In Practice May 12, 2022

Industry Changes Reflected in NFP Business Realignment

The firm says its personnel changes will help it meet clients “wherever they are” and address the needs of plan sponsors, family offices and high-net-worth individuals equally.

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This week, NFP announced the reorganization of its business segments to better meet the needs of its clients.

As the firm tells PLANADVISER, moving forward, there will be three “distinct yet integrated” business segments. These are property and casualty; benefits and life; and wealth and retirement. According to the firm, this new approach will allow the company to sharpen its focus on delivering holistic guidance to clients.

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“This realignment better integrates our offerings,” says Doug Hammond, NFP’s chairman and CEO. “Our expertise and best-in-class consultants and advisers give plan sponsors, family offices and high-net-worth individuals a trusted partner they can rely on to successfully pursue their goals.”

Each business segment will continue to operate in the areas it knows best to service specific challenges in complex environments, and the segments will communicate and collaborate as needed.

The firm wants to be able to equally address the needs of plan sponsors, family offices and high-net-worth individuals, says Mike Goldman, NFP’s chief operating officer. They feel like they have well-rounded offerings for all the different types of companies they serve.

“The real goal is to be able to meet client’s needs wherever they are, whether that’s at the corporate level or the individual level,” Goldman says. “We strive to able to provide an incredibly effective set of services to those folks so that we can really be their trusted adviser across the board.”

As noted by Goldman and Hammond, the change also reflects the increased scale of NFP’s wealth management and retirement businesses, which has a combined total of approximately $445 billion in assets under management. Through the acquisition of financial advisory businesses and significant investments in people and technology, the company says it has expanded its capabilities across individual wealth management and institutional asset management services.

Within the NFP family of brands, Wealthspire Advisors provides financial planning and investment expertise for high-net-worth families, individuals and family offices. Fiducient Advisors provides advisory services for retirement plan sponsors, endowments and foundations, private clients and financial institutions.

Goldman says NFP has done a number of acquisitions over the past decade to increase its presence in the wealth management and retirement space, with the goal of increasing its geographic presence and rounding out its suite of services in each of the serviced regions.

The firm has seen many advantages as it continues to scale, Goldman says. Greater scale enables the firm to have the best people available and to make the best investments using the best services and technology, he says. Further, scaling geographically means NFP can “meet people where they are at.”

“You’re able to make sure that you have access to the to the most attractive investment options for your clients and an ability to demonstrate to them the type of service that you need to be able to provide, Goldman says. “[You] then also have the technology that allows them to very seamlessly see their data and access their data in any way that they want.”

The challenge is making sure that the firm is able to maintain its culture, Goldman says. He wants people to feel connected to the broader organization.

“I think you have to be you have to be very deliberate about making sure to both acquire the right firms with the right cultural fit, and then really spend the time to make sure that the people are highly engaged, in that they have a chance to spend time together, because I think that’s what ends up building the strongest culture,” Goldman says. “That’s the biggest challenge, and it’s one we’re very focused on.”

The reorganization will allow NFP’s clients, acquisitions, acquisition prospects and investors to have an open look into the size and quality of the retirement and wealth business, Goldman says. They wanted to make it easier for people to see. People may have associated the firm with the insurance brokerage side of the business, but he believes that they do retirement and wealth just as well.

“We’ve built something special in our wealth management and retirement businesses, and we believe we can go even further for our clients,” says Ed O’Malley, executive vice president, head of insurance brokerage and consulting. “The diversity within our platform is key. Whether it’s an employee planning for their future, a plan sponsor eager to retain their talent, a family office helping a client leave a legacy or a mission-based foundation, NFP has a portfolio of exceptional advisers and solutions to help them succeed.”

Compliance May 11, 2022

ERISA Class Action Complaint Targets O’Reilly Automotive

The lawsuit closely resembles numerous others previously filed by the law firm Capozzi Adler but adds new argumentation based on a recent Supreme Court ruling.

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A new Employee Retirement Income Security Act fiduciary breach lawsuit has been filed in the U.S. District Court for the Western District of Missouri, naming as defendants the O’Reilly Automotive company, its board of directors and the committee tasked with operating the firm’s 401(k) plan.

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The arguments made by the plaintiffs closely resemble those of the many others that have filed ERISA suits in recent years, at least partly due to the fact that the plaintiffs in this case are represented by the increasingly active law firm Capozzi Adler. In fact, the firm has represented clients who sued another national automotive company, Magna International of America, making more or less the same excessive fee arguments advanced in the new case.

According to the new complaint, the O’Reilly plan’s assets under management, which are reported in the range of $1.1 to $1.2 billion, qualify it as a large plan in the defined contribution plan marketplace, and among the largest plans in the United States. As a large plan, the complaint states, it had substantial bargaining power regarding the fees and expenses that were charged against participants’ investments.

“Defendants, however, did not try to reduce the plan’s expenses or exercise appropriate judgment to scrutinize each investment option that was offered in the plan to ensure it was prudent,” the complaint states.

Nearly identical language has been used in numerous prior ERISA fiduciary breach lawsuits. The claims have met with varying degrees of success across the federal court system, based mainly on the degree to which a given complaint establishes that an imprudent fiduciary management process was potentially in place. In other words, it is not enough for a potential class of plaintiffs to merely point out that its plan has relatively expensive investments or administrative fees relative to its peers. (See Davis v. Salesforce and Kurtz v. Vail Corp.)

“Defendants did not adhere to fiduciary best practices to control plan costs when looking at certain aspects of the plan’s administration such as monitoring investment management fees for the plan’s investments, resulting in several funds during the class period being more expensive than comparable funds found in similarly sized plans,” the complaint states. “Yet another indication that the plan was poorly run and lacked a prudent process for selecting and monitoring the plan’s investments is that, as of 2020, it had a total plan cost of more than .60%, or, in other words, more than 172% higher than the average.”

One new feature in the O’Reilly complaint is the citation of the recent Supreme Court decision in Hughes v. Northwestern University, which concluded that a retirement plan fiduciary cannot simply put a large number of investments on its menu, some of which may or may not be prudent, and assume that the large set of choices insulates the plan sponsor from the duty to monitor and remove bad investments. In other words, having a large investment menu does not itself protect a plan sponsor who permits an overly costly or otherwise imprudent investment to persist, and sponsors cannot hide behind the fact that participants ultimately choose in which funds to invest their money.

The O’Reilly Automotive company has not yet responded to a request for comment about the allegations. The full text of the complaint is available here.

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