Hello and welcome to this week's edition of 401k Real Talk. This is WealthManagement.com Omnichannel RPA Contributing Editor Fred Barstein & CEO at TRAU, TPSU & 401kTV coming to you from Steam Jupiter – I Review everything from the past week's stories and pick out the most relevant and interesting ones offering an open honest and candid discussion that you wouldn't get anyway. So let's get real!
of the job market has definitely cooled – only 206,000 new jobs were added in June from 215,000 in May which is 3st month of decline in a row. The unemployment rate is the highest it has ever been since November 2021, and June marked the slowest 3-month average job creation since January 2021. The professional and business sectors led the decliners, losing 17,000 jobs. work.
Jeff Schulze, The head of economic and market strategy at ClearBridge Investments noted, “June's jobs further report that the labor market is nearing equilibrium,” which could lead, he said, to “the Fed starting its long-awaited rate-cutting cycle in September.”
There has been a shift in focus to retention versus recruitment, while continued labor shortages and rising wages have led to marked declines in record turnover services for the largest plans, down 12% from 2022, according to a recent Cogent survey.
As DC plans continue to act more like DB plans, the question is whether private equity investments will be made available to participants. According to a Blackstone study, 90% of wealth advisors allocate a portion of their client's portfolio to private equity. And with only 15% of companies with $100 million or more in public revenue and fewer IPOs, to improve returns, DC participants are likely to turn to these markets just like DB plans and individual investors.
As with retirement income, the list of PE-seeking firms in DC is impressive led by Blackrock, Franklin Templeton, Legal & General, Appollo, Neuberger Berman and Partners Group – the alternative investment association, DCALTA, boasts almost 70 members .
There are liquidity and confidence concerns, which are likely to mean that private equity will initially be involved in professionally managed investments such as TDFs and managed accounts, although the middleware can help, as with income from retirement.
To make RPAs and plan sponsors more comfortable with in-plan annuity products, fi360 recently launched a comparison tool using Cannex's annuity database. Currently, it reviews 8 products growing to 15-20 soon using 60 criteria.
Although adoption within the retirement income plan is slow for many reasons, one may be the inability to compare products. But there are public risk-transfer lawsuits alleging that plan sponsors and their co-fiduciaries failed to perform due diligence on operators, which can reduce interest in retirement income since most RPAs acting as co-fiduciaries have not the knowledge needed to make an informed decision.
Under 401(k) and 403(b) plans. have evolved from an additional savings plan to a comprehensive financial and benefits toolso is the role of the RPA, which is arguably the most important vendor for retail plan sponsors.
The evolution of RPAs and awakening plan sponsors have coincided with promising not only greater benefits for plan sponsors, but more importantly for participants.
Read my latest WealthManagement.com column about how DC plan sponsors can use a simple RPA rating system that, along with due diligence, should lead to dramatic improvements.
So those were the top stories from last week. I listed a few others that I thought were worth reading:
- 401Go CEO discusses how technology can help DC filers better serve the small/startup market
- DOL reports more study needed on pension purchases
- California adds high school education requirements
- Brokerage associations join lawsuit against DOL's fiduciary rule
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.