Data & Research December 11, 2017

Nearly Half of Americans Say Their Financial Situation Improved in 2017

Another 40% say they reduced their debt during the year.

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As 2017 draws to a close, a Fidelity Investments survey found that many Americans are in a better financial position than they were in 2016, with 47% saying they are in a better financial situation.

Forty percent say they have reduced their debt; only 11% report the opposite. Seventy-six percent believe they will be better off financially in 2018.

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However, only 27% are making a financial resolution for 2018, down from a high point of 43% in 2014.

“Financial resolutions are on the decline because many people are feeling better about their personal financial situation and are generally optimistic about what 2018 will bring,” says Ken Hevert, senior vice president of retirement at Fidelity. “Even if you don’t feel a burning need to create a financial resolution, you can still resolve to identify financial areas needing improvement and make some smart financial moves before December 31.”

Among those who have set a financial resolution for 2018, 55% want to save more, 25% want to pay down debt, and 18% hope to spend less. Among the 47% who feel they are in a better financial position this year than in 2016, 66% attribute this to being able to save more. Among Millennials, this jumps to 78%, and 90% of Millennials believe they will be better off financially in 2018.

Top financial concerns for 2018 are unexpected expenses (57%), rising health care costs (53%) and anguish over the economy (50%).

Among those who have set a goal to save more in 2018, 54% have long-term goals, down from 62% in 2016, and 38% are focusing on the near term, up from 32% last year. Among all respondents, 43% plan to increase their retirement savings by one percent or more of their salary. For Millennials, 62% have this goal. In part due to recent natural disasters, 54% of all respondents plan to beef up their emergency savings.

Fifty-eight percent plan to increase their household charitable giving, up from 54% in 2014. Among Gen Xers, 64% plan to increase charitable giving. For Millennials, it is 63%, and Baby Boomers, 56%.

Thirty-eight percent of those surveyed say they feel financially stressed due to debt, expenses and saving. Conversely, 70% say setting financial goals helps alleviate financial stress.

ORC International conducted the telephone survey of 2,059 adults for Fidelity in October.

The Markets December 11, 2017

Boosted by Retirement Contributions, CIT Assets Approach $3 Trillion

U.S. collective investment trusts assets have grown to roughly $2.8 trillion, according to Cerulli Associates; much of they money is in target-date funds. 

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New data from Cerulli Associates shows assets in collective investment trusts (CITs) grew to $2.8 trillion as of year-end 2016, representing strong year-over-year growth of approximately 11.6%.

Christopher Mason, senior analyst at Cerulli, highlights findings to the effect that many asset managers are revisiting their product offerings and considering how CITs could play a role in their business. This will likely result in ongoing CIT product expansion, putting pressure on retirement plan sponsors and advisers to weigh whether utilizing CITs makes sense as a cost-saving strategy. In fact, recent fiduciary breach lawsuits filed in district courts across the U.S. have cited plan sponsors’ lack of consideration for cost-saving investment strategies, whether CITs or institutionally priced mutual funds, as imprudent under the Employee Retirement Income Security Act (ERISA).

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“Many firms are exploring the possibility of launching CITs to help meet this demand and remain competitive in the marketplace,” Mason notes. “Institutional investors are gradually looking to commingled vehicles, such as CITs, because of their heightened sensitivity about fees paid to investment managers.”

Broadly speaking, because CITs can often be priced lower than mutual funds, they serve as an attractive option for cost-sensitive defined contribution (DC) and defined benefit (DB) plans. Indeed, Cerulli’s report states the primary reason an institutional investor seeks out a CIT is the fact that it can often gain more favorable pricing compared to using other vehicles, in particular retail mutual funds.

“Nearly 95% of plan sponsors value the cost savings compared to mutual funds as one of the most important attributes of CITs,” Masons observes. “Similarly, roughly 90% of consultants feel that the cost savings compared to mutual funds is a very important attribute of CITs.”

Target-date strategies make up approximately 19.4% of total CIT assets held in DC plans, the research shows. Related to this, the majority of asset managers anticipate adding portfolio specialists/client portfolio managers to their institutional sales teams during the next 12 months; approximately 59% of managers indicate that they are very dependent on consultants for corporate DB and state/local DB mandates.

These findings are from the “North American Institutional Markets 2017: Strategies for Implementing Customized Services Across Client Segments” report. Information about obtaining Cerulli Associates research is available here.

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