Products & Services March 7, 2024

Product & Service Launches – 3/7/24

Orion, DPL partner on annuities marketplace for advisers; Morgan Stanley launches private markets transaction desk; Just Futures announces 'values-driven' 401(k) and 403(b) plan offerings; and more.

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Orion, DPL Collaborate to Provide Commission-Free Annuities to Advisers

DPL Financial Partners LLC and Orion Advisor Solutions announced a partnership to get fee-based financial advisers on the Orion Advisor Technology Platform access to DPL’s commission-free annuity marketplace, product discovery tools and team of licensed insurance consultants.

“We’re excited to provide thousands of advisors with access to insurance products through Orion’s expanded partnership with DPL,” said Brian McLaughlin, president of Orion Advisor Technology LLC, in a statement. “We recognize DPL is the leader when it comes to making fiduciary-friendly annuities accessible to RIAs and, with this partnership, advisors using Orion technology can broaden their offering to deliver greater client value and grow their firms with scalable, modern solutions.”

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Data feeds from DPL into the Orion Advisor Technology platform enable management of annuity assets alongside other investments in a client’s portfolio. In addition to a line-up of commission-free annuities and life, disability and long-term care products, Orion advisers can have direct access to DPL’s proprietary tools for discovering and comparing annuities by type, benefits and costs.

Morgan Stanley Creates Private Markets Transaction Desk

Morgan Stanley announced the launch of a concierge service that allows eligible shareholders and investors to buy and sell eligible private company shares in the secondary market.

The Private Markets Transaction Desk will assist clients seeking liquidity in a “highly fragmented and opaque secondary market,” according to Morgan Stanley. Clients who use the desk can benefit from direct support for one-off sales of private company shares, and clients focused on investing in private companies can gain access to investments not widely accessible.

The Private Market Transaction Desk is currently live and facilitating trades on behalf of clients. To lead the desk, Morgan Stanley tapped industry veteran Jeff Urban, who previously led several significant private and public markets distribution and syndication businesses.

Just Futures Launches ‘Values-Driven’ 401(k) and 403(b) Plans

Public benefit investment firm Just Futures Advisors LLC announced the launch of 401(k) and 403(b) employer-based plans, designed to enable workers to save while “staying true to their social justice values.”

Just Futures is a people-of-color-led firm founded by activists and experienced nonprofit workers.

Recognizing the need for access to retirement investment options that align with people’s social values, Just Futures’ plans are designed to help minimize investment in sectors counteractive to social equity and long-term risk management. 

The Just Futures platform not only screens for companies complicit in climate change, but also for companies involved in issues like the prison industrial complex, immigrant detention, weapons manufacturing, racial inequality and more.

Just Futures partnered with digital recordkeeper Vestwell on the announcement, with the firm managing plan administration and recordkeeping needs, including reporting, Employee Retirement Income Security Act compliance, and plan review and maintenance.

T. Row Price Launches Social Security Optimizer

T. Rowe Price announced the launch of Social Security Optimizer, a tool designed to help individual investors and plan participants maximize Social Security benefits based on their expected lifespan.

The optimizer offers tailored insights and estimates when a participant should begin claiming Social Security and how much they should expect to receive, according to the announcement.

The tool can also model life expectancy to see what claiming strategies will yield the most amount of money over time, based on the inputted life expectancy. After individuals are asked a short series of questions, the tool will estimate the optimal age to begin collecting Social Security, the optimal age for their partner to begin collecting Social Security and the amount of benefit the individual (and their partner) will receive, given their assumed life expectancy.

The product stems from the firm’s 2023 acquisition of Retiree Inc.

IRI Releases Updated Retirement Saving and Income Handbook

The Insured Retirement Institute published an updated version of its Retirement Saving and Income Handbook, featuring new content and illustrations showing the value of annuities and an updated glossary of common annuity and industry terms.

The handbook was originally published last year and is meant to serve as a basic guide to annuity and non-annuity solutions for accumulating and preserving wealth, as well as generating retirement income from investable assets.

The guide provides basic descriptions of annuity and non-annuity products commonly available to investors directly or through financial professionals.

Financial professionals can use the handbook as a resource for “understanding and contrasting annuity and non-annuity solutions, training those new to the industry and satisfying the requirement under the U.S. Securities and Exchange Commission’s Regulation Best Interest to evaluate annuities alongside reasonably available alternatives when making product recommendations,” according to IRI’s announcement.

Data & Research March 7, 2024

$20B Club Plans’ Funded Statuses Declined Slightly in 2023

The drop among the traditional group of 21 companies comes after two years of gains, according to Russell Investments.

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In a departure from two consecutive years of growth, the largest pension plans among publicly listed U.S. corporations faced a slight decline in their average funded status in 2023, revealed Russell Investments’ annual analysis. The study focused on 21 corporations historically managing more than $20 billion in pension liabilities, collectively known as the “$20 billion club.”

The group represents approximately 40% of all pension and liability assets of U.S. listed corporations; it experienced a funding deficit increase to an average of $43 billion in 2023 from an average of $30 billion in 2022.

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Justin Owens, Russell Investments’ senior director and co-head of strategic asset allocation, attributed the decline in funded status to various factors, including risk transfer, plan closures and plan freezes. Owens emphasized that total liabilities increased due to a decline in discount rates and higher interest costs than in previous years.

“Despite ongoing effects of risk transfer, plan closures, and plan freezes, total liabilities were still up,” Owens said in a statement. “The net effect was a slight decline in funded ratio for the $20 billion club, with assets inching downward and liabilities inching upward.”

Russell Investments also highlighted a downward trend in employer contributions, which reached their lowest point in 19 years of data tracking for this group. Contributions in 2023 were 25% below the high point recorded in 2017. Owens noted that companies’ expectations for 2024 indicated little appetite to contribute beyond government requirements.

The research follows on the heels of IBM’s wave-making decision in November 2023 to end its 401(k) employee matching program in favor of an automatic 5% retirement benefit account, a cash balance plan regulated like a DB plan. Unlike many of the companies in Russell’s report, IBM had an overfunded pension plan that it could not use for its 401(k) benefits plan but can use for the new cash balancer plan. Despite the average funding dip year-over-year in Russell’s report, the average funded status for each corporation over the past three years remained close to the 100% threshold, a milestone not seen since 2007, the firm noted.

Another unexpected shift was an increase in the average expected return on assets assumptions for the first time since the inception of the $20 billion club in 2011. Owens pointed out that the decline in EROA assumptions in recent years resulted from increased liability-hedging fixed income in defined benefit portfolios and decreased expected returns on fixed income.

“Expected returns on fixed income are much higher than they have been,” Owens said. “Most of these companies (13 of 21) chose to increase expected return assumptions for accounting purposes, some quite dramatically. For these companies, a higher EROA assumption would lead to lower pension expense (or higher pension income) disclosed on the corporate income statement.”

Other key findings in the analysis included:

  • Liabilities (projected benefit obligations) rose to $708.5 billion at the end of 2023 from about $700 billion in 2022, the first increase since 2009;
  • Assets, on the other hand, declined to $665.6 billion at the end of 2023 from $672 billion at the end of 2022, marking the first time they have sunk lower than $700 billion since 2011; and
  • Deficits, representing excess assets above or below liabilities, totaled $42.9 billion at the end of 2023, compared to $29.6 billion at the beginning of the year. Contributing factors included actuarial loss of $23.1 billion partially offset by investment returns minus interest cost $10.6 billion.

“Understanding trends among [the $20 billion club] will help all DB sponsors in their fiduciary duties,” Owens said. “Looking at the latest corporate disclosures gives sponsors the perspective and broad-stroke trends in the corporate pension industry.”

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