“Cerulli Associates found that a major focus of DC aggregators’ acquisition strategy is wealth management, and conversely, a major focus of wealth RIAs is growing the DC business,” Steve Dopp, National Director, Defined Contribution with Lord, Abbett & Co. said. “Yet, we still exist in silos.”
It was just one of many insights from a meaningful DCIO discussion at the LeafHouse National Retirement Symposium (LNRS) in Austin, Texas, last week moderated by LeafHouse Financial Chief Operating Officer Chad Brown.
Dopp, Natixis Investment Managers’ Alexandra Wells, American Century Investments’ Kevin Eknaian, and First Eagle’s Mike Rosenberg provided critical insight into where the DCIO space is now and where it’s headed.
Photo credit: #PranaByJonesie or @PranaByJonesie
“Ten years ago, it was cool to be a retirement plan specialist,” Dopp began. “Today, it’s about being holistic and consultative to the participant or client.”
Eknaian noted the level of innovation currently happening within the industry, specifically mentioning in-plan income solutions.
“The deductible 401k plan is 40 years young,” he added. “We’ve done a great job as an industry with accumulation, so now we’re at the tipping point with the decumulation puzzle. Why now? We have clear guidance contained in the SECURE ACT regarding in-plan income solutions. Employee Benefit Research Institute found that three out of four respondents to a survey want income products. We did our own research and found it was eight out of 10.”
Wells referenced the rising popularity of ESG and the importance of performing additional ESG analysis on top of fundamental analysis to know it will hold up under different market cycles and circumstances. She added that an important motivator for Natixis is meeting the demand for ESG options, and the demand is huge—from employees and employers alike.
“It’s not tree-hugging,” she said to laughter. “I’m from Vermont, so believe me, I know tree-hugging, and this is not it. ESG will not negatively impact return and will most likely add to returns.”
“A 13-year bull market masks a lot of problems that are still relevant in 401k plans. The advisor’s job is to engage clients.”
Mike Rosenberg, First Eagle
Natixis conducted several case studies of plan sponsors who have added its ESG Target Date suite into their plans, and they have consistently seen significant increases in both contribution and participation rates.
Wells explained that it can also act as a retention tool; many employers realize that looking at ESG factors helps long-term success. Employees want to be a part of companies that care and offer them investments that match their beliefs.
As a result, she said, Natixis is sought out because companies and employees recognize ESG’s value.
Rosenberg then raised the topic of quantitative scoring systems before rhetorically asking if they add to positive participant outcomes.
“The answer is, unequivocally, no,” he argued. “A 13-year bull market masks a lot of problems that are still relevant in 401(k) plans. We still have under-served plan sponsors and disengaged plan participants. The advisor’s job is to engage clients. As a fiduciary, in an effort to be consultative about what belongs in the investment menu, you should be considering solutions that have the ability to help in all market environments.”
“At First Eagle, our focus isn’t to beat the market but to focus on downside mitigation when the market declines,” he continued. “That is a tough job to do in a 13-year bull market, but represents a great opportunity as we look to the future.”
Dopp agreed, noting it’s increasingly about downside protection and helping create an environment in which participants can almost accidentally succeed.
Rosenberg added that fees are an ongoing industry challenge and that the industry may be one acquisition away from a completely different landscape. Recordkeepers are now creating products usually reserved for advisors—like managed accounts, financial wellness platforms, and participant education.
“But there are opportunities for true partnerships rather than arguing over who owns the data,” he concluded. “We’re perhaps a few steps away from a true battle, which concerns me. That will not be in the best interest of the participant. We have to figure it out because there are big companies with big checkbooks that could alter the ecosystem of the retirement business.”
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
