TDFs are popular because they offer instant diversification in stocks, bonds and cash-like investments, but their potential returns may be sandbagged by their failure to allocate to real estate, natural resources, commodities and precious metals, and other alternatives, says Rich Lang, multi-asset investment director at Capital Group.

Until recently, TDFs have also tended to place participants in portfolios constructed from record keepers’ proprietary funds, at times in high-fee share classes, notes Andrew Arnott, the CEO of John Hancock Investments.

For many advisors, the biggest problem with TDFs remains cost: Since a target-date series imposes its own management costs on top of a fund’s existing fees, expense ratios at times top 120 basis points—and high-cost TDFs may run afoul of existing ERISA fiduciary requirements.

Asset managers are heeding the call for better, lower cost target-date products. In November 2015, Dimensional Fund Advisors unveiled a TDF series that tilts toward inflation-protected Treasurys as investors near retirement. The hope is that these will provide a buffer against market volatility and inflation.

In 2016, BlackRock shifted its actively managed TDF series to smart beta mutual funds whose allocations are 80 to 90 percent low-cost ETFs. Toward the end of the year, Schwab debuted the lowest cost target-date series on the market, which charges 8 basis points in expenses.

Some advisors working with larger 401(k)s are embracing customized or “open architecture” TDF options, according to analysis published in February by Cogent Reports. According to the study, roughly 15 percent of advisors managing at least $50 million in defined contribution plan assets are using some type of custom TDF.

In open architecture TDFs, plan advisors have the freedom to select any fund available on a platform for inclusion in a target-date strategy and implement that fund within a glide path.

“Open architecture is potentially a better strategy because there are some managers out there that are great single managers within TDFs, but there are certain risks that come into the equation that may be alien to them,” Arnott says. “A manager or a firm can’t really be all things to all people; it’s very rare that you find one that is good at a lot of different things, across asset classes.”

In 2016, OppenheimerFunds launched the (k)ustom Advisor Program to help advisors vet “semi-custom” target-date funds. While custom TDFs allow advisors and sponsors to control the glide path and fund selection within funds, semi-custom plans offer advisors the ability to select investments and adjust allocations within an established framework.

“Our semi-custom TDF plan uses a custom model playbook,” says Kathleen Beichert, OppenheimerFunds’ head of retirement. “We keep it flexible. When working with a sponsor, advisors usually decide on a target-date strategy first—who has the best glide paths, who has the best funds. In (k)ustom Advisor, we can come in and help advisors understand which platforms have the options they want.”