Almost Half of Plans to Add Third-Party Advice in 2007

A new Hewitt Associates study of large US company retirement plans found that 43% offer, or are very likely to offer, third-party investment advisory services in the coming year.

Nearly one in five (19%) of the 146 companies surveyed offer or plan to offer an in-person investment adviser, while a quarter (24%) of companies offer or plan to offer managed accounts by the end of 2007, a Hewitt news release said.

The majority, 85%, offer or plan to offer target maturity/premixed lifestyle funds and more than half (54%) offer or plan to offer investment guidance, according to the Hewitt study.

Never miss a story — sign up for PLANADVISER newsletters to keep up on the latest retirement plan adviser news.

The Hewitt study found that among the issues on employers’ 2007 agenda for pension change are:

  • an overall evaluation of retirement programs;
  • a continued focus on managing costs and risks;
  • enhanced retirement education and guidance; and
  • a continued emphasis on automating the 401(k) plan to help employees maximize the benefits of their retirement plans.

According to Hewitt’s study, half of companies (50%) say they plan to review their defined contribution fund operations, including fund expenses, revenue sharing and communication to employees, and almost half (48%) will conduct a review of fund offerings. Just 12%, however, said they were very likely to find ways to reduce the costs of funds they offer.

 

Automatic Provisions

 

Supplying more emphasis about the spread of auto plan features, more than half (58%) of the companies studied will automatically enroll employees into 401(k) plans by the end of the year, and just over a third (34%) already couple or plan to marry automatic enrollment with features automatically escalating the worker’s deferral. Further, almost 60% of companies (57%) already offer or are very likely to offer automatic rebalancing in 2007, up from 47% in 2006.

Almost one in five (19%) companies that already offer automatic enrollment say they plan to increase the default contribution rate, and more than two-fifths (43%) intend to change the default investment fund to a Qualified Default Investment Alternative (QDIA). Almost one-fifth (19%) plan to apply automatic enrollment to additional classifications of workers, and expand the feature beyond just new hires.

 

Plan Design

 

The Roth 401(k) plan still seems low on the totem pole of plan design features, as only about one in 10 companies (12%) added a Roth 401(k) in 2006, and 11% said they were very likely to do so in 2007.

Consistent with previous years, the majority of companies say they plan to leave alone their company match (78%). Eight percent say they plan to add/increase the company match, and only 1% plan to reduce or eliminate the company match.

More about the study is here.

 

 

 

 

 

 

 

 

 

 

Q3 Mutual Fund Growth Better Than Early 2006

The combined assets of mutual funds around the globe climbed 4.1% in the third quarter of 2006 to $20.22 trillion, beating the 2005 numbers for the same quarter by $2.94 trillion, according to the Investment Company Institute’s (ICI) survey of the mutual fund industry.

The total assets were also greater than those posted in Q2 ($19.4 trillion) and Q3 ($19.1 trillion).

Assets in equity funds rose 4.1%, with $9.6 trillion in assets at the end of Q3. Bond funds were up 2.1% to $3.7 trillion and money market funds went up by 3.6%, while assets in balanced/mixed funds increased 6.7% to $1.9 trillion.

Never miss a story — sign up for PLANADVISER newsletters to keep up on the latest retirement plan adviser news.

Net cash flows to mutual funds worldwide were $252 billion in the third quarter, with equity fund flows slowing to $64 billion, compared with $74 billion in the second quarter.

Asia/Pacific and African regions accounted for the greatest equity inflows for the quarter, at $20 billion, followed by the Americas ($18 billion), down from $42 billion and $29 billion, respectively, in the second quarter. Inflows into European equity funds strengthened, increasing from $3 billion in Q2 to $26 billion in Q3.

Balanced fund inflows remained strong at $37 billion, but slipped from the $48 billion reported in the quarter before. Net flows to bond funds remained weak at $8 billion in the third quarter of 2006, managing to barely recover from an outflow of $5 billion in the second quarter.

Net inflows to bond funds in the Americas were $20 billion in the third quarter, but were offset by outflows in the European region and the Asian and Pacific region, according to the release.

The pace of flows into money market funds picked up in Q3 to $124 billion, up from $71 billion in Q2, with the U.S. accounting for $101 billion of money market inflows in the third quarter, up from $58 billion in the second quarter.

The complete ICI data is here.

«