Thursday, June 27, 2013

Open-Architecture Investment Platforms

Offer a diverse range of investments to suit any retirement strategy


In the days of guided architecture (or focused investment platforms), employees often had to choose from an investment menu containing proprietary funds to build their retirement strategies. Investment platforms were limited, and fund lineups were therefore more constrained.

In the 21st century, open-architecture investment platforms can help employees avoid investment restrictions.

Developed to accommodate a broad range of investment needs, platforms today seek to ensure that financial professionals and employers can construct plan investment menus that are consistent with their Investment Policy Statements.

Industry trends and statistics show that these platforms are now the standard for modern retirement plans, as they have made substantial gains in popularity and usage over the past 10 years.

According to Cerulli Associates, the shift to open-architecture investment platforms is evidenced by the growth of defined contribution investment-only assets and the diminished use of proprietary-only investment products: 75% of 401(k) assets were addressable1 for investment-only managers in 2011, compared with 50% in 2003.2

Furthermore, Ernst & Young notes that a majority (79%) of wealth management firms plan to add open-architecture investment platforms to their overall client and product strategies within the next two to five years.3

Open-architecture investment platforms are favored because they can support any combination of proprietary and non-proprietary strategies, along with both traditional and non-traditional investment options that include:

  • mutual funds
  • ETFs
  • stable value funds
  • collective trust funds
  • unitized company stock
  • alternative investments

These platforms are also flexible enough to adapt to new developments—such as target date funds and model portfolio solutions—that can address distinctly different employee investment preferences.

A 21st century retirement plan allows employees to select from a wide range of fund families and investment options in order to choose the best investments for their retirement needs. This makes open-architecture investment platforms an essential retirement plan tool for both financial professionals and employers.



1Addressable assets are defined by Cerulli Associates as those in which the plan is not restricted to using a recordkeeper’s proprietary investment product.
2Source: Cerulli Quantitative Update, U.S. Retirement Markets 2012.
3Source: Ernst & Young 2011 US Wealth Management Study: A Focus on Product and Client Trends.