Client Service August 22, 2024

Media’s Role in Creating Retirement, Investing Stress

A Capital Group national accounts manager makes the case that simply turning off the TV may help boost financial wellness.

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Misleading depictions of retirement on television can prevent Americans from focusing on and even achieving long-term financial goals, according to a Capital Group senior accounts manager speaking Tuesday during a webinar, “Stop Playing Mind Games.”

Advertisements and television often portray retirement as an active, joyful lifestyle full of leisure, when the reality is often very different, said Jonathan Young, a senior national accounts manager at Capital Group.

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“The media is showing us this ideal image of retirement,” Young said.

Very often, people may retire from one job, but return to work not by choice, but out of necessity, Young noted. For others, health issues prevent them from reentering the workforce even when they need to, and they must find other means of financial assistance. Both realities stand in stark contrast to idealized images of retirement.

This creates unrealistic expectations for many Americans, ultimately leading to disappointment and regret, said Young, adding that regret can then cause paralysis from the fear of making the wrong choice.

“This mind game confuses them, makes them feel guilty, makes them regret the decisions they made to do something or not do something,” he said. “Sometimes doing nothing was the worst decision.”

Turn to Advice

Young said behavioral coaching can help bridge the gap between investment returns and what investors often experience.

“Behavioral coaching can be a huge step forward in making everyone’s lives a little bit better when it comes to investing,” he concluded.

Capital Group, like many financial services firms, has ramped up its holistic financial wellness programming for clients and their participants. In July 2023, the firm announced a partnership with Financial Finesse to offer wellness coaching to clients in the large plan sponsor market.

“We have to help [investors] see around the corners to make better decisions,” said Young. “This may mean changing your plan design, changing the recordkeeper, changing your enrollment system, adding some of these auto features. These adjustments can help a lot to minimize overconfidence, herd mentality, regret, etc.”

News Nightmares

When it comes to investing and saving decisions, Young also discussed the negative impact coverage of war, the COVID-19 pandemic and political unrest can have on financial decision making.

“It unsettles investors,” Young said, “When they are unsettled, they’re less likely to stay in tune with their long-term goals. They lose sight of objective-based investing.”

Young’s advice for avoiding the anxiety triggered by current events is to “change the channel,” referring to watching less coverage. He suggested that by controlling the environment, whether in the office or at home, investors and retirees alike can remain focused on their long-term goals instead of getting swept up in the chaos of the news cycle.

“Maybe consider the Travel Channel,” he suggested. “Every now and then, the Travel Channel comes on, and they’ve got that million-dollar RV show. I’ve got to tell you: That looks like an intriguing retirement to me—riding around from national park to national park.”

Compliance August 21, 2024

SEC Charges Transfer Agent Equiniti Trust for Failing to Safeguard Clients From Cyber Attacks

The ruling shows the increased need to protect client data, as recordkeepers and others could face such fines due to a participant data breach.

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The Securities and Exchange Commission on Tuesday charged Equiniti Trust Co. LLC, formerly American Stock Transfer & Trust Co. LLC, for failing to protect client securities and funds from theft or misuse.

Two “cyber intrusions,” one in 2022 and one in 2023, resulted in more than $6.6 million in client losses, of which $2.6 million was recovered. Equiniti, which as part of its services keeps records of who owns publicly traded stocks and bonds, fully reimbursed the clients and agreed to pay an $850,000 civil penalty to settle the SEC’s charges.

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The charges also included an incident in 2023 when an “unknown threat actor used stolen Social Security numbers … to create fake accounts that were automatically linked by American Stock Transfer to real client accounts.” In 2023, a hack of data transfer software called firm MOVEit, owned by Progress Software Corp., led to millions of retirement plan participants’ data being exposed, including Social Security numbers.

Retirement plan recordkeepers are in the “bull’s-eye” of potential regulator fines, as well as plan litigation, according to Jay Gepfert, founding partner in Culpepper RFP, as they hold sensitive information on millions of participants and beneficiaries.

Gepfert says the digital landscape is changing on a daily basis, resulting in the convergence of fines, legislation and litigation merging together to transform the industry.

“The number and dollar amount of breaches are not sustainable for insurers and corporations,” he says. “Because of that fact, fines and litigation will force the market to make changes. Change typically takes place when enough ‘pain’ forces those responsible to adapt to the new market conditions. We have reached that inflection point.”

Investment advisers are now tasked with educating their clients on a variety of issues including cybersecurity, and they cannot stand on the sideline and wait for third parties to educate their clients, Gepfert says.

“The first step in the ‘Who moved my cheese?’ moment was the DOL cybersecurity guidelines, which, to a cyber professional, were very basic,” he says. “We expect more will be coming down the pike from both the DOL, SEC and other governmental agencies trying to protect and reduce the number of breaches.”

According to the SEC, in September 2022, an unknown threat actor hijacked an email chain between American Stock Transfer and a U.S. public issuer, impersonating an employee to instruct the issuance and liquidation of millions of new shares. The proceeds, about $4.78 million, were transferred to Hong Kong, though $1 million was recovered.

In April 2023, another threat actor used the stolen Social Security numbers to link fraudulent accounts to legitimate ones, liquidating about $1.9 million in securities;  $1.6 million of that was recovered.

“American Stock Transfer failed to provide the safeguards necessary to protect its clients’ funds and securities from the types of cyber intrusions that have become a near-constant threat to companies and the markets,” said Monique C. Winkler, director of the SEC’s San Francisco regional office, in a statement. “As threat actors become more sophisticated in the cyber space, transfer agents must act to implement and maintain effective safeguards and procedures around client assets.”

The SEC’s order determined that Equiniti breached Section 17A(d) of the Securities Exchange Act of 1934 and Rule 17A(d)-12. Along with the civil penalty, Equiniti consented to a cease-and-desist order and received a censure.

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