The modern workforce, and the workforce of tomorrow, is and will be more diverse than ever, according to research from Deloitte.

Millennials now represent the largest generational share of the workforce. Still, the workforce is aging. Consider this: by 2024, 30 percent of the 65 to 74 age group are expected to still be working, compared to just 17 percent in 1994.

Women's share of the workforce is growing too, expected to be 47.2 percent in 2024, according to Deloitte. And less than 60 percent of the workforce will describe itself as "white non-Hispanic," compared to three-quarters of the workforce that fell into that category in 1994.

For sponsors of 401(k) plans, and more specifically, the investment committees that oversee retirement plans, accounting for demographic trends can lead to better fiduciary stewardship, and ultimately, better retirement outcomes for all participants in a plan, thinks Brendan McCarthy, national sales director for Nuveen's DCIO business.

"The more different groups can be represented on a committee, the more effective the decision making can be," said McCarthy.

What exactly constitutes diversity is, of course, an increasingly diverse definition. Beyond age and gender demographics, individual businesses can have disparate race and socio-economic makeups.

And the roster of investment committees can't be expected to be expanded to represent all demographic silos in a given retirement plan.

The majority of investment committees—64 percent—are comprised of four to seven members, according to research from Callan.

An odd number is better than an even number, so as to avoid split votes. Five is a sound number, but McCarthy says a committee can be expanded to seven seats without compromising efficiency. "It starts to get unruly after nine," he said.

Three seats should be occupied by traditional choices—a member from the senior leadership of a business' financial arm, one from human resources, and one from legal.

From there, a plan sponsor would be wise to consider the specific demographics of its workforce, says McCarthy.

"The idea is to look at your workforce to make sure it is adequately represented," he said. "Every company is different, but often investment committees lack a younger demographic that might be represented in the workforce."

Including representation of rank-and-file workers can add insight to how a plan is being used by all wage earners.

The 401(k) market is naturally diverse by size. Fortune 100 and 500 companies, the primary targets of the plaintiffs bar in 401(k) fiduciary claims, are leading the way in diversifying investment committees to be more representative of their workforces.

Large plan consultants have helped direct sponsor clients to the value of diversifying committees, says McCarthy.

But often mid-sized and smaller plans have yet to get the memo.

"Some of those plans don't even have an investment committee," he said.

In his role overseeing DCIO sales for Nuveen, McCarthy's point of communication is with plan advisors, whom he says play a critical role educating sponsors on their roles as fiduciaries under the Employee Retirement Income Security Act.

Advising on the potential positive outcomes of diversifying investment committees creates an opportunity for advisors to relay their value proposition to existing clients and prospects.

"We help advisors with those conversations," McCarthy said of his role. "If an advisor can walk into a client or a prospect and initiate a fiduciary conversation, that can be a huge differentiator. In helping improve the make up of an investment committee, an advisor can potentially improve outcomes of the retirement plan for participants. And the more an advisor can increase their value proposition."

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Diversifying investment committee could lead to better retirement outcomes

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