A warm 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!
JD Power's 2024 Financial Advisor Satisfaction Study of over 4,000 advisors indicated that employee-based broker-dealers, such as wire houses, are rated higher than independents, in part because of benefits in compensation, technology and support, while indy advisors cited poor leadership at their firm.
Stifel led all employee-based firms followed by Raymond James & Associates and Edward Jones; independents were led by Commonwealth, Raymond James Financial Services and Cambridge.
More advisors are moving to pure RIA models and RIA and RPA aggregators are opting for top independent firms leaving the remaining indy advisors perhaps feeling a bit left out as many independents are owned or are acquired by PE firms, which usually leads to cost cutting and top management turnover.
While the asset-weighted expense ratios of mutual funds and ETFs fell 3.4% to 36bps last year and are flat. lowest price in history according to a Morningstar report, the decline in 2023 was only half of the decline in the previous year.
Pricing pressure hits passive and active funds, but consumer costs may not fall due to fees paid to advisers as the importance and value of advice continues to rise.
Fund fee pressure is particularly rampant in DC plans due to litigation, reliability concerns and the proliferation of CITs, as well as the exodus to passive investing. Larger active managers can lower their management fees by putting pressure on smaller competitors.
Is the recent US Supreme Court case overturning the Chevron decision a sea change for our country that puts more power in the hands of courts over regulators to interpret vague laws? Chairman Foxx of the Committee on Education and the Workforce intends to ensure that the Biden administration adheres to the restrictions promising strong oversight if they don't in letter to 8 agencies including DOL & PBGC.
Foxx cited past gross and abusive overreaching, which he hopes will be curbed by the latest court case.
And while Justice Kagan in dissent predicted a tsunami of lawsuits echoed by many ERISA experts, Encore Fiduciary's Dan Aronowitz welcomes the restrictions that claim the DOL has overstepped their ERISA jurisdiction with their fiduciary rule and suspects they will rise again. many lawsuits against DC plan sponsors.
Citing inflation and rising benefit costs, a LIMRA study shows that employees are cutting back willing to spend 20% less than two years ago.
Even as health care benefits increase, workers are unlikely to give them up putting pressure on retirement savings, but also an opportunity for advisors to help workers maximize their benefits spending as only 54% were satisfied with the employer's communications. Look for more employers to set up the high-deductible health care HSA triggers.
IRA rollovers are big business for many wealth advisors with close to or over $800 billion coming out of DC plans each year. While some RPAs focus on returns, most see them as lost revenue opportunities. But with the new DOL fiduciary rule, the potential for in-plan retirement income, and financials like Pontera and Future Capital, will IRA returns diminish or evolve?
Read my latest WealthManagement.com column While harvesting IRA rollovers, most with modest balances, may not be great business for RPAs, it's just one of many services advisors can provide to plan participants that they manage to build relationships with. lead to more profitable engagements such as wealth convergence, retirement and workplace benefits continue to gain momentum.
So those were the top stories from last week. I listed a few others 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.