Hello and welcome to this week's edition of 401k Real Talk & Happy 4th of July. 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 candid discussion that you wouldn't get anyway. So let's get real!
In a landmark case, the US Supreme Court overturned their 1984 Chevron decision that allowed agencies, not courts, to interpret vague laws. Chevron has been cited tens of thousands of times by lower courts and could dramatically affect a number of agencies, including the SEC, DOL, EPA and OSHA.
The decision has been hailed as a victory for businesses and conservatives, while critics claim the courts lack the technical expertise enjoyed by the agency's field-expert staff. A single judge can now more easily overrule a law that gives more power to the judicial branch.
Chevron's reversal makes it even more likely that the DOL rule will be overturned.
Perhaps it's just a coincidence, but shortly after announcing that Fisher Investments is taking $3 billion from an Abu Dhabi fund, it was announced that Ken Fisher's son, Nathan, will take their 401k private retirement solutions no longer part of the mother ship.
Focused on the small and micro 401k markets, Nathan has grown assets to $4.75 billion, which, while small compared to the $275 billion that Fisher Investment manages, is one of the largest small market 401 practices thousand.
Nathan's group created CIT with zero overhead allowing him to charge over 100 bps for advisory services and still be competitive. It will be interesting to see if this pricing scheme changes when they become independent.
As the momentum for in-plan retirement income increases, so does the need for plans and participants to transfer the guarantee when they change record holders.
Rather than placing the burden on data holders to build connectivity, middleware providers have emerged to do the heavy lifting.
One of these firms, a relatively new fintech entrant Micruity, announced a $5 million investment from Prudential, TIAA and State Street after previously raising $6 million from Pac Life, all eager to make retirement income more available in DC plans.
Stay tuned as this industry tries to overcome many of the challenges facing in-plan retirement income.
Driven by concerns about quality of service, M&A activity and the growth of plan sponsors, more plans, especially with $100M+ are likely to change record holders according to a Cogent study with 1,300 plans ranging from $5-500 million in assets. The average stay has fallen for the largest plans 12% since 2022.
The plans also cited concerns about investment fees, participant engagement and cybersecurity.
Record holders are not immune from the war for talent, not only making high-quality talent scarce and more expensive, resulting in lower quality of service, intense consolidation of providers has led to plans to seek a new record holder when theirs is sold. And plan sponsors can outgrow their provider as they add employees or buy other firms.
With rising technology costs and cybersecurity concerns, as well as employers wanting providers to help their employees, the game has changed for record keepers with only a few able to keep up. Similar problems are being faced by RPAs.
At a recent TPSU training program focused on managed accounts, a plan sponsor asked why she needed them after her retirement plan advisor provided guidance to her employees. Why incur additional expenses?
The reality is that even a well-intentioned HRD with significant resources cannot work effectively with every employee. Most still focus on the Triple F's (fees, funds and goodwill) and even the most resource-rich advisory firms do not have a proven wealth pool like wealth managers, who, by the way, are not equipped to help the less wealthy in scale.
Read my latest WealthManagement.com column about how advisors can use managed accounts to create more engagement, without which the costs will be hard to justify, and can also lead to greater adoption of retirement income.
So those were the top stories from last week. I listed a few others that I thought were worth reading:
- NEPC asks if the value of managed accounts justifies the cost
- The largest TDF providers continue to dominate
- Schroeders' study highlights key issues for retirement savers
- SPARK & Vanguard will host the SECURE 2.0 workshop
- What role does AI play in ERISA lawsuits?
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.