Hey there, folks! I'm back with another episode of 401(k) Real Talk, and today we're diving into some fascinating industry news and trends. So, let's get started!
First up, we're talking about the surge in OCIO assets from defined contribution (DC) plans. Now, this is a big deal because it shows a significant shift in how plan sponsors are managing their investments. According to P&I, OCIO assets have skyrocketed by a whopping 400% to $580 billion over the last eight years! That's a massive increase, and it's not just limited to large plans; even smaller ones are getting in on the action.
Personally, I think this trend is a result of plan sponsors wanting to offload fiduciary risk and simplify their investment strategies. With the growing complexity of alternative investments, it makes sense for them to seek expert guidance. And let's not forget about the resource constraints many sponsors face; outsourcing can be a great solution.
Moving on, we have some exciting news from Empower. They've hit a massive milestone, topping $2.1 trillion in assets in Q2, which is a 10% increase from the previous quarter! Their earnings are also through the roof, surging by 6.3% and a whopping 36% year over year. That's incredible growth!
What makes this really interesting is Empower's focus on converging wealth, retirement, and benefits at the workplace. By acquiring Personal Capital and Milliman's DB and benefits administration, they're creating a comprehensive platform for participants. It's a smart move, as it allows them to offer a holistic financial solution, which is exactly what participants need.
Now, here's a story that might spark some debate. It seems like the CFPB's rule allowing customers to access their data for free might be reversed. This could mean big bucks for banks and custodians, who could charge fees for data aggregation services. While some argue that this will result in cleaner and more manageable data, others believe it's a step backward.
From my perspective, this move could have huge implications for DC advisors and plans. If data access becomes a paid service, it might impact the way advisors serve their participants' holistic financial needs. It's a delicate balance, and we'll have to wait and see how this plays out.
Next, we have an interesting take on the advisor crisis. Simon Hoyle, a financial advisor recruiter, suggests that the situation might not be as dire as some predict. He believes that many advisors haven't fully embraced technology, especially AI, which could boost their productivity significantly.
I find it fascinating how Hoyle points out that advisors tend to retire later than the average worker, which might skew the numbers. It's a valid point, and it raises the question: are we overestimating the impact of the advisor crisis?
Regardless, attracting younger talent to the industry remains a challenge. Most advisors come from wirehouses and insurance companies, and the commission-only sales model might not be appealing to the younger generation. However, there could be an opportunity to train these younger workers as financial coaches for DC participants, which could evolve into an advisor role as the wealth and retirement convergence gains momentum.
Finally, we're discussing the future of Pooled Employer Plans (PEPs). Predicting which products and services will become mainstream in DC plans is a tricky business, and PEPs are no exception. With an estimated $30-$40 billion in assets, they're certainly gaining traction.
In my opinion, PEPs could be a game-changer for smaller plans, as they offer a cost-effective way to access a broader range of investment options. It'll be interesting to see if they become a mainstream service or remain a niche offering.
So, there you have it! Those were the most important stories from the past week. I hope you found this breakdown insightful and engaging. Remember, in the world of 401(k)s and retirement planning, staying informed is key.
Until next time, keep learning and stay curious!
Fred Barstein, signing off.
