Welcome to this week's edition of 401(k) Real Talk! I'm Fred Barstein, contributing editor at WealthManagement's RPA channel and CEO of The Retirement Adviser University. I'm here to review the latest industry news and share my insights on the top five stories that matter. Let's dive in!
Story 1: The Rise of OCIO Assets
One of the most significant trends in the industry is the surge in OCIO assets from DC plans. Over the last eight years, these assets have skyrocketed by 400% to $580 billion, while DB assets have only increased by 51%. This growth is largely attributed to the desire of plan sponsors to outsource fiduciary risk, manage complex investments, and address resource constraints. The addition of over $60 billion by GS for Lockheed and Verizon highlights the growing trend of OCIO services.
Story 2: Empower's Asset Growth
Empower, a leading player in the industry, recently surpassed $2.1 trillion in assets in Q2, a 10% increase from the previous quarter. Their earnings surged by 6.3% year-over-year, and wealth assets climbed to $122 billion, up 40% from last year. With nearly 20 million participants and 1.2 million wealth clients, Empower's growth is impressive. Their strategic acquisitions, including Personal Capital and Milliman's DB and benefits administration, demonstrate their commitment to providing comprehensive solutions.
Story 3: Data Access and Fees
The CFPB's rule allowing customers to access their data at no charge is expected to be reversed, which could result in banks and custodians generating billions in fees from data aggregators like Plaid. This move has significant implications for DC advisors and plans, as they rely on data from record keepers to meet participants' financial needs. While some argue that data should be free, others believe it will lead to cleaner and more cost-effective management.
Story 4: The Advisor Crisis
Despite concerns about an impending advisor crisis, financial advisor recruiter Simon Hoyle suggests that the situation may be overstated. He claims that most advisors have not fully leveraged technology, especially AI, to boost productivity. The McKinsey report, based on Cerulli data, indicates that 40% of financial advisors and 50% of CFPs are 50 years or older, with 110,000 expected to retire by 2034. However, Hoyle points out that advisors tend to retire later than the average worker, which could skew the numbers.
Story 5: Pooled Employer Plans (PEPs)
Predicting the future of PEP is challenging, as it has been over five years since their introduction. With an estimated $30-40 billion in assets, PEP's mainstream adoption remains uncertain. I've written an article on WealthManagement.com/RPA exploring whether PEP is a fad, niche, or mainstream service, offering further insights into this evolving trend.
These stories highlight the dynamic nature of the industry and the importance of staying informed. As we navigate the ever-changing landscape of retirement plans and investments, it's crucial to adapt and make informed decisions. I encourage you to explore the additional resources I've mentioned and share your thoughts in the comments.
Join me next week for more insightful discussions on 401(k) Real Talk!
