Data and Research July 13, 2016

Financial Education Improves Retirement Savings

Ninety percent of Millennials and Gen Xers said they would be comfortable talking with their employer about retirement planning.
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Employees with access to financial and retirement education have less stress, more savings and more confidence than those without access, a Ramsey Solutions survey found.

Forty percent of workers, however, are not offered financial education. Seventy percent of those who have no retirement savings are not offered financial education.

The most common sources that Americans rely on for retirement education are their employers and their parents, each cited by 35% of respondents. This is followed by family and friends (32%). Workers who cited their employers as their first or second source have more money saved than those who rely on family or friends. In addition, people who are offered financial education at work say they feel positive emotions like excitement (49%) and optimism (40%), while those who do not have financial education say they feel anxious (47%) and afraid (40%).

Forty-seven percent of those who have saved between $250,000 and $999,999 say their employers are a source of financial education. Ninety percent of Millennials and Gen Xers said they would be comfortable talking with their employer about retirement planning. Half of Baby Boomers say their employers do not offer retirement education, compared to 39% of Gen Xers and 33% of Millennials. Among lower-income workers, 64% are not offered retirement education, compared to 43% of middle-income workers and 29% of highly compensated workers.

“Educating employees on how to take control of their money and increase their retirement savings not only puts employees in a better financial position, but it also helps them reduce money-related stress so they can be more effective at work,” says Chris Hogan, a spokesperson for Ramsey Solutions.

The findings are based on a survey of 1,016 people. The full survey can be viewed here.

Investing July 13, 2016

Asset Managers Committed to Securities Lending Business

Institutional investors, such as pension plans, widely use securities lending, but a survey also found interest from DC plan sponsors.
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A combination of the acceptance of securities lending by institutional investors, reduced risk and greater regulatory attention is keeping asset managers in the securities lending market, according to a survey by Finadium.

Among the 30 North American and European asset managers surveyed, 89% are lending, up from 84% last year. Further, none of the firms with securities lending programs had ended them, and several non-lending managers were considering restarting. Looking out over the next two years, 96% of firms were certain they would be lending.

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The percentage of asset managers lending only for revenue generation grew from 80% last year to 86% this year, while interest in liquidity generation declined proportionately. Some managers noted they could turn quickly to securities loans for liquidity if needed, but didn’t see demand at this time.

Since the logical objective is to produce high returns for the institutional investor with low collateral exposure risk brought on by a securities loan, asset managers told Finadium that, intuitively, most loans should be specials. However, the survey found 68% of firms willing to lend both general collateral and specials, while 27% of programs were specials only. A threshold spread of 25 bps was seen as ensuring a true specials only program, although firms had also placed minimums of 50 bps and 100 bps before a loan could go out.

Securities lending remains an ancillary business; it is not the alpha generation of primary investing but rather a secondary means of generating revenues, Finadium notes. Still, lending revenues are valued: 38% of respondents said that lending revenues were important in 2016, up from 33% the prior year.

On the client side, asset managers report that there is a direct correlation between the size of the client and their interest in securities lending revenues. This is often because large clients understand the potential value of their assets and are also lending through their own portfolios and with other asset managers. A new trend in the U.S. is increased interest in securities lending by defined contribution (DC) retirement plans, the survey found. Finadium says this is a long-expected transition by DC plans, which often require additional education to help human resource and other administrative plan managers understand the nature of the transaction.

U.S. asset managers expect the onset of money market reform this fall to create further changes to cash collateral reinvestment practices. Some fund managers will wind up selecting an ultraconservative bond fund for cash reinvestments because they have not found a legal way to do anything else.

Forty-seven percent of managers think that transparency rules in securities lending is positive for the markets.

For information about how to subscribe to Finadium research, go to http://finadium.com/subscription-options/.

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