Client Service January 12, 2021

15th Anniversary of RPAY: Capital Strategies Investment Group

The practice’s leaders say all decisions made for a plan must improve participants’ retirement readiness, which they describe as a top priority.

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Alison Bettonville

What sets Capital Strategies Investment Group—which was named the 2013 PLANSPONSOR Retirement Plan Adviser Team of the Year—apart from its competitors is that it is “really unique to other firms in truly taking a teams-based approach,” says Alison Bettonville, principal, director of investment strategy and research at the firm.

Since winning the award eight years ago, Capital Strategies Investment Group, which is based in Oakbrook Terrace, Illinois, has reassigned its staff in order to “deliver more expertise to clients in a timely manner” and embraced more technology and automation, particularly for day-to-day processes, Bettonville says. “This has dramatically freed up team members to work more closely with clients,” she adds.

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Will Woodall

Capital Strategies Investment Group has also expanded its focus from “investments and governance to really think hard and deliver on plan design and outcomes,” says Will Woodall, managing principal.

Bettonville agrees. “We no longer focus just on investment analytics. We cover plan design, participant behavior and fees—and deliver consistently on every point in order to successfully oversee each client’s retirement plan,” she says.

What is also notable about how the practice has evolved since 2013 is that assets have grown nearly four-fold, from $4 billion to $15 billion, Woodall notes. That growth is particularly noteworthy as Capital Strategies Investment Group is very selective about the clients it partners with, choosing only those that indicate they are truly interested in the best possible outcomes for participants, he says.

Bettonville adds: “The other thing we focus on, from a client perspective, is that many of the issues our clients are grappling with are complex, such as helping them with plan integration as they go through mergers or acquisitions.”

Yet another challenge that Capital Strategies Investment Group is willing to take on, she continues, is that each client has between 1,000 and 5,000 participants.

As to how the industry has changed in the years since the practice won the PLANSPONSOR award, Bettonville says the “trend of the RIA [registered investment adviser] aggregators has had some impact on what I will call ‘generational turnover.’ The first generation of advisers that were working with DC [defined contribution] plans are now looking toward retiring, and that impacts M&A [mergers and acquisitions] activity. We are now beginning to lose a lot of talent with long-tenured experience—but that is opening up plenty of room for new ideas.”

For his part, Woodall says today’s retirement planning industry is far more competitive than it was in 2013. “There is constant pressure on fees due to fee compression, and it has become more difficult for retirement plan practices to differentiate themselves in a market where plan sponsors are so focused on fees.” Woodall also believes that as pooled employer plans (PEPs) begin to take hold, they will create more competition for retirement plan advisers.

While many other practices are struggling to recruit new talent, particularly diverse talent, Bettonville says, Capital Strategies Investment Group has developed “a comprehensive recruiting process and in-house analyst training process to grow new hires into successful advisers and consultants. We think that is the best way to acquire new talent.”

Bettonville says that because of the service model her firm delivers, she is very optimistic about its future prospects. “We make it a point to partner with companies that value our expertise—not just someone coming in four times a year just to talk about financial markets and investment returns,” she says. “We really are looking for companies committed to being fiduciaries and serve them by keeping them up to speed on emerging trends among retirement plans. That is where we add a lot of value.”

As for what advisers can do to improve DC plans and participants’ outcomes, Bettonville says their role must expand well beyond just being an investment adviser. “From our perspective, we think of plan health in terms of retirement readiness and outcomes—and ensuring there is an alignment between the solutions we bring to a plan and the sponsor’s goals. Plan design is important, as is education for committees—not just fiduciary education but how to help participants successfully retire. Everything needs to be brought back to the all-important question of retirement readiness.”

Compliance January 11, 2021

Vail Resorts Wins Dismissal of ERISA Fiduciary Breach Lawsuit

The Vail Corp. has skied past a fiduciary breach lawsuit, which was dismissed with prejudice in a detailed ruling.

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A new ruling out of the U.S. District Court for the District of Colorado grants the dismissal motion filed by the defense in an Employee Retirement Income Security Act (ERISA) lawsuit known as Kurtz v. Vail Corp.

The underlying lawsuit accuses the Vail Corp. of permitting excessive fees in the Vail Resorts 401(k) Retirement Plan. According to the complaint, for at least 18 of the 27 mutual fund share classes available within the plan, the same issuer offered a different share class from that selected by the plan that charged lower fees, and consistently achieved higher returns. The plaintiff says the plan “inexplicably failed to select these lower fee-charging and better-return producing share classes.”

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The complaint also alleges that the administrative fees charged to Vail plan participants are greater than more than 90% of its comparator fees when calculated on a cost-per-participant basis, or as a percent of total assets, without the provider delivering commensurate value. Finally, the complaint suggests the defense imprudently failed to provide a sufficient number of passively managed investment options.

In ruling against these allegations and granting Vail’s dismissal motion, the District Court echoes some of the same points made in the recent dismissal ruling filed in favor of Salesforce. Central to the dismissal is the consideration of several issues of standing.

As the text of the Vail ruling recounts, the defendants argue that the lead plaintiff only invested in five of the many plan options that she challenges. As a result, the defendants contend, the lead plaintiff has no standing to challenge the remaining options, because she has not alleged a “concrete and particularized” injury in fact. In response, the ruling recounts, the plaintiff asserts that she does not bring independent claims for each of the challenged funds, but instead brings a single claim for mismanagement of the entire plan.

“There is no 10th Circuit authority on point for this issue,” the judge states. “After my own review of the case, I conclude that this case is more similar to ones in which courts have found standing to exist even without plaintiff investing in each individual option. … I conclude that plaintiff has both statutory and constitutional standing to bring this suit against the defendant for alleged breach of fiduciary duties under ERISA. However, because I find below that her claim fails under Rule 12(b)(6), this issue is ultimately irrelevant.”

Turning to the standing issues under the Federal Rule of Civil Procedure 12(b)(6), the ruling recalls that the defense argues that the lead plaintiff fails to allege facts sufficient to constitute a breach of fiduciary duties under ERISA.

“A plaintiff must show that a more prudent plan management process would have avoided the alleged harm, which necessarily requires a plausible allegation explaining how no reasonable fiduciary could conclude that removing such investments would not be likely to do more harm than good to the plan and its participants,” the ruling states. “In essence, this requires alleging facts that plausibly establish that no reasonable fiduciary would have retained a set of investments had the fiduciary engaged in proper monitoring, and that abandoning the investments could have presented the plan’s losses. It is not sufficient to simply allege that an investment did poorly, and, therefore, a plaintiff was harmed—relative underperformance is insufficient to state a claim.”

The ruling goes on to state that much of plaintiff’s complaint is taken up by statements explaining what ERISA requires, or providing generic background about performance of different types of investment funds.

“The deceptively long complaint can thus be boiled down to a few factual allegations,” the ruling states. “The defendant’s motion asserts that plaintiff has failed to plead sufficient facts to surpass the 12(b)(6) standard. I agree. While certainly specific, plaintiff’s allegations are insufficient to support a claim for breach of fiduciary duty. Nowhere in the complaint does plaintiff allege anything imprudent about defendant’s process. In fact, it does not address at all Vail’s process for selecting or retaining fund options, monitoring expenses, or managing the overall plan. Nor does it provide any factual allegations regarding whether the defendant employed the appropriate methods to investigate and determine the merits of any investments.”

The suit was dismissed with prejudice, which means it can’t be brought back to court.

The full text of the dismissal ruling is available here.

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