Data & Research February 25, 2016

Participants and Plan Sponsors Part Ways on Assessing Readiness

What plan participants know about adequate savings rates and what plan sponsors think they know are often miles apart, according to a survey released by BlackRock.
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More than half of retirement plan sponsors (59%) say the majority of their participants are saving enough to retire with the income they will need, according to BlackRock’s DC Pulse Survey. But only 28% of the participants surveyed are confident they are saving enough.

When it comes to the information plan participants need, nearly two-thirds of plan sponsors (64%) describe their participants as “very” or “extremely” informed about how much money they should be saving today for retirement, but only 37% of employees describe themselves the same way.

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Another big divide appears on the topic of retirement income, with 58% of plan sponsors saying their workers are either “very” or “extremely” informed about how to generate income from their retirement savings. Just under one-third of employees (31%) say they are.

Despite this apparent disconnect, plan sponsors appear well aware of the challenges participants face. Nearly half of plan sponsors (49%) agree with the statement, “My organization is facing an impending ‘retirement crisis’ where participants will keep working because they are unable to afford to retire.”

“Employers generally recognize that employees are under-prepared for retirement, but in some ways the problem runs far deeper than they realize,” says Anne Ackerley, head of BlackRock’s US and Canada defined contribution group.

Workers—particularly younger ones—want more support for retirement planning. Slightly more than half of workers (55%) say that their employer should provide more help. The younger the cohort, the louder the call for help: 63% of Millennials think their employer should be doing more to help them prepare for retirement, versus just 47% of Baby Boomers.

NEXT: A call for information about income in retirement.

Better retirement income solutions are one area where plan sponsors might provide more help, according to the survey. Although just 38% of workers have heard of products that give a consistent stream of income in retirement, 88% said they would be interested in considering such a product (40% would be “very” or “extremely” interested). Among plan sponsors, 69% agree that there is a growing need for DC plans to provide retirement income solutions and services—however, just 51% say they currently do so.

At the same time, 65% of plan sponsors agree that participants would value more company help, and many are taking steps to make good savings practices automatic. In the past 12 months, about one in four plan sponsors have introduced auto-enrollment, auto-escalation and/or company matching into their DC plan. Plan sponsors also are focusing on their older participants: 60% say they would like to find ways to encourage participants to stay in the plan after they retire.

In general, workers in DC plans have a positive view of their retirement investing. Nearly 70% of workers chose the words “confident,” “optimistic,” “hopeful,” “certain,” or “comfortable” when describing how they feel about the investing they do through their DC plan. But nearly half don’t agree that they are “on track” to retire with the lifestyle they want.

The BlackRock DC Pulse Survey bases results on 200 large and mega DC plan sponsors and 1,003 plan participants in the U.S. fielded online by Market Strategies International, an independent research company. Plan sponsors have at least $300 million in assets, with nearly half of the respondents serving in benefits or human resources roles, and the rest in finance, investment or business management. The 1,003 plan participants are employed full-time and were participating in their employer’s 401(k), 403(b), 457 or 401(a) plan, with at least $5,000 in assets in their current account.

Products February 25, 2016

Investment Product and Service Launches

This week Northern Trust announced enhancements to services for private equity investment clients, while Franklin Templeton expanded multi-asset solutions capability with new open architecture offering. 
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Northern Trust Enhances Servicing for Private Equity

In response to increased demand for outsourced alternative asset administration, Northern Trust announced enhancements to its private equity support with the launch of its capital call execution service.

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The service will allow private-equity holding defined benefit plan sponsors and their advisers to “gain operational efficiencies by outsourcing the processing of capital calls.” Capital calls are periodically issued by general partners to their clients and require investors, upon demand, to transfer a previously agreed upon amount to fund strategic investments.

“Intended for portfolios with more than 20 private equity investments, clients notify Northern Trust of the initial capital call via the automated Trade Order Entry system,” the firm explains. “Northern Trust then handles all subsequent capital call payments directly with the private equity general partners, either based on standing direction or individually based on client approval.”

Pete Cherecwich, Americas head of corporate and institutional services at Northern Trust, says the firm’s clients have invested more heavily in alternative assets in recent years, “and we have sought ways to make their processes more efficient. By taking the tasks associated with capital calls out of their hands and automating the process, we have freed them to focus on the investment decisions rather than the administrative tasks.”

Key aspects of the enhanced capabilities include “streamlined global operational process for handling subsequent capital call processing; direct communication between Northern Trust and general partners regarding subsequent capital calls; and more time focused on investment decisions and less time spent in administering capital calls.”

More detail is at www.northerntrust.com.

NEXT: New Multi-Asset Solutions from Franklin Templeton 

Franklin Templeton Expands Multi-Asset Solutions Capability

Franklin Templeton Investments has added to recent expansion in its global multi-asset solutions capabilities with a new solution that “enables financial institutions to address the needs of a specific global investor base by providing a tailored suite of multi-asset, open architecture funds.”

Under the expanded multi-asset solutions program, Franklin Templeton says investors will benefit from the firm’s global footprint and investment management team, “with the added flexibility to incorporate third-party managers for a one-stop multi-asset solution.”

“As the trend toward open architecture grows, we continue to seek new ways to make our investment expertise—both traditional long-only and alternative solutions—available to investors globally,” says Rick Frisbie, executive vice president, head of Franklin Templeton Solutions. 

Through its open architecture multi-asset capability, Franklin Templeton Solutions says it has built “the flexibility to create comprehensive portfolio solutions for investors by allocating to a mix of in-house and third-party mutual funds and exchange traded funds (ETFs).”

By employing tactical asset allocation, Franklin Templeton Solutions “seeks to position portfolios to capitalize on opportunities presented by changing market conditions and reduce risks within a given portfolio’s established investment objectives and risk profile. The team seeks to build different portfolios customized to meet the needs of investors in different regions and countries around the world.”

More information is available at www.franklintempleton.com. 

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