The marketing rap from Nick Della Vedova's press person caught our eye.
"Generation X is often under appreciated in our boomer-conscious culture. Yet 51 million Xers--those born between 1965 and 1976--are driving big change in business with their self-reliant, rule-rejecting, ?ber-serious approach to results. Think Gen-X accomplishments like Google, YouTube, and Amazon. At 37, Nick Della Vedova, president of 401(k) Advisors, is emblematic of his generation's tectonic impact."
Hyperbolic? Yes, but certainly not inaccurate.
Della Vedova, president of Retirement Plan Advisory Group, the sister organization to southern California-based 401(k) Advisors, joined the company in 2004, when it held $1.5 billion in assets under management. Under his leadership, it now has $10 billion under advisement, a six-fold in only five years.
We think he knows what he's doing.
Founded in 2000 by CEO Vince Giovinazzo, 401(k) Advisors is an independent firm whose 40-member team focuses in on what it calls, "high-caliber retirement plan consulting."
In 2004, Giovinazzo also founded 401(k) Producer Services, an outsource practice management platform for other 401(k) advisory firms, and hired Della Vedova. In 2008, Producer Services rebranded to Retirement Plan Advisory Group, "a practice management platform for other advisors across the United States."
After the hit America's investment vehicle of choice recently took, we sat down with the outspoken Della Vedova to get his take on the future of the 401(k), what needs to happen from a regulatory and product development standpoint, and what will in fact happen soon.
Boomer Market Advisor: We'll begin with the somewhat obvious observation that target-date funds haven't panned out as expected. What changes are you seeing to the product?
Nick Della Vedova: True, target-date funds in their current design are not the panacea people are looking for. From a theoretical standpoint, target-date asset allocation funds are something that do bring value. And what we mean by that is, "less is more." The 401(k) has been around for 25 years, and created this opportunity for participants to have an immense amount of choice. Unfortunately, most participants have not made the right choices, especially in creating a secure retirement. Statistically, only three out of 10 people are in 401(k) plans. Of the people that do invest, 7 percent describe themselves as aggressive investors, yet 33 percent actually invest aggressively. So it's interesting how what people want and need are not necessarily going to create successful outcomes. When you look at asset allocation funds, it is a way to help people make a sound choice. Unfortunately, many plan sponsors did not do basic due diligence on the actual asset allocation funds offered.
BMA: So what's being done?
NDV: What you're seeing (and what is a great opportunity for advisors) is this shift toward age-based asset allocation models. The typical plan sponsor spends an immense amount of time researching and reviewing with their advisor the core funds available. They want to make sure they offer a great large cap value fund. They want to make sure they offer a great large cap growth fund. But then they have what I call "house brand" asset allocation funds. What's happening now is many of the record keepers are allowing advisors to actually build age-based models off of those core funds being offered. So you get the best large cap growth manager, the best large cap value manager, the best small cap growth manager, the best bond manager, and you combine those into asset allocations.
BMA: What about the insurance aspect, that guarantee against the bottom dropping out again?
NDV: There's definitely interest. I'm going to answer your question but I have to back up one step. When you look at the glide path of many of the age-based asset allocations models, they're either "to retirement" or "through retirement." So many of them dial down to say, "at age 65, I am going to think that I'm at retirement and it's going to be much more conservative." Through retirement says, "I think someone's going to stay in this fund forever until I pass away." If you have a "through"-type environment, it would be prudent to have some kind of wrapper because you're taking on more risk when you can. The downturn has told us that people in their latter years cannot afford downside risk; period, end of story. And it comes with sequencing. So it's important to have some type of risk associated with those "throughs." If I'm a plan sponsor and I decide to use a "to retirement" type of asset allocation and glide path, then what you're really thinking is when participants reach age 65, they'll take their money and roll it into an IRA. That's typically the time they're buying that insurance.
