EBRI found a significant difference in retirement deficits when comparing the current environment where defined contribution plan participants rollover their assets versus a hypothetical state where workers never rollover their DC assets.
To determine how important rolling over defined contribution (DC) plan assets to an individual retirement account (IRA) or another DC plan at job change versus cashing out is to the current state of retirement income adequacy, the Employee Benefit Research Institute (EBRI) used its Retirement Security Projection Model (RSPM) to compare projected retirement deficits of U.S. households in the current state—where there are rollovers into IRAs from defined contribution (DC) plans—versus a hypothetical state where workers never rollover their DC money to an IRA at job change but instead always cash out assets that are not retained in a defined contribution plan.
This impact of rollover analysis focuses on five-year age cohorts from age 35 through age 64. It finds that for the youngest workers, the absence of any IRA rollovers has a very material impact on retirement deficits: EBRI projects that the baseline average retirement deficit for that age cohort of $49,182 would increase by nearly half (46%) to $71,786 if IRA rollovers were assumed never to occur. A similar magnitude of increase in deficits is seen for those ages 40 to 54, ranging as high as a 52% increase in the projected retirement deficit for the ages 40 to 44 cohort.
While the projected increase in retirement deficit is lowest for older workers, EBRI found it is still material. For those ages 60 to 64—who have the lowest opportunity to experience job change (and therefore roll over) due to time remaining in the workforce—the deficit would increase by about one-third, from $44,055 to $58,893, if IRA rollovers did not occur.
EBRI says these findings highlight the importance of keeping money in the retirement system—and avoiding leakage at job change—when it comes to retirement deficits for U.S. households.
A previous EBRI study showed that while policy to expand retirement plan coverage can significantly impact aggregate savings shortfalls, initiatives to reduce plan leakage can materially augment such efforts.
The Department of Labor (DOL) has issued a notice of a proposed exemption from certain prohibited transaction restrictions of the Employee Retirement Income Security Act (ERISA) to Retirement Clearinghouse (RCH) for use of its auto-portability solution.
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Morgan Stanley builds low-minimum impact portfolio suite; American Century Investments decreases ETF management fee; Sun Life Financial consolidates asset management businesses; and more.
Morgan Stanley Builds Low-Minimum Impact Portfolio Suite
Morgan Stanley Wealth Management announced the launch of a new suite of Impact Portfolios with a $10,000 minimum on its Investing with Impact platform. These portfolios aim to provide investors with an accessible solution to help integrate impact objectives into an investment plan without sacrificing performance potential. The six Portfolios utilize a range of Investing with Impact objectives including restriction screening, environmental, social and governance integration, and thematic investing.
The Impact Portfolios leverage Wealth Management Investment Resources’ intellectual capital including asset allocation advice, portfolio construction resources, manager analysis, risk management and ongoing portfolio monitoring to provide clients with a diversified multi-asset class portfolio. The portfolios comprise mutual funds and exchange-traded funds (ETFs).
“At Morgan Stanley we are committed to integrating environmental, social and governance (ESG) factors across our core businesses, and we use our platform as a global financial services provider to mobilize and scale capital in ways that deliver sustainable growth and long-term value,” says Lisa Shalett, chief investment officer for Morgan Stanley Wealth Management. “We’ve seen impact investing can deliver competitive market returns when investors choose to integrate positive environmental and social impact over the long term, and this new suite addresses heightened investor demand to align values with their portfolios.”
Through the companies that the Impact Portfolios invest in Morgan Stanley is trying to contribute to the development of solutions to the world’s most pressing environmental and social problems, such as those outlined by the United Nations Sustainable Development Goals (SDGs). In addition to SDG 14, the Impact Portfolios include alignment with several of the 17 SDGs including 6 (Clean Water and Sanitation), 7 (Affordable and Clean Energy), 8 (Decent Worth and Economic Growth), 10 (Reduced Inequalities) and 13 (Climate Action).
The Impact Portfolios are part of Morgan Stanley Wealth Management’s firm-discretionary program, which is led by Paul Ricciardelli, head of Wealth Advisory Solutions. The Impact Portfolios complement other higher minimum Investing with Impact firm-discretionary portfolios launched in 2015.
American Century Investments Decreases ETF Management Fee
American Century Investments has reduced its American Century Diversified Corporate Bond Exchange Traded Fund’s (KORP) management fee from 0.45% to 0.29%. The fee reduction for KORP was effective June 14.
“With KORP now exceeding $60 million and attracting steady flows, we decided to reduce the fees in order to provide better value to investors,” says Edward Rosenberg, senior vice president and head of ETFs for American Century Investments. “Our goal has always been to provide a lineup of ETFs that apply our unique insights to solve common investment problems.”
KORP is an actively managed corporate bond fund designed for investors seeking current income. The fund emphasizes investment-grade debt while dynamically allocating a portion of the portfolio to high yield in a single, systematically managed portfolio. By integrating fundamental and quantitative expertise, the portfolio management team strives for enhanced return potential versus traditional capitalization-weighted passive portfolios.
The fund is co-managed by Charles Tan, Jeffrey Houston, Le Tran and Gavin Fleischman. Senior Vice President and Global Fixed Income co-chief investment officer Tan joined American Century in 2018. Vice President and Senior Portfolio Manager Houston has been with the company since 1990. Vice Presidents and Portfolio Managers Tran and Fleischman joined the firm’s fixed income team in 2004 and 2008, respectively.
American Century offers a suite of ETFs that include American Century Quality Diversified International ETF (QINT), American Century STOXX U.S. Quality Growth ETF (QGRO), American Century STOXX® U.S. Quality Value ETF (VALQ) and American Century Diversified Municipal Bond ETF (TAXF). STOXX is a registered trademark of STOXX Ltd. All of the firm’s ETFs feature institutional-quality management that draws on the American Century’s fundamental and quantitative expertise.
Sun Life Financial Consolidates Asset Management Businesses
Sun Life Financial Inc. announced the establishment of SLC Management. SLC Management combines the organization’s affiliated fixed income institutional asset management businesses—Prime Advisors, Ryan Labs Asset Management and Sun Life Institutional Investments (U.S. and Canada)—as well as Sun Life’s general account, into a new autonomous asset management business. SLC Management also replaces the Sun Life Investment Management brand globally, effective immediately.
“The launch of SLC Management builds on the organic growth that we’ve achieved since the establishment of our business and on the acquisitions of Ryan Labs, Prime Advisors and Bentall Kennedy,” says Steve Peacher, president, SLC Management. “This next step underlines our commitment to putting our clients at the heart of everything that we do. It enhances the strength, breadth, and seamless functioning of our investment strategies so that we can further achieve the investment objectives of our institutional clients.”
SLC Management will have two related, but distinct pillars—a fixed income pillar and a real estate pillar. The fixed income pillar will operate under the SLC Management brand name and will include the affiliates currently known as Prime Advisors, Ryan Labs Asset Management and Sun Life Institutional Investments (in both the U.S. and Canada). The real estate pillar will be comprised of the merged operations of SLC Management’s Bentall Kennedy business with GreenOak Real Estate (to be named “BentallGreenOak” upon close).
Each of the portfolio management teams within SLC Management will retain investment autonomy while having access to a global credit analyst team of 40 experienced colleagues. This structure allows the teams to focus on driving investment performance for SLC Management’s clients, a structure the firm believes creates additional value for clients.
Adds Peacher, “Every change to our business is one that we feel will enhance our capabilities for our clients, who we share a common purpose with, which is to manage assets to meet long-term financial obligations. Sun Life has done this successfully for over 150 years and believe that we are uniquely placed to support them going forward. SLC Management supports and advances Sun Life’s vision of creating a global asset management firm that provides differentiated investment strategies to meet the evolving needs of investors.”
Empower has designed a new variation of its Dynamic Retirement Manager (DRM) offering that integrateslow-cost, index-based investments fromState Street Global Advisors’,the asset management business of State Street Corporation.
In this offering, plan sponsors start with target-date funds (TDFs) from State Street. When the time is right for participants, their savings will transition into a customized managed account solution, managed by Advised Assets Group, LLC (AAG), a registered investment adviser, using the same underlying investments offered by State Street.
“We are on a mission to revolutionize the workplace retirement savings programs we offer our customers,” says Edmund F. Murphy III, president and CEO of Empower Retirement. “We recognize that developing value-aligned partnerships brings us to better outcomes for American workers who are saving for their retirement.”
With this solution, Empower says advisers no longer have to choose between target-date funds (TDFs) and managed accounts. DRM provides employees a glide path in the target-date series. Then, when the employees reach a certain age, they easily transition into a more personalized managed account based on their individual circumstances while still using the investment options that they already know and trust.
In April, Empowerannouncedit had designed an offering within its DRM program that integrates the American Funds Target Date Retirement Series, which is an actively managed target-date series.
