Data & Research September 7, 2016

Sponsors View Income as Primary Purpose of Retirement Plans

They also believe that balances should be translated into income streams.
Reported by

In the past four years, plan sponsors have definitely gotten the message on the importance of showing retirement account balances as income, rather than just as savings, as 85% say the core purpose of a defined contribution (DC) plan is to provide income, up from 9% in 2012, according to the MetLife 2016 Lifetime Income Poll.

Additionally, 96% think it would be helpful if balances were shown as income, and 92% would like the Department of Labor (DOL) to provide a safe harbor so that they can include annuities in their plans. When analyzing the solvency of annuity providers, 76% of sponsors would prefer to rely on the assessments of state insurance commissioners, as opposed to conducting the due diligence themselves.

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Ninety percent of sponsors think plan design should be simple, as offering too many choices often leads to inertia. Additionally, 58% of sponsors do not think that withdrawal solutions with minimum guarantees are easy for the average plan participant to understand.

When asked about their approach to retirement income, 79% of sponsors think that allowing participants to take a partial lump sum and a partial annuity is preferable to requiring them to take either a lump sum or an annuity, and 72% think that offering the latter two options may not be in the best interest of participants.

“No longer can DC plans exist solely as retirement savings plans,” says Tim Brown, senior vice president and head of life and income funding solutions at MetLife. “The core purpose of today’s DC plans must be recast to move beyond retirement savings to retirement income, by enabling plan sponsors to provide the education, tools and solutions to help participants make their savings last a lifetime.”

Roberta Rafaloff, vice president, institutional income annuities at MetLife, adds: “Today, only 6% of plan sponsors say their 401(k) plan includes a guaranteed lifetime income option. This number could rise exponentially once the DOL completes the work on an updated safe harbor rule. Two-thirds of plan sponsors whose plans do not currently include a guaranteed income options reported that they would be at least somewhat likely to make income annuities available for DC plan participants once the rule is announced.”

MMR Research Associates conducted the online survey of 212 sponsors for MetLife in mid-May.

Deals & People September 7, 2016

Kapoor Named Next President of Morningstar

Current President of Morningstar Kunal Kapoor has been named as the firm’s next CEO. 
Reported by

In January, Kunal Kapoor, president of Morningstar, will be promoted to the role of chief executive officer; he will also be appointed to Morningstar’s board of directors.

Both appointments are effective January 1, 2017.

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Morningstar announced that company founder Joe Mansueto will become executive chairman and will continue to serve as chairman of the board. To limit the number of inside directors, Don Phillips has voluntarily opted to step down from the board, effective December 31, 2016.

In a memo sent to Morningstar employees, Mansueto expressed optimism about Kapoor’s pending leadership, describing the soon-to-be CEO as a Morningstar veteran “who lives and breathes our mission of creating great products that help investors reach their financial goals.” In the memo, Mansueto commends Kapoor’s 19-year track record with Morningstar, pointing out that he started with the firm as a data analyst. 

Kapoor will take the reins as the company and its competition face significant opportunities and challenges in the retirement arena. These include the Department of Labor fiduciary rule and a significant shift in the way financial advisers make recommendations and access products.

Against this backdrop, Kapoor says the firm will be able to leverage its capabilities in research, data, and software to solve problems for investors. “As the recent Department of Labor Fiduciary Rule has confirmed, our strong focus on putting investors’ interests first is as relevant as ever,” he adds. “We’ll continue to invest in our workforce, expand our core strengths in design and technology, and build on our strong position in the industry. I’m committed to aligning our operations to accelerate innovation, focus on execution, and drive long-term results for our stakeholders.”

Kapoor originally joined Morningstar as a data analyst in 1997 and has been president of the company since October 2015. In his current role, he is responsible for product development and innovation, sales and marketing, and driving execution and accountability across the company. He previously served as head of global products and client solutions and has served in a variety of other leadership roles for Morningstar, including director of mutual fund analysis, director of business strategy for international operations, president and chief investment officer of Morningstar Investment Services, and head of Morningstar.com and the company’s data business.

As noted, Don Phillips will step down from the board of directors, effective Dec. 31, 2016, and will be succeeded by Kapoor. He will continue in his role as a managing director for Morningstar, focusing on research innovation. 

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