Products July 22, 2014

Schwab RIA Custody Data Added to Morningstar Office

Schwab Intelligent Technologies reached an agreement with Morningstar, Inc. through which the investment research provider will participate in the Schwab OpenView Gateway technology platform.
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By joining the Schwab OpenView Gateway platform, Morningstar now has direct access to Schwab systems and those of other participating technology providers. The integration will make real-time custodial data from Charles Schwab available within Morningstar Office—a scalable practice and portfolio management platform that facilitates advanced research, performance reporting and secure client communications.

Schwab says the new technology enhancements are part of its ongoing effort to integrate with new platforms and technology systems tailored for independent registered investment advisers (RIAs). This particular integration should help RIAs make more informed investing decisions and provide better client service through improved efficiency in their practices, Schwab says.

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“Morningstar Office is a popular solution among the advisers we serve, and we currently have more than 1,000 shared clients who could benefit from our new working relationship,” explains Neesha Hathi, senior vice president for adviser technology solutions, Schwab Advisor Services. “Working with Morningstar underscores our continued commitment to a flexible, open architecture technology platform for better business outcomes.”

Currently, more than 2,000 independent advisers on Schwab’s platform use some facet of Morningstar’s data and research offerings, Hathi explains, highlighting the opportunity for wide scale integration between the companies.

“This agreement allows Morningstar to deliver more value to independent RIAs,” adds Tricia Rothschild, head of global adviser solutions for Morningstar.

In a related announcement, Schwab provided additional updates on its Client Experience Transformed initiative. After a successful pilot, Schwab will proceed with the phased launch of new electronic approval tools allowing clients of RIAs to easily and securely approve forms and wires on the go. Schwab says the new tools help advisers drive efficiency and deliver a better client experience by streamlining paperwork and speeding up transaction processing.

Schwab also announced that Project PM2 (pronounced “PM squared”) will be in beta testing later this year and will be launched in 2015. Project PM2 will allow advisers to use Schwab data to create customized dashboards, reports and presentations.

In addition to these announcements, Schwab also provided details on a number of other integration updates impacting the Schwab OpenView Gateway platform. These include the following:

  • MoneyGuidePro – The full integration with Gateway has now launched, enabling advisers to link client profiles and account information back to MoneyGuidePro’s financial planning software system. This can help advisers save time on data entry and create more precise snapshots of assets and future investment scenarios.
  • Naviplan by Advicent – Integration with the Naviplan financial planning tool is now available for independent advisers. This integration will allow advisers to directly transfer client profiles, accounts, holdings, balances and fees to increase the speed and accuracy of financial plans. The integration can also help advisers reduce manual data entry.
  • Salentica Inc. – Schwab has initiated the second phase of integration with Salentica CRM Advisor Edition. This increases data accessibility and enables unified client service processing from within the Salentica client relationship management (CRM) system, Schwab says. The offering will be made generally available late July.
  • Advisor Rebalancing by Envestnet / Tamarac – Now in a pilot program stage with trade integration capabilities, Advisor Rebalancing allows advisers to submit trade files they produce directly to Schwab via Schwab OpenView Gateway.
  • Junxure – Following Junxure’s comprehensive desktop integration with Gateway, Junxure and Schwab are moving into pilot with integration of Junxure’s cloud-based CRM solution, Junxure Cloud.

“The continued evolution of added capabilities and integration with participants further enhances the technology solutions available to advisers, helping to not only improve client service, but to save time and drive efficiency,” Hathi says. “Combined with hands-on consultative guidance from Schwab on how to optimize this technology, advisers can put themselves in a position to serve clients better, now and in the future.”

More information about Schwab technology programs is available here.

Data & Research July 22, 2014

Early Savers Fare Well with Workplace Plans

A secure retirement is achievable, research says, if retirement plan participants start saving early and consistently—and at levels far above 3%. 
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Americans with access to 401(k) plans can achieve a more secure retirement if they begin in their 20s and save consistently over the course of their career, according to findings from the Center for Retirement Research (CRR) at Boston College. The latest National Retirement Risk Index (NRRI) from CRR was sponsored by Prudential Financial Inc.

Individuals with a workplace-based retirement plan should look to that plan, whether it’s a 401(k) or other retirement savings plan, for 35% of their retirement income, on average, the CCR study contends.

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The average required savings rate to achieve that level of targeted income is 14%—that is, if savings starts at age 35 and retirement occurs at age 65, according to “How Much Should People Save?” The research was designed to determine the amount 401(k)s would need to generate for working-age American households to be able to maintain their standard of living in retirement.

“Planning for Retirement: The Role of 401(k)s in Retirement Income,” a Prudential paper, summarizes the NRRI research and notes the improvements to 401(k)s since they were introduced as supplemental savings vehicles in 1978.

The research helps to highlight the strength of the existing retirement system, according to James McInnes, senior vice president of product management and development at Prudential Retirement, and co-author of Prudential’s paper. “Modern plan design allows individuals to get tax-advantaged savings and the ease of payroll deduction, as well as investment education, advice and institutionally priced products to help provide them the opportunity to better prepare for a more secure retirement,” McInnes says.

Improved Plan Features

Prudential’s paper highlights three features of 401(k) plans that help improve retirement security. Matching contributions and auto enrollment have boosted incentives to save and made it easier to do so. Retirement modeling tools, which project future retirement income, can improve savings behavior by increasing savings rates.

The NRRI model assumes that households start saving at age 35 and retire at age 65. The research also found that the required savings rate for an average wage earner in a single income household drops from 15% to 10%, if the individual starts saving at age 25, instead of age 35.

When the target retirement age is changed to age 67—the retirement age of Social Security for those born after 1959—the average required savings rate (starting at age 35) drops from 15% to 12%. When the retirement age is further delayed to age 70, the average rate drops to 6%. If approaches are combined, with savings starting at age 25 and retirement occurring at age 70, the required savings rate drops to 4%.

“Even small changes in savings behavior can have a positive impact on individuals’ results,” McInnes says. “This research shows it is never too late to start saving, and even if you didn’t begin at age 25, saving a little more now or extending retirement can still get you to a comfortable place.”

Employers can help their workforce achieve their retirement savings goals by ensuring they take advantage of the employer-match provided, offering automatic enrollment and providing participants with the proper tools, says George Castineiras, senior vice president, total retirement solutions, at Prudential Retirement, and one of the authors of the Prudential paper.

CCR’s paper “How Much Should People Save?” can be downloaded here. The paper’s co-authors are Alicia Munnell, the center’s director; Anthony Webb, a senior research economist at the center; and Wenliang Hou, a research associate at the center.

“Planning for Retirement: The Role of 401(k)s in Retirement Income” is available on Prudential’s website. 

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