Deals & People April 6, 2023

Investment Product Launches

Xtrackers by DWS announces a new ETF; Principal launches hybrid QDIA; Penn Mutual introduces Protection Whole Life; and more.

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Xtrackers by DWS Launches ETF

DWS Group announced the listing of the Xtrackers MSCI USA Climate Action Equity ETF. The exchange-traded fund is designed for investors seeking exposure to large- and mid-cap companies in the U.S. that are taking actions on climate change.

Ilmarinen Mutual Pension Insurance Co. has invested in USCA as a part of its goal to achieve a carbon-neutral portfolio by the end of the year 2035. The firm is Finland’s largest private earnings-related pension insurance company.

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“DWS is pleased to partner with Ilmarinen to establish this new Xtrackers fund in the U.S. to help drive the transition to a low carbon economy,” said Dirk Goergen, DWS Americas CEO, in a comment. “We are focused on providing investors bespoke index investment solutions across asset classes and expanding the Xtrackers brand in the Americas with specialized products with attractive long term return opportunity.”

The investment of approximately $2 billion on the first day of trading makes it the largest ETF launch of all time in the U.S. and the single largest climate-investing ETF launch.

Principal Launches Hybrid QDIA

Principal Financial Services Inc. has launched a hybrid qualified default investment alternative, Principal Intelligent QDIA, which offers both target-date strategies and a managed-account service in one default option.

Participants younger than the plan’s set transition age will be defaulted into a target-date fund, unless a different investment election is made during enrollment. Once participants reach the plan’s set transition age, they will automatically move to a managed account service.

“We know from research and our direct conversations with customers that personalized investment advice has become a need for retirement savers,” said Brett Fisher, head of investment product strategy for retirement and income solutions at Principal, in a statement. “Principal Intelligent QDIA can help participants feel more confident in their financial futures by getting them started on a savings path for retirement before ultimately helping them manage the wealth they’ve accumulated.”

Penn Mutual Introduces Protection Whole Life

The Penn Mutual Life Insurance Co. has introduced Protection Whole Life, a permanent life insurance product that provides guaranteed lifetime protection at a competitive premium rate.

“As a leader in the life insurance industry, Protection Whole Life strengthens our ability to support diverse client needs, goals and budgets,” said Tom Harris, president of life insurance and annuities for Penn Mutual, in a statement. “This newest addition to our life insurance product lineup can be a good fit for clients when protection, guarantees and the cost of coverage matter most.”

Protection Whole Life’s client-focused features include:

  • Guaranteed Protection – death benefit guaranteed to age 121;
  • Guaranteed Premiums – payment amounts are set and guaranteed to never increase; and
  • Guaranteed Cash Value – accumulates tax-deferred and is accessible income tax-free at any time.

Schwab Announces Enhancements to Schwab Personalized Indexing

Charles Schwab today announced new personalization and digital capabilities to Schwab Personalized Indexing, the firm’s direct indexing solution with tax-loss harvesting and portfolio management capabilities.

The enhancements include new options for portfolio customization and digital capabilities for retail clients who work with a Schwab financial consultant. Similar enhancements are anticipated to be available to independent advisers who custody with Schwab later this year.

“We have seen strong adoption of Schwab Personalized Indexing since its launch last year and we are excited to introduce new customizations to further address unique client preferences or situations—such as concentrated stock positions or values-based exclusions—and to make investing a more personal experience,” said Divya Krishnan, Schwab director of product management and strategy, in a statement. “The new digital tools are designed to add transparency and accessibility to valuable account information and analysis, setting Schwab Personalized Indexing apart from competitors.”

Savvy Wealth Rolls Out Proprietary Direct Indexing Solution 

Savvy Wealth Inc. announced the launch of Savvy Direct Indexing. The solution provides advisers with a solution to deliver tax-efficient, values-aligned portfolios that are customized to their high-net-worth clients’ environmental, social and governance preferences.

Savvy Direct Indexing allows investors to use separately managed accounts, emulating clients’ desired index exposure while screening out investments that undermine their values.

“The age of personalization is upon us, and off-the-shelf index funds are largely ill equipped to meet the complex needs of high-net-worth investors,” said Ritik Malhotra, Savvy’s co-founder and CEO, in a statement. “With Savvy Direct Indexing, our advisors can help clients achieve diversified exposure while proactively managing for tax liabilities, concentrated positions, ethical convictions, and more.”
Data & Research April 6, 2023

Gig Workers Uncertain if They Will Retire, Likely to Self-Fund if They Do

Many freelancers plan to work beyond 65, and 30% say they don’t plan to retire at all.

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A new survey of gig workers reveals what many in the retirement industry and public policy have been discussing since the proliferation of non-full-time opportunities: A lack of access to workplace retirement plans may be crimping their long-term saving.

According to a survey released Wednesday by financial firm Legal & General Group, 77% of gig workers say they would rely on their own personal savings to fund their retirement. Additionally, 45% of gig workers do not expect to retire at 65, and 30% never expect to retire at all.

The survey of more than 1,000 freelance workers between 18 and 60 years of age found that their decision to work independently has stymied their ability to save for retirement. That group is not a small part of the U.S. economy, with some 58 million people working as freelancers at the end of 2022, according to research by consulting firm McKinsey & Co.

“The big question on many freelance workers’ minds is: ‘How can I retire?’” the researchers wrote. “More than half (53 percent) of the gig workers we spoke with don’t feel they have effective access to retirement and savings plans, while two-thirds (67 percent) say that not having access to retirement plans and other benefits is a key drawback to working independently.”

Gig Politics

The findings come as a national adviser group is keeping its eye on the potential for gig workers to save for retirement. The head of the National Association of Plan Advisors noted at its national conference on Sunday that gig workers would likely be a key political talking point in coming years for providing a federally-backed retirement plan.

Brian Graff, executive director and CEO of NAPA, was speaking about freelance workers in regard to a 2022 Congressional proposal called the Retirement Savings for America Act. Part of that proposal is a national government-sponsored retirement program that the association head said could undercut the private defined contribution industry.

Meanwhile, the private industry has multiple firms looking to service gig worker saving needs. Just last year, Robinhood, known for digital trading during the pandemic, announced an IRA complete with 1% automatic match marketed at the gig economy.

Your Own CFO

Almost three out of four (73%) of freelancers surveyed by Legal & General Group expect Social Security to cover just 25% of their retirement expenses, according to the researchers. The study found that more than half (53%) of the freelancers surveyed thought that gig work negatively impacted their access to savings and retirement plans, while 29% felt that choosing to work this way negatively affected their ability to save.

Adding to the strain is that many freelancers need to take care of other areas of their finances and benefits often provided by employers.

“Having to plan for and pay one’s own taxes, health insurance, and … long-term retirement needs—all areas that are normally mitigated by employers—puts most gig workers in the position of becoming their own CFO,” the researchers wrote.

The researchers at Legal & General Group noted that gig workers are often financially savvy, citing 2022 Pew research that they generally have higher financial literacy than the general U.S. population. The researchers surmised that the lack of retirement savings in one of the readily available IRA options may stem from the lack of prompt, then habit that workplace plans provide.

“One missing link in financial security for gig workers is the prompt for saving—including having a system in place to keep people from having to think about it very often,” Legal & General noted. “The active initial phase of setting up a structure to ensure saving practices is already being addressed through new technologies in finance, which can render the process of saving seamless and transparent.”

Legal & General Group’s survey sample was sourced from YouGov and was conducted in August 2022.

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