Welcome to this week’s edition of 401(k) Real Talk, where Fred Barstein, contributing editor for Wealth Management’s RPA channel, reviews all of last week’s industry news and selects the five most important/interesting stories.
Worth Reading:
Read the full raw transcript below:
Greetings & a warm welcome to this week’s edition of 401k Real Talk. This is Fred Barstein contributing editor at WealthManagement’s RPA omnichannel and CEO at TRAU, TPSU & 401kTV – I review all of this week’s stories and select the most important and interesting ones providing open honest and candid discussion you will not get anyway else. So let’s get real!
FIRST STORY
OCIO assets from DC plans have surged by 400% to $580 bn over the last 8 years according to P&I with DB assets hitting $675bn but up just 51% with the vast majority coming from +$1bn plans. GS recently became the OCIO for Lockheed and Verizon adding over $60 bn.
A similar trend is occurring with advisor sold DC plans in the form of 338 services which almost no one charges more than 321. PEPs with an estimated $30-$40bn are another form of fiduciary outsourcing.
The impetus behind this trend by plan sponsors includes the desire to outsource fiduciary risk, growing complexity of investments especially alts, resource constraints and greater buying power.
Next story:
Empower topped $2.1 trillion in assets in Q2 up 10% from the precious quarter with earnings surging by 6.3% and 36% year over year. Wealth assets climbed to $122bn up 40% from last year. They boast almost 20m participants and 1.2 million wealth clients.
To help participants navigate every stage of life, Empower has leaned into the convergence of wealth, retirement and benefits at the workplace through the 2021 acquisition of Personal Capital and the recent purchase of Milliman’s DB and benefits administration.
NEXT STORY
Though some believe data should be free, an expected reversal by Trump’s CFPB could result in banks and custodians racking in billions of dollars in fees mostly from data aggregators like Plaid.
The CFPB rule that allowed customers to access their data at no charge was enjoined and is expected to be reversed by the agency.
Though some decry the move, others claim that data will be cleaner and cost less to manage. This movement has huge implications for DC advisors and plans who need data from record keepers to serve the financial holistic needs of participants.
NEXT STORY
Simon Hoyle, a financial advisor recruiter, notes that the looming advisor crisis may be overstated claiming that most have not leveraged tech, especially AI, to its fullest with lots of room for productivity boosts.
The issue came to light in a McKinsey report relying on Cerulli data with 40% of financial advisors and 50% of CFPs 50 years or older. 110,000 of the almost 300,000 advisors are expected to retire by 2034.
But Hoyle claims that advisors retire later than the average worker which skews the numbers.
Regardless, younger workers are not attracted to a commission only sales job with most coming through wirehouses and insurance companies. There may, however, be opportunities for these younger workers to become financial coaches for DC participants who could evolve into an advisor role as the convergence of wealth and retirement heats up.
FINALLY
Predicting which products and services will become mainstream in defined contribution plans is a tricky and at times life and death exercise. After over five years, it’s fair to ask the same question about Pooled Employer Plans which now include an estimated $30-$40bn.
Read my WealthManagement.com/RPA column about whether PEPs are a fad, niche or mainstream service.
FINISH
So those were the most important stories from the past week. I listed a few others I thought were worth reading covering:
The father of the 401 (k) starts a new retirement plan
Major TPA aggregator launches advisor portal
Which record keepers leverage advisors and TPAs AND
Congress targeting mega IRAs
Please let me know if I missed anything or if you would like to comment. Otherwise I look forward to speaking to you next week on 401k Real Talk.