Products April 23, 2020

Investment Product and Service Launches

Wells Fargo launches Retirement Income Solution, and Morningstar to acquire Sustainalytics.

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Art by Jackson Epstein

Art by Jackson Epstein

Wells Fargo Launches Retirement Income Solution

Wells Fargo Asset Management has launched the Wells Fargo Retirement Income Solution. The company notes that with increasing life expectancy, many workers and retirees don’t know how long their retirement savings will need to last.

Based on patent-pending research, the Wells Fargo Retirement Income Solution is designed to enable participants to seamlessly transition from investing for retirement to drawing income in retirement. Participants can pair a target-date series with a qualified longevity annuity contract (QLAC).

“We believe our suite of retirement-oriented solutions has the potential to help millions of Americans live more fulfilling lives,” says Nate Miles, head of retirement at Wells Fargo Asset Management. “By providing an option for more consistent retirement income, we help retirees address their fear of running out of retirement savings.”

Wells Fargo provides 3(38) fiduciary services for the selection of the insurance carrier to provide the annuity. Wells Fargo will also work with recordkeepers to improve simplicity and portability.

Sean Fullerton, retirement investment strategist at Wells Fargo Asset Management, adds: “Defined contribution [DC] plans are becoming the primary source of retirement income for many individuals. As an industry, we need to focus not only on helping people save while working but also on helping them spend sustainably once they retire.”

Morningstar to Acquire Sustainalytics

Morningstar has reached an agreement to acquire Sustainalytics, a provider of environmental, social and governance (ESG) ratings and research. Morningstar currently has a 40% ownership stake in Sustainalytics, which it took out in 2017.

Morningstar is purchasing the remaining 60% stake for 55 million euros ($59 million) and additional cash payments in 2021 and 2022 based on a multiple of Sustainalytics’ 2020 and 2021 fiscal year revenues. Morningstar estimates the enterprise value of Sustainalytics to be 170 million euros. Morningstar expects to close on the transaction early in the third quarter of this year.

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“Modern investors in public and private markets are demanding ESG data, research, ratings and solutions in order to make informed, meaningful investment decisions,” says Morningstar Chief Executive Officer Kunal Kapoor. “From climate change to supply-chain practices, the nature of the investment process is evolving and shining a spotlight on demand for stakeholder capitalism. This is the future of long-term investing.”
Compliance April 22, 2020

Social Security Reports Comparable Projections from 2019

However, the estimates do not reflect the potential outcomes due to the COVID-19 pandemic, says the Social Security Board of Trustees. 

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The Social Security Board of Trustees has released its annual report on the long-term financial status of Social Security Trust Funds.

The findings from the “2020 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds” show comparable numbers to last year’s report. It suggests combined asset reserves of the Old-Age and Survivors Insurance and Disability Insurance (OASI and DI) are projected to be depleted in 2035, with 79% of benefits payable. Separately, the OASI Trust is said to be exhausted a year earlier in 2034, with 76% of benefits payable. The DI Trust Fund is estimated to deplete in 2065, with 92% of payable benefits.

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The board says that while these estimates are current, they do not reflect potential outcomes following the COVID-19 pandemic. “The projections in this year’s report do not reflect the potential effects of the COVID-19 pandemic on the Social Security program. Given the uncertainty associated with these impacts, the trustees believe it is not possible to adjust estimates accurately at this time,” says Andrew Saul, commissioner of Social Security. “The duration and severity of the pandemic will affect the estimates presented in this year’s report and the financial status of the program, particularly in the short term.”

Other findings show Social Security paid a total benefits amount of $1.048 trillion during 2019. There were about 64 million beneficiaries at the end of the calendar year, and an estimated 178 million people had earnings covered by Social Security and paid payroll taxes, according to the report.

Total income, including interest, to the combined OASI and DI Trust Funds amounted to $1.062 trillion in 2019. The Social Security Board of Trustees says $944.5 billion of this amount was from net payroll tax contributions, $36.5 billion was from taxation of benefits and there was $81 billion in interest. Total expenditures from both funds amounted to $1.059 trillion, and asset reserves increased by $2.5 billion, for a total of $2.897 trillion.

The board announced its total annual cost of the program is projected to exceed total annual income in 2021—the first time since 1982— and remain higher throughout the 75-year projection period. As a result, asset reserves are expected to decline during 2021. Social Security’s cost has exceeded its non-interest income since 2010.

More findings from the 2020 report can be found here.

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