America’s workers face a massive challenge as they save for retirement. A guaranteed monthly check that they (and their spouse) can depend upon for the rest of their lives is not an option with most pension plans. Direct contribution plans give more control to investors, but in the end these plans are largely failing them. Several industry estimates put the average 401(k) balance for a 65-year-old at roughly $200,000. At a typical 4% annual draw-down, this would equate to less than $700 a month. Too many Americans are not saving enough.

While the list of issues with the current system is lengthy, there is one that directly concerns the mutual fund community. Most 401(k) plans offer open-end mutual funds as their primary investment option. Mutual funds, excellent products in themselves, are required to have daily liquidity, which inflicts numerous drags on performance: redemption/trading costs, layers of (recently increased) regulation, and the need to maintain cash balances in portfolios, to name a few. The rationale is that investors should be able to move in and out of different funds on any given day, and have the money be available immediately in the event they decide to cash out. It goes without saying that these options directly conflict with the principals of long-term investing.

Further related to liquidity is the relatively limited range of investment options available to the vast majority of Americans. Publicly-traded stocks and bonds are perfectly good investments, but there are numerous asset classes, such as real assets (timber, infrastructure, etc.), Business Development Companies (BDCs), private equity/venture capital, and various credit instruments that are essentially off-limits for most investors. While the common assumption is that these investments are too “risky” for the average investor, much of the risk lies simply in the need for longer time horizons; cashing out is not an option at a moment’s notice. These types of less liquid investments, however, when managed properly, can offer diversification, non-correlation, and returns that often beat equities over longer time periods. The cruel irony is that these investments are for the most part only available to the wealthy.

There is clearly a need for a product that better suits a long-term investing horizon; something similar to today’s mutual funds, but without the burden of daily liquidity. The key principals of today’s mutual funds should all still apply: responsible investment selection, diversification, disclosure, transparency, compliance, and oversight by independent directors. However, it should have the flexibility to invest in a broader array of investments, much like a target-date or balanced fund, but with sleeves of varying liquidity within it. As an example, interval funds, which allow daily purchase but only periodic liquidity/share sales, might be a good model. Provision for hardship withdrawals could easily be incorporated without penalizing the majority of investors that will never need them.

Of course, the issue lies not with the industry, which is certainly capable of providing such products, but with regulation. The current regulatory environment is racked with uncertainty, however this may also may create an opportunity. In one sign of potential change, SEC Commissioner Piwowar recently suggested that consideration should be given to opening access to private offerings to non-accredited investors. In his words, “question the notion that non-accredited investors are truly protected by regulations that prevent them from investing in high-risk, high-return securities available only to the Davos jet-set…exacerbating inequalities of wealth and opportunity…”

What is a fund director’s role in this environment? The industry will continue to evolve, likely at a greater pace, so boards must be prepared. As always, directors must stay educated and up to date regarding developments in the industry and regulatory climate. The fund’s advisor is one of the best resources, along with industry groups, publications, and other service providers. Director recruiting and board structure are becoming more regular agenda topics. Things may happen sooner than expected. One of the industry’s largest advisors, with significant operations in private equity investments, just moved to acquire a major 401(k) business, perhaps with this concept in mind.

Beyond that, more proactive directors and other industry players may recognize the eventual reckoning that is coming for DC plans, and perhaps feel compelled to provide investor protection in a broader sense. The mutual fund community, including advisors, directors, and service providers, are a tremendous resource, and are among the best-informed group to weigh in on this issue. While it would extend well beyond the duties laid out in the ’40 Act, directors might elevate their profile to help make a difference.

Advanced products offering wider investment opportunities (but similar protections) for American workers someday could—and is this writer’s opinion, should—start appearing on retirement platforms. While not appropriate for everyone, it seems reasonable that a broader portion of the population should have access to opportunities that are currently open only to the wealthy. In any scenario, independent director oversight stands as a hugely valuable resource and protection for America’s retirement savers. Directors will continue to play an increasingly critical role—perhaps more than ever—and should plan accordingly.