401(k) Real Talk Transcript for November 8, 2023
Greetings and welcome to this week’s edition of 401k Real Talk. This is Fred Barstein contributing editor at WealthManagement.com’s RPA Edge and CEO at TRAU, TPSU & 401kTV - I review all of last week’s stories and select the 5 most important and interesting ones providing open honest and candid discussion you will not get anyway else. So let’s get real!
Of course the DOL’s new fiduciary rule, now named The Retirement Security Rule perhaps hoping to avoid the fate of previous iterations, was announced with a press conference that included Biden himself.
One attendee at the recent RPA Broker/Dealer Roundtable dubbed it the “Oprah Rule” because everyone will be a fiduciary. Not surprisingly, the 5 part test is now a 4 part test eliminating the requirement of an ongoing relationship.
While the retirement industry seemed to approve of the rule, predictably the insurance and brokerage industries did not as the new rule would cover insurance products calling out annuities and their high fees and of course IRA rollovers. The press conference and release highlighted the terms hidden fees, junk fees and conflicts of interests. Will the result be that more assets stay in DC plans and will in plan retirement income solutions benefit even as former EBSA director Brad Campbell questions wheter the DOL has jurisdiction over IRAs?
Unless lawsuits hold it up, the rule will go into effect next summer and be applicable January 1 2025. And what will happen if the republicans take the white house next year?
Job growth cooled in October just as September’s surprising surge was revised down led by healthcare and social assistance as well as government which is catching up to the private sector post pandemic. Financial services lost 2,000 jobs and will likely take another hit led by Schwab’s massive layoffs – other firms like Prudential have also cut staff.
There were more part-time workers who wd have preferred full time work and, anecdotally, people are reporting that it is harder to find a new job after losing one. Unemployment rates stayed steady as did the interest rates with the Fed seeing a cooling economy.
So is the war for talent over and will that affect benefits, especially retirement benefits? It’s likely that the renewed focus on helping people with financial issues at work, especially retirement planning, will not end even if recruiting and retention become less urgent.
Creative Planning announced the purchase of Mesirow’s $13 billion 350 plan retirement advisory business, which does not include its 321 and 338 services as well as their non-qualified business. Creative also announced the close of their purchase of United Capital from Goldman Sachs claiming to have retained $20 of the $29 bn reported when the sale was announced. The United Capital firms will be housed in a separate RIA.
As of July 1, Creative had $245 billion which included the $110 billion of retirement assets when Lockton was purchased so the simple math means the firm will have $288 billion when the dust settles with approximately half in retirement though revenue of the wealth division is likely much greater.
All of which makes Creative Planning a major player in both the RIA and RPA markets with only Captrust, which has significantly more retirement plan assets and recently raised additional capital, even close. Other RPA aggregators are scrambling to build and acquire their wealth capabilities just as RIA aggregators are starting to realize that DC plans could be a good source of new wealth clients.
On the heels of their national Impact conference, Schwab announced massive layoffs of 2,000 workers saving an estimated $500m – before the layoffs, their website touted almost 40,000 workers.
While not unusual when 2 massive firms merge, there are rumors of additional layoffs early next year as Schwab also let go of real estate in major metro areas.
Even more concerning is the 67% decline in new assets and 44% net income decrease in Q3 with many RIA clients complaining about service at the Impact conference.
Likely to expect more financial service firms to pull back just as others like Prudential have recently which may provide opportunities for advisory firms to pick up talent, especially RPAs looking to grow their wealth businesses.
As momentum builds around defined contribution plans driven by the convergence of wealth, retirement and benefits at the workplace, the DC industry gathered at a high-level Roundtable hosted by WealthManagement.com at the fi360/Broadridge offices in NYC to discuss how to best leverage the many opportunities.
Retirement leaders at broker dealers have struggled in the past to serve both the specialists and wealth advisors with limited resources and collaboration with their wealth divisions. It seems that the tide has turned, finally, as leaders like Morgan Stanley’s CEO James Gorman predicts that the workplace will become the number one source of assets over the next ten years.
Read my recent column about the seminal forum especially the broker dealer’s view on the new DOL rule.
So those were the most important stories from the past week. I listed a few other stories I thought were worth reading covering:
- Payroll Integration raises $20 million https://techcrunch.com/2023/11/02/payroll-integrations-20m-employee-financial-wellness/
- DC cost of living increases announced https://www.benefitslawadvisor.com/2023/11/articles/401k-plan/2024-cost-of-living-adjustments-for-retirement-plans/
- IBM revises match to save money https://www.theregister.com/2023/11/02/ibm_401k_changes/
- Why smaller businesses are reluctant to start a DC plan https://www.capitalgroup.com/employer/pdf/shareholder/RPGEBR-249-1045213.pdf
- Fidelity introduces alts in their target date series for the first time https://www.pionline.com/defined-contribution/fidelity-includes-alternatives-target-date-series-first-time
And, as a correction on a story reported last week on private equity tapping retirement accounts, Fidelity noted that they did not act as a placement agent and that the KKR fund is not affiliated with their retail offering nor did the $2 billion come from IRAs.
Please let me know if I missed anything or if you have any comments. Otherwise, I look forward to speaking with you next week on 401(k) Real Talk.
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Originally posted on: https://www.wealthmanagement.com/retirement-news/401k-real-talk-transcript-november-8-2023