The Markets June 19, 2017

Ripe Time to Reevaluate Clients' Investment Approach

About half of investors with at least $50,000 in investable assets say they have yet to reevaluate their investment approach in light of new challenges.
Reported by

Nearly half of Americans (49%) say they’ve yet to reevaluate their investment approach despite being in a changing investment landscape characterized by low global interest rates and uneven economic growth, according to new research by Dreyfus.

The study shows this inertia is more common among older investors, even though this group has experienced massive economic shifts ranging from the stock market crash of 1987 to the financial crisis of 2008. According to the study, more than half, or 61%, of those who are at least 55-years old say they have not or will not change their investment approach. However, 65% of those between the ages of 21 and 34 said they already have evaluated their investment strategy for appropriateness in the emerging environment.

Want the latest retirement plan adviser news and insights? Sign up for PLANADVISER newsletters.

“As long-term risk/return expectations have shifted with an increase in inflation, the rise of U.S. nationalism and record-low volatility, investors would be well-served to reevaluate their portfolios in light of changed circumstances to determine if they will continue to meet their investment objectives,” observes Mark Santero, chief executive officer for the Dreyfus Corporation, a BNY Mellon company.

Additionally, the study finds that those working with advisers, especially younger people, are more likely to update their investment approach compared with those who aren’t working with advisers. Younger investors between 21 and 34 (63%) also indicate they have worked with an adviser in reevaluating their investments, while only a third (38%) of those 55 or older have evaluated their investments with an adviser.

These findings may suggest plan sponsors can benefit from targeted communication about investments geared toward older participants and those not working with advisers. Santero adds, “We believe investors who don’t work with a professional adviser could greatly benefit from the insights an adviser can provide in tailoring a goals-based approach for their individual circumstances against today’s investing environment of uneven economic growth. Options might include diversifying their U.S. exposure with global fixed-income and equities or considering dividend or alternative investing strategies.”

The survey shows six in 10 investors (60%) without a financial adviser say they are likely to put off their plans to address today’s market challenges, with only one-quarter (24%) saying that they plan to address challenges they face at some point in 2017.

The “Helping Meet Investor Challenges Study” surveyed 1,250 investors with $50,000 or more in investable assets on their approach to investing. The full results can be found at BNYMellon.com.

Client Service June 19, 2017

PSNC 2017: How Current Trends Will Drive the Future Retirement Planning Market

BrightScope data included developments in the retirement industry and what to look forward to in the future.
Reported by

During Day Three of the PLANSPONSOR National Conference, in Washington, D.C., BrightScope data revealed top trends influencing the defined contribution (DC) industry.

Allegra Heyligers, managing director of Strategic Insight, highlighted the pivotal role defined contribution plans play in the retirement marketplace, with a $7 trillion increase in DC assets since 2001, 24 million plan participants and 660,000 existing plans. Additionally, Heyligers mentioned the growing average rate of participation and rising cash contributions. In 2015, total cash contributions amounted to $425 billion—a surge from the $291 billion in 2009.

For more stories like this, sign up for the PLANADVISERdash daily newsletter.

She attributed the growing changes to the Pension Protection Act of 2006 (PPA), which created safe harbors for automatic enrollment and qualified default investment alternatives (QDIAs), typically target-date funds (TDFs). As a result, 27% of total plans auto-enroll new hires; TDF assets have risen 27% annually from 2009 to 2014; and 76% of all plans now offer TDFs.

The panel discussed recent developments to monitor investments, including the impact of lower-cost institutional share classes. Referring to BrightScope data, Heyligers said plan sponsors should expect to see more of these introduced, as R-share formation has initiated an enhanced alignment between investors’ and distributors’ needs.

Due to fiduciary concerns, index TDFs and collective investment trusts (CITs) have expanded in market share, with index funds gaining 15% from 2009 to 2014. CITs saw somewhat larger growth, at 26% over these years.

Compared with active TDFs, which dominated in the small-plan market, the use of passive funds varied across all segments, Heyligers said. They were most prominent in the $500 million through $1 billion segment, at 20%.

As DC plans boom, the industry will see a growth in provision of intermediary advice. Currently, 215,000 plans are served by an adviser and 2,700 by consultants, Heyligers said.

“There’s a growth of advisers and consultants in the DC retirement plan space,” she said. “There’s a lot more advice happening in the large end of the market compared with the small end.” However, Heyligers emphasized, while larger plans are more apt to use the services of an adviser, small and midsize plans shouldn’t be overlooked, especially as each have unique needs with which advisers could help. Micro plans, she said, will continue to develop.

“[The trends are] size-dependent, but you’ll continue to see those trends, whether it’s [in] CITs or separately managed accounts [SMAs],” she said.

«