching and understanding how participants learn about investing, and we will work closely with you and your communications provider to design a robust, tailored target date communications program incorporating your firm s branding, customized target date offering and other plan features. J.P. MORGAN S CUSTOMIZED PARTICIPANT COMMUNICATIONS Important note! Need help putting together your portfolio? Need help putting together your portfolio? ABC Company ABC Company 401(k) Savings Plan Option 3: (continued) Presorted First-Class Mail u.s. postage paid JPMRPS Look inside for more ways to invest your retirement account! Need help putting together your portfolio? J.p. morgan retirement plan services LLc P.O. Box Kansas City, MO ABC Company ABC Company 401(k) Savings Plan Newsletter ABC Company Take the first step real dreams. real retirement. Engaging participants through multiple touch points Inform about upcoming plan changes and important dates ABC Company What type of investor are you? real dreams. real retirement. real dreams. real retirement. ABC Company 401(k) Savings Plan Check the box to be enrolled in the ABC Company 401(k) Savings Plan Yes, enroll me in ABC Company 401(k) Savings Plan Signature Date Educate on various investment, financial and retirement topics Influence through continuous engagement Questionnaire Quick Enroll 6 CUSTOMIZED TARGET DATE SOLUTIONS

9 A Collaborative, Consultative Approach With our flexible framework, you set the guidelines and determine what level of customization is necessary for each aspect of the process. Our effective target date framework will walk you through each of the development and implementation steps to deliver the most appropriate portfolio design for the outcomes you hope to achieve. Set up GLIDE PATH DEVELOPMENT Determine target date portfolio objective Analyze participant behavior and plan design Outline asset class diversification requirements PORTFOLIO CONSTRUCTION Select underlying managers Establish rebalancing and cash flow policies OPERATING PROCEDURES Coordinate custodian, recordkeeper and investment manager interaction Document roles and responsibilities COMMUNICATIONS Develop strategy and key messages Coordinate with communications provider Launch ONGOING MANAGEMENT AND MONITORING GLIDE PATH MANAGEMENT Strategic asset allocation Tactical asset allocation, if applicable PORTFOLIO MANAGEMENT Implementation and oversight of cash flow policies Portfolio rebalancing ADMINISTRATION Daily custodial reconciliation Calculate daily NAV Monthly and quarterly reporting COMMUNICATIONS Fund commentaries Ongoing support J.P. MORGAN ASSET MANAGEMENT 7

10 A Complete Target Date Solution Partnering with J.P. Morgan offers you access to the insights, expertise and global resources of one of the industry s premier providers of DC investment solutions. Our target date platform is focused on delivering service and product innovation not just on day one but over the full course of our partnership. Our customized target date program enables you to structure a fully tailored, prudently designed portfolio for your plan s participants. Together, we can build an effective target date strategy to help your participants better prepare for retirement. Dynamic target date design and management Implementation ease and efficiency Effective employee communications J.P. Morgan empowers you to deliver the right strategy for your plan s needs. 8 CUSTOMIZED TARGET DATE SOLUTIONS

11 For more information about J.P. Morgan s customized target date solutions, please contact your J.P. Morgan Client Advisor or us at jpmam.info@jpmorgan.com.

12 J.P. MORGAN ASSET MANAGEMENT 270 Park Avenue I New York, NY J.P. Morgan Asset Management 270 Park Avenue I New York, NY Opinions and statements of financial market trends that are based on current market conditions constitute our judgment and are subject to change without notice. We believe the information provided here is reliable but should not be assumed to be accurate or complete. The views and strategies described may not be suitable for all investors. References to asset classes and financial markets are for illustrative purposes only and are not intended to be, and should not be interpreted as, recommendations. References to future returns are not promises or even estimates of actual future returns. The value of investments and the income from them may fluctuate and your investment is not guaranteed. Past performance is no guarantee of future results. Please note that investments in foreign markets are subject to special currency, political and economic risks. Exchange rates may cause the value of underlying overseas investments to go down or up. Investments in emerging markets may be more volatile than other markets and the risk to your capital is therefore greater. Also, the economic and political situations may be more volatile than in established economies and these may adversely influence the value of investments made. Certain underlying Funds of target date funds may have unique risks associated with investments in foreign/emerging market securities and/or fixed income instruments. International investing involves increased risk and volatility due to currency exchange rate changes, political, social or economic instability, and accounting or other financial standards differences. Fixed income securities generally decline in price when interest rates rise. Real estate funds may be subject to a higher degree of market risk because of concentration in a specific industry, sector or geographical sector, including, but not limited to, declines in the value of real estate, risk related to general and economic conditions, changes in the value of the underlying property owned by the trust and defaults by the borrower. The fund may invest in futures contracts and other derivatives. This may make the Fund more volatile. The gross expense ratio of the fund includes the estimated fees and expenses of the underlying funds. A fund of funds is normally best suited for long-term investors. IRS Circular 230 Disclosure: JPMorgan Chase & Co. and its affiliates do not provide tax advice. Accordingly, any discussion of U.S. tax matters contained herein (including any attachments) is not intended or written to be used, and cannot be used, in connection with the promotion, marketing or recommendation by anyone unaffiliated with JPMorgan Chase & Co. of any of the matters addressed herein or for the purpose of avoiding U.S. tax-related penalties. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice. J.P. Morgan Asset Management is the marketing name for the asset management business of JPMorgan Chase & Co. Those businesses include, but are not limited to, J.P. Morgan Investment Management Inc., Security Capital Research & Management Incorporated and J.P. Morgan Alternative Asset Management, Inc. INST-TDF-BRO 2011 JPMorgan Chase & Co. All rights reserved. jpmorgan.com/retirement/dc