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Deals & People January 9, 2024
T. Rowe Price Announces Retirement Strategy Team
The investment manager and retirement recordkeeper made the announcement as it highlights retirement saving trends, including personalization and diversification.
Reported by Natalie Lin
Michael Davis
Davis, a former federal regulator who joined T. Rowe in 2016, will now be responsible for aligning retirement strategy across T. Rowe Price’s business lines to better support clients, including research, thought leadership and public policy viewpoints, according to the announcement.
“The retirement industry is undergoing significant change, and the consolidation in the industry suggests that the development of new ideas within separate channels may not be sufficiently responsive to these evolving trends,” Davis says via email. “Developing solutions that can leverage these insights across channels more seamlessly is a critical success factor in this new world.”
Retirement Focus
Currently, about two-thirds (between 60% and 70%) of T. Rowe Price’s assets under management are allocated to retirement and retirement-related accounts, according to the firm. More than $850 billion of the approximate $1.39 trillion in AUM, as of November 2023, is in retirement. Meanwhile, the firm’s target-date franchise constitutes more than one-quarter of its total assets under management.
“Each of the interactions we have with these plan sponsors, intermediaries and investors provide us with insights that help us to better understand complex retirement issues and to build centers of excellence around our response,” Davis says. “By finding ways to stitch these insights together in a more comprehensive and actionable way, this team will help us to provide added value for our clients and to better address their evolving needs, both in the U.S. and around the world.”
Davis has led the defined contribution specialists in T. Rowe Price’s Americas institutional business for the last several years and was previously deputy assistant secretary in the U.S. Department of Labor. He reports to Dee Sawyer, T. Rowe Price’s head of global distribution.
The establishment of the global retirement strategy team comes as T. Rowe Price has continued to grow its retirement business. In April 2023, T. Rowe Price acquired Retiree Inc., a retirement income fintech firm, to drive innovation in retirement income solutions.
Responding to Key Retirement Trends
Davis says his team is poised to address key retirement trends anticipated in 2024, including diversification, personalization and retirement income, according to the firm’s 2024 U.S. Retirement Market Outlook, “Three Themes Shaping the U.S. Retirement Landscape.”
“These themes were built from the insights available from our retirement platform which engages across plan sponsors, intermediaries and investors in the US and around the world,” Davis says. “This new team will seek to coordinate these insights in a way that adds value to the thought leadership output we publish, inform our product development and design agenda, and raise our voice around these themes in retirement thought leadership and policy circles.”
Retirement investment portfolios should be diversified beyond just typical asset allocation, T. Rowe analysts recommended in the report, citing core fixed-income assets, higher-yielding fixed income and non-core bonds as alternatives.
The firm advised that plan sponsors, in collaboration with advisers and consultants, must align current allocation policies with the market conditions of persistent inflation risk and expectations of prolonged higher interest rates. This is crucial for fixed-income allocations within target-date strategies, the predominant default vehicle for retirement investors, the firm’s analysts wrote.
A second key theme in 2024 identified by the firm is the trend toward personalization in retirement plans. The report stated that data from T. Rowe’s recordkeeping platform underscores how personalization drives behavioral change and enhances retirement outcomes.
T. Rowe Price found that the evolution of services for Spanish-speaking participants has increased activity of digital engagement data. The firm’s report, “Participant Reactions to Jobs and the Economy” revealed that 8.6% of visitors to the company’s Spanish-language retirement plan portal in the second quarter of 2023 completed an action, compared with 4.6% of Spanish-speaking users who did not visit the portal.Finally, the firm pointed toward the need to solve for the retirement income needs of participants, which it noted will take more than a singular investment solution.
DC plan sponsors are increasingly exploring strategies to transform plans into both savings vehicles and supportive decumulation platforms for retirees, T. Rowe’s researchers noted. Additionally, the demand for nonguaranteed solutions for pre-retirees is rising.
“We encourage plan sponsors, consultants, and advisers to take the broadest view of retirement income possible—from participant tools and retire-friendly plan design to considering both investment and insurance solutions and access to personalized advice,” the report stated.