Hello and welcome to this week's edition of 401k Real Talk. This is WealthManagement.com's Fred Barstein Omnichannel RPA Contributing Editor & CEO at TRAU, TPSU & 401kTV – I Review everything from the past week's stories and pick out the most relevant and interesting ones offering an open honest and frank discussion that you wouldn't get anyway. So let's get real!
Quoting the NY Times, “If the economy is slowing, no one told the labor market” how The number of jobs in February again exceeded experts' expectations with 275,000 new jobs. Although unemployment rose slightly, it was 25 in Februaryth consecutive months that it was below 4%, the longest streak since the 1960s.
The education, health and government sectors led growth followed by hospitality and leisure – business services gained just 9,000 jobs.
And while we're no longer in a war for talent, it's still a battle with perhaps more emphasis on keeping up with retirement benefits, a top 3 weapon that further drives the convergence of wealth, retirement and workplace benefits providing opportunities for enlightened advisors to be strategic benefits and financial consultants.
The House sent a bill to the Senate in the long-awaited move allow 403b plans to offer CIT along with defaulting to electronic document delivery.
As more retirement plan assets move into more affordable CITs, it only makes sense for 403b participants to have access with most experts believing it will pass soon as retirement policy remains one of the few bipartisan issues .
Bringing ERISA 403b into the modern era with CITs is hopefully just one step toward fixing the non-ERISA k-12 403b plans plagued by exorbitant fees, surrender charges, and conflicts of interest that the DC industry corrected 20 years ago seen. But progress is being stymied at the state level by powerful Washington lobbyists and associations, as well as insurance companies and brokers desperate to preserve multi-vendor teacher retirement systems for their own enrichment.
If data is the new oil, then the financial services industry, especially DC plans, must work with participants to make it available as the move toward personalization continues.
A recent report by Cerulli shows that 45% of Gen Zers are willing to share their data to receive more personalized TDFs compared to only 32% of Millennials and 36% of Gen Y and Baby Boomers.
Consumer research confirms that people are willing to share information if they get value in return, and with TDFs receiving the lion's share of new assets, personalization could allow them to include other options such as retirement income.
18th annual NEPC DC Plan Trends and Rates Survey with 128 customers representing $259 billion provides a glimpse into the future of DC retail plans.
Highlights include:
- 97% of plans offer a TDF that accounts for 47% of assets, which has led to the shrinking of major formations.
- 86% offer a retirement income solution.
- 43% offer managed accounts, but only 5% of participants use them accounting for only 4% of assets – prices have fallen 10% in the past year, but the average fee is still 39 bps
Read the latest P&I column by Robert Streyer about the steps larger plans are taking to provide retirement income solutions.
Years ago, retirement plan advisors built their businesses targeting plans using blind puppies and squirrels by highlighting the risks while emphasizing the benefits of using a specialist. The same philosophy is driving changes for CPA plan auditors along with revised requirements and PEPs that limit audit costs for their members.
However, according to a 2023 DOL study, “30 percent of audits contained major deficiencies…(that) put $927 billion and 11.7 million plan participants and beneficiaries at risk.”
Advisers should encourage clients to use an experienced CPA auditor as well as navigate the new definition of which plans must have an audit. Read my latest WealthManagement.com column about opportunities for advisors to differentiate themselves from Triple F advisors.
So those were the top stories from last week. I listed some other stories that I thought were worth reading:
Please let me know if I missed anything or if you would like to comment. Otherwise, I look forward to talking with you next week on 401k Real Talk.