Week in Review - April 2, 2024
Wave of New 401(k) Plans Expected
Welcome to this week's News Brief.
The retirement market is moving beyond boomers into a boom of its own, according to recent research.?Cerulli Associates?expects roughly 290,000 new employer-sponsored plans to?sprout?by 2030. That would push the total number of 401(k) plans on the market to 1 million.
Driving the roughly 40% jump are the changes set in motion by Secure Act 2.0, according to Cerulli retirement director?Shawn O'Brien.
The segment of workers most likely to see new plans are those working for small businesses. In fact, just 53% of people working at companies with fewer than 50 employees have access to a 401(k) or other workplace retirement program.
It is indicative of a problem?BlackRock?Chief Executive Officer?Larry Fink?last week noted demands a "national effort" to address.
"America needs an organized, high-level effort to ensure that future generations can live out their final years with dignity," he wrote in his annual shareholder letter, which was published last week.
"I don't have all the answers," Fink wrote.
But among the?solutions he pointed to?were a federally mandated savings account, akin to Australia's Superannuation plans, and re-setting people's retirement age expectations.
Allowing people to think 65 is a suitable age is "a bit crazy" given that the number comes from the era of the Ottoman Empire, Fink wrote.
People live longer now, he noted.
Equitable, meanwhile, appears to have taken aim at the small plan market, naming a?new group retirement head.?Jim Kais, who previously worked with?Ameritas?and?Transamerica?joined the firm this week. He takes over from?Jessica Baehr, who is now president of?Equitable Investment Management. Equitable has a firm toehold in the 403(b) school market, as well as the 457 government employee plan space.
Also last week,?Ascensus?said it will?take over?the recordkeeping business of?Mutual of Omaha, which administers more than 2,300 plans representing 65,000 participants and $3.9 billion in savings. Ascensus has 154,000 plans with more than 5 million participants and $760 billion under administration.
Voya?also announced last week that it has?added?a target-date managed account series from?Capital Group?to its menu. Sponsors who pick the Target Date Plus option get models of?American Funds?products built by?Morningstar.
Capital Group controls 8.2% of retirement plan market assets, according to data from?Sway Research.
That is up 2.3 percentage points from 2018, which makes the Los Angeles-based shop the fastest grower of market share.
Still, just 2% of sponsors offer managed accounts as their plan's default option. And when they do, less than 15% of participants choose them, according to Sway.
领英推荐
Although regulators may call leveraged exchange-traded products and single-stock ETFs "novel," neither is really new,?Sullivan & Cromwell?Partner?Dalia Blass?said.
But they do have risks that not all retail investors fully understand.
That point was once again driven home last week when?Stifel?became the latest broker-dealer to get?smacked?with charges of improper sales of the products. The St. Louis-based distributor will pay $2.3 million in response to?Finra's findings that between 2014 and 2016 the firm failed to have good systems in place to ensure its advisors used the funds properly.
Blass, who formerly served as head of the?Securities and Exchange Commission's Division of Investment Management, said the problem may not be the products themselves but the disclosures provided to investors.
That, she said, should be regulators' top concern.
Click below?to hear Blass talk about how regulators can help protect retail investors from less traditional ETF strategies.
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