Hello and welcome to this week's edition of 401k Real Talk. This is Fred Barstein Omnichannel RPA Contributing Editor of WealthManagement.com and 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!
The court has decided in favor of the defendants for the long-awaited lawsuit brought by participants in the Wood 401k plan represented by the law firm of Jerome Schlichter involving flexPATH.
Citing the plan's due diligence and the value added by flexPATH placing multiple risk sliders within each of their TDF series, the court found the plan sponsor and flexPATH more than justified the 338 fees paid to them. NFP, which had owned flexPATH and spun it off last year, was the plan's adviser and was initially named in the suit, but was quickly dropped. Ironically, the plan eventually replaced FlexPATH TDFs in favor of Vanguard.
Advisers operating and being paid for the growing number of accounts managed by advisers will heave a sigh of relief, but questions still remain about loyal advisers recommending regular products and services, although 338 services seem clearly outside the scope of this issue.
The question is not if but how AI will affect DC's plans, attendees and presenters with CFA Institute CEO Margaret Franklin giving some examples. She noted that AI that analyzes terabytes of data finding patterns may be able to improve asset allocation.
Other possibilities include performing routine and repetitive tasks, preventing fraud and hacking of participant accounts, and modeling behavior.
The bottom line: firms that use AI effectively will have a more productive staff, better services and products, and can improve results.
Although we've come a long way since robo-advisors promised to replace financial advisors, we still have a long way to go with AI with warnings about the bad results of data distortion as well as firms manipulating the underlying algorithms.
Financial wellness and employee communication and education are all the rage in DC plans and with benefits programs in general, but engagement is still pathetically low. But before it can improve, we need an objective way to measure it.
An outline of professional benefits how to measure engagement which they claim results in 59% lower turnover and 17% higher productivity.
Borrowing from the key performance indicators or KPIs that media companies use to measure engagement include: Open rates, click-through rates, page views, read time and video views.
They also recommend post-campaign surveys, benchmarking, evaluation and taking action based on what works and what is likely to be more effective.
After behavioral funding, which dramatically improved DC plans through automated features, the next frontier is engagement, which is difficult to improve but must be rigorously measured.
Like a straight wave the convergence of wealth and retirement continues in the workplacethere is more evidence that retirement plan advice is skewing with a recent T Rowe survey claiming that 100% of these firms are offering wealth strategies to participants.
Although it seems a little high, personalization is driving the move to managed accounts and other related services, although serving the masses through personal financial advisors at scale is still a challenge. Regardless, the income opportunities, especially for the top 10% and HENRY are very visible.
The question is whether RPAs with access to tens of thousands of plan participants they manage are better positioned than wealth advisors, who are now able to integrate DC accounts into their planning through firms like Pontera and Future Capital and are beginning to see DC's plans as a way to find more affluent customers.
Regulators and law firms are watching closely as conflicts will inevitably increase and will estate advisors become ERISA fiduciaries if they are paid from plan assets?
Over 20 years ago, some of today's leading retirement plan advisors built their businesses on the principles of loyalty while helping plan sponsors lower recordkeeping fees. While it took some prodding to get plans to do RFPs of record holders because most claimed to be happy, the results have been much better service at a lower price and fewer providers.
All of this is likely to happen for RPAs who have trained their clients well, but it's also likely to happen more slowly than with record holders and investments as plan sponsors wake up. Read my last column how and when this movement will happen.
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.