Deals & People August 19, 2009

WESPAC Expands Southern California Team

WESPAC, provider of retirement plan consulting, wealth management, and health and welfare benefits, added a team of advisers previously of Tower Asset Management.

Reported by

Raymond Baker, Jr., brings to WESPAC nearly 30 years of senior level experience in the areas of equity fixed-income trading, portfolio management, and research. Prior to joining WESPAC, he headed Tower Asset Management, where he served in its Equity Trading and Research Department, according to a news release. Prior to that, he was a managing director of Morgan Capital Management, and Chairman of the Investment Strategy Committee at Bateman Eichler Hill Richards.

Peter P. Chen joined Tower Asset Management in 2000. Prior to that, he was at Van Deventer & Hoch, Washington Mutual, and Charles Schwab & Co.

Morgan T. Gough joined Tower Asset Management in 2000 as director of the Private Client Advisor team, where he worked exclusively with corporate executives and high-net-worth individuals. He began his career in 1991 with Merrill Lynch and also worked at Dean Witter, Home Savings of America, and Charles Schwab & Co.

Wade S. Perry joined Tower Asset Management in 2003, serving high-net-worth individuals as well as corporate retirement plan clients. He began his career with Putnam Investments and later moved on to American Express Financial Advisors.

Coco M. Lorenzo joined Tower Asset Management in 2009 and is responsible for managing the Private Client Service department of the Southern California division of WESPAC.  Prior to that, she served in client service, sales associate, marketing, and operations positions at Tower, Wells Fargo Investments, and Pantheon Private Equity.

“Our clients have been very supportive of our move and many have already begun inquiring about our new resources, like 401(k) reviews,” said Perry, now principal of the WESPAC Southern California Division.



Data & Research August 19, 2009

Vanguard: Asset Allocation Funds Help Participants Diversify

Vanguard said the diversification of target-date funds helped cushion the blow of bad markets.

Reported by

The fact that 20% of participants in defined contribution plans administered by The Vanguard Group invested their entire nest eggs in an asset allocation fund at year-end 2008 helped shield the participants from the market’s turmoil during the year, new Vanguard research indicated.

A news release about the company’s “How America Saves 2009” study found nearly 70% of Vanguard’s plans offered the investment company’s own target-date fund products during 2008; 37% of the participants in those plans invested in one.

By year end, about half of Vanguard plans had designated a qualified default investment alternative (QDIA) and of those, 85% chose a target-date fund.

“The diversification within a target-date fund helped to diminish the impact of last year’s volatility on investors,” said Stephen Utkus, director of the Vanguard Center for Retirement Research, which conducts the yearly data analysis.

According to the Vanguard news release, the latest study also found that participants in general during 2008 remained committed to equities, engaged in only modest trading activity, and experienced overall losses far milder than the precipitous declines of the U.S. and international stock markets.

Utkus said: “Our research underscores that 401(k) plans continue to be an effective retirement savings vehicle.”

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Effects of Automatic Enrollment

Automatic enrollment is leading to more workers being covered by a retirement plan, Vanguard found. Employees covered by automatic enrollment plans at Vanguard had an overall participation rate of 84% in 2008 compared to 60% for plans with voluntary enrollment. About 20% of all Vanguard plans have adopted automatic enrollment, quadruple that of 2005.

Most participants saw smaller decreases in their account balances due to last year's market decline than has been widely reported. "Continuous" participants (the 75% who had a balance at both the beginning and end of the year) had a median decline of 14%. The median decline for an age group of particular concern—pre-retirees aged 55 to 64—was 16%.

Vanguard participants deferred an average 7% of their income in their plan. This deferral rate was down slightly from the 7.3% rate of 2007, a dip due mainly to the fairly low default deferral rate of 3% set by many automatic enrollment plan sponsors. The median participant deferral rate was 6%, unchanged since 2000.

At the end of 2008, 61% of existing plan assets (as distinct from future contributions) were invested in equities, a drop from 73% in 2007. The report estimates that eight percentage points of this movement came from declining stock prices and four percentage points from participants shifting assets to fixed-income holdings.

As Vanguard released in previous research, despite last year's market volatility, most participants made no trades at all (see “When Markets Get Cold, Many Participants … Do Nothing”). Only 16% of participants traded during 2008 and 2% abandoned equities. The remaining 14% engaged in a variety of other portfolio changes.

Participants who separated from service in 2008 largely preserved their assets for retirement. Sixty-nine percent either remained in their plan or rolled over their savings to an IRA or a new employer plan.

The number of new loans issued during 2008 declined by 12% from the 2007 level. Only 2% of participants took hardship withdrawals in 2008, a figure slightly higher than in recent years but still low overall.

The report is based on the 2008 plan-based behavior of more than 3 million participants in more 2,200 defined contribution plans administered by Vanguard.

The study report is available here.

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