2024 Regional Summits | QDIA Debate

Matthew Giovinazzo and Alex Kahn took part in a spirited debate about the future of QDIA. The contestants discussed a variety of subtopics within QDIA talking about different approaches while defending opposing sides. The session consisted of four rounds with the winners being voted on each round by the audience. The coin was tossed and the debate began.

Kicking off this debate with round one was the question of what the future of target fund selection is in terms of the primary criteria we look at, will it be performance and fees or suitability? The coin was tossed with Matt taking the side of performance/fees and Alex arguing suitability. Some key points that were made in favor of performance and fees included familiarity, ease of conversation, fiduciary protection, and higher quality target date funds. On the opposing side, suitability emphasizes a more customized approach that takes into account the needs of each participant as well as long-term appropriateness, potentially avoiding the drawbacks of a strategy that is solely performance-based.

Round two began with the topic of conversation revolving around the future of QDIA in terms of Target Date Funds (TDFs) vs. Managed Accounts. Matt started things off by taking the side of TDFs and although Managed Accounts do offer personalized investment strategies, benchmarking for Managed Accounts is impossible because everyone has their own allocation. TDFs are simplistic, cost-effective, and easy to use which makes them ideal for a broad range of participants. Matt also made the point that an ideal outcome is more about navigating the spectrum of TDFs on one side with being low cost and less personalized and Managed Accounts being on the other end of the spectrum as highest cost and most personalized. Alex took his stance on Managed Accounts which focuses more on personalized, dynamic investment strategies tailored to individual needs at a higher cost. He argued that although Target Date Funds still have a place, personalization will be the future.

Lifetime income joined the debate in round three, with Alex arguing for it and Matt taking the position against it. Starting with the argument against, Matt shines a light on the biggest issue that faces lifetime income, which is accumulation; right now we are having a savings crisis where people aren't saving enough or retiring with enough in their account. On the other hand, there was the argument being made by Alex for lifetime income. Firms believe that it's important that income will be the future because defined benefits have been rapidly going away. For instance, in 1975 about 75% of Americans had access to a defined benefit plan, today, however, that number has decreased substantially to about 10%. Providing lifetime income could help Americans with market fluctuations and with having a stable and successful retirement.

The final round took place, with the deciding vote looming. The topic was co-manufactured QDIA options with the stance of for or against. Alex began the final round with his argument against, primarily with the point that plans have largely left their recordkeepers proprietary options in recent years; and although co-manufactured has done well in a rising rate environment, it won't do nearly as well once the FED cuts rates. On the other hand, Matt argued the side for co-manufactured. These funds often use stable value investments to smooth and reduce volatility, resulting in a lower risk-return profile. In 2023, there was a 24% improvement in down capture from co-manufactured, and that volatility reduction is what is leading to higher net sharp ratios. The bell rang and the debate came to an end, the audience had to decide who they choose to be the winner, was it Matt or Alex? Tune into the full video to discover who the audience chose as the winner and for a more in-depth view of the debate topics.

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