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.
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Economic impact on employee benefits:
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
QuickBooks which serves 36 m clients named Vestwell as their exclusive 401k partner. The announcement follows the acquisition of the 27,000 Guideline plans not using Gusto as their payroll provider and an additional $385 m Series E round.
Vestwell also collaborates with Morgan Stanley, JP Morgan, Manulife John Hancock and Amazon’s delivery partners. Vestwell has become the dominant state auto IRA provider recently named by NY state and soon to take over Illinois’ program.
According to Vestwell CEO Aaron Schumm, 2/3’s of employees working in organizations with less than 50 workers do not have access to a retirement plan at work. Integrating DC plans into payroll systems leveraging tech and AI will streamline workflow and lower costs. The question is what is the role of the advisor in these plans and are there enough of them?
Next story:
Empower announced record Q1 earnings up 23% over last year topping 20 m “investors” and $2 trillion in assets adding 335,000 new participants last quarter alone.
Citing that $1 trillion is expected to roll out over the next 5 years, Empower is doubling down on the Personal Wealth division which is aggressively hiring new “advisors” while reworking their compensation saw a 65% earnings increase.
CEO Ed Murphy noted that participants have 3 times as much assets off platform indicating a greater emphasis will be made to focus on the $6 trillion that they participants have.
NEXT STORY
Just as he did with DC plans, Jerome Schlichter is targeting other benefits plans especially voluntary benefits almost exclusively paid by employees citing egregious behavior by employers and their brokers.
The lawsuit against Banner Health, Lockton and their wholly owned BCInsourcing, alleges a failure to exercise proper due diligence to monitor, negotiate and ensure reasonable fees. Schlichter alleges that the employer allowed brokers to aggressively sell expensive products in exchange for valuable services which had been a common practice for DB plan sponsors that also had a complimentary DC plan.
The lawsuit claims that Lockton and BCI commissions averaged a whopping 40% which equated to $4 m annually from 2020-2024.
This is the 5th lawsuit of its kind by Schlichter with Keller Rohrback also filing against Banner. Just like with DC plans 20 years ago, benefit plan practices and fees seem to be out of line and with new laws and disclosure requirements they appear to be ripe for fiduciary advisors.
Next story:
Though DC assets are stickier in tough economic times, they are not immune from economic realities nor are workers and retirees.
To that end, TTEC, a $2 bn tech outsourcing company suspended its 3% match to invest in AI. Deloitte and Zoom have also recently shrunk benefits. Concerns about cost will limit auto enrollment and escalation.
On another note, the NYTimes is reporting that more people are being “fired from retirement” with retirees returning to the workforce as the cost of basic goods like gas and food continue to rise. It is estimated that 37% of Americans over 55 still work. Many people are afraid to retire because they do not think they have enough and even those that do are afraid to spend.
No easy solutions for plan sponsors, retirees and workers especially those without access to a retirement plan at work.
FINALLY
There’s a lot to unpack from the acquisition of Leafhouse’s fiduciary services by Mesirow starting with understanding the various businesses that Leafhouse founder and CEO Todd Kading has and continues to create. It seems simple at the surface level with Mesiorw picking up Leafhouse’s $23 billion in fiduciary services adding to their $115 billion business while making a strategic investment in Leafhouse’s tech division.
Read my recent WealthManagement.com/RPA column about how Leafhouse is well positioned to change the CIT business which suffers from significant operational inefficiencies.
FINISH
So those were the most important stories from the past week. I listed a few others I thought were worth reading covering:
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Private credit industry takes blame for confusion about liquidity
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Teresa Ghiladucci warns that crypto does not belong in retirement plans
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Cerulli cites small plans as growth opportunity for record keepers
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SEC clarifies how PEP plans fit under securities law and
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White paper on CIT adoption
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.
