Retirement Industry People Moves

This week brings new hires at Northern Trust Asset Management and SageView Advisory, and a business deal for Alliance Benefit Group.

Tony Politano has joined Northern Trust Asset Management as senior client investment officer in the multi-manager investment outsourcing practice.

Politano is responsible for managing institutional investment programs for Canadian clients, including the development of investment policies, asset allocation recommendations, risk management, investment manager search and selection, and portfolio construction.

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Politano, who has 20 years of experience in investment consulting, investment manager research and client service, was most recently senior investment consultant at Aon Hewitt Investment Consulting. His background includes providing investment consulting services to public and private pension plans, foundations and insurance company clients.

Andrew Smith, practice executive for Northern Trust Asset Management in Canada, cites Politano’s experience advising pension plans, foundations and insurance companies on asset mix, investment policy, risk management, and investment manager selection. Politano is based in Toronto.

Prior to Aon Hewitt, Politano was manager, investment management at Alderwoods Group Inc. and also held investment related roles at The Canada Trust Company, and Global Securities Services.

Politano holds a bachelor’s of commerce degree from University of Toronto and the Chartered Financial Analyst (CFA) designation. He is a member of the Toronto CFA Society.

NEXT: SageView Advisory Group expands footprint with Honolulu office.

David Lum has joined SageView Advisory Group’s new Honolulu office as managing director. Lum, who has more than 25 years of experience providing retirement plan consulting services, is an investment professional with expertise in both defined benefit and defined contribution Employee Retirement Income Security Act (ERISA) plans, as well as endowments, foundations, and corporate plan sponsors. Lum will be a lead contact for new clients and will oversee client and team responsibilities for the branch office.

Previously, Lum held a senior leadership role in Bank of Hawaii’s investment management services department. He has spoken frequently about topics including capital markets, employee benefit issues and ERISA fiduciary matters.

Lum holds a bachelor’s degree in business administration in finance from the University of Hawaii. He holds the Accredited Investment Fiduciary Analyst (AIFA) designation from the Center for Fiduciary Studies in association with the Joseph M. Katz Graduate School of Business at the University of Pittsburgh. He was also awarded the Certified Investment Management Analyst (CIMA) designation from the Investment Management Consultants Association.

Randy Long, SageView’s founder and CEO, said strengthening the firm’s Hawaiian presence has been a priority. Steven Edwards and Wanda Sanchez also join the Honolulu branch as retirement plan specialists. SageView opened the office on the heels of increased demand for client-focused retirement plan consulting services.

NEXT:Alliance Benefit Group sells its recordkeeping, administration and payroll unit.

Alliance Benefit Group North Central States Inc. (ABGNCS) said its employee benefit administration/recordkeeping division is merging with Alerus Financial N.A., a multibillion-dollar financial services company in Grand Forks, North Dakota.

The transaction involves only the recordkeeping, administration, and payroll services division of the organization. Employee Benefits consulting, investment advisory and personal wealth management divisions are not being sold, and will continue under the ownership of Brad Arends and Grant Arends.

Most ABGNCS employees will transition to Alerus, and the ABGNCS location in Albert Lea, Minnesota, will become a significant processing site for the growth of Alerus’ services. This merger will bring retirement recordkeeping/administration clients of ABGNCS continuity in service staff; a faster, more robust recordkeeping platform; enhanced cyber security and disaster recovery systems; and trustee/custody/paying agent services tightly integrated with recordkeeping/administration services. Clients also gain size and scale to remain competitive, according to Arends.

The acquisition also brings to Alerus complementary employee benefit recordkeeping and administrative services. ABGNCS’ existing staff will deliver payroll, health savings account, flexible spending account (FSA), health reimbursement arrangement (HRA), and COBRA services to their clients.

Brad Arends notes that the two firms share similar business goals and basic core values, and cites Alerus for its ability to support substantial growth on a national scale.

Is DC Market Showing More Love for ETFs?

ETF asset growth is robust across a range of distribution channels—except one.

Recent Cerulli data shows robust ETF asset growth across various retail and distribution channels, except in one area: private defined contribution (DC) plans, according to the October issue of “The Cerulli Edge – U.S. Monthly Product Trends Edition,” which examines institutional product use.

Historically, ETFs were not used in 401(k) plans, Cerulli says, because the very characteristics—intra-day trading, tax advantages and low costs—that make them appealing are either irrelevant or questionable when considered in the context of a DC plan.

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For larger plan sponsors with access to institutional shares of index mutual funds, the value-add of ETFs is immaterial, Cerulli contends, because institutional class shares of mutual funds’ expense ratios are often even more competitive than ETFs. If investors are seeking passive exposure, index mutual funds may be more suitable than index ETFs as they have the potential to incur expensive trading costs relative to mutual funds.

Mutual funds continue to be the most common investment vehicle within 401(k) plans, and collective trusts a distant second. ETFs make up just a fraction of a percent (0.02%) of the investment vehicles used in 401(k) plans.

But ETFs might be gaining wider acceptance. According the 2015 Plan Benchmarking Report from PLANSPONSOR, overall, 7.1% of DC plans use ETFs outside of brokerage windows, a substantial increase from the previous year’s 3.7% of plans. Plans with less than $1 million in assets have the highest uptake at 12%, a gain of five percentage points from the previous survey, and plans with $500 million to $1 billion have the lowest (2.1%). The largest increase in usage comes from plans with $1 million to $5 million in assets, rising from 2.2% to 9.7%.

NEXT: Robo-advice could also raise DC interest in ETFs

A few firms have begun offering ETFs to the DC market. In 2014, Schwab rolled out the Schwab Index Advantage 401(k) ETF platform. It comprises approximately 80 ETFs, a combination of Schwab proprietary ETFs and those from other sponsors, including PIMCO, Van Eck and PowerShares.

The platform has grown to more than 120 plan sponsors. Schwab also offers a managed account advisory service within the Index Advantage platform, which has ongoing investment management based on a variety of factors, including an employee's age, income, account balance, and savings rate in his or her 401(k) plan.    

Considering the vast size of the DC marketplace, though, Schwab’s success has been minimal. At more than $5 trillion as of year-end 2014, the pool of DC assets is one of the largest within the institutional channel. Based on the size of that asset pool, Cerulli believes the amount of recent media attention to ETFs within the context of the 401(k) space is outsized with respect to their marketshare and potential use.

Cerulli’s survey shows more ETF sponsors are focusing distribution efforts on small- and mid-sized defined contribution (DC) plans, with assets less than $250 million. Then, too, the market for automated online advice or robo services is also boosting efforts to bring ETFs to DC plans.

As more eRIA firms enter the market using ETFs as a primary investment, adoption in 401(k) plans could be in the foreseeable future. However, given ETFs’ current marketshare in the DC space, any meaningful impact is still a ways off. The concept of bringing ETFs into 401(k) plans through online advice service may be the next trend that will further catapult ETF growth, which has the ears of sponsors ringing. Cerulli believes true success will stem from support and awareness from recordkeepers to offer ETFs to plan sponsors.

More information about “The Cerulli Edge - U.S. Monthly Product Trends Edition, October 2015” is available on their website.    

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