Investing January 8, 2019

401(k) Participants Made Opposing Trades in 2018

High trading activity days were concentrated around the beginning and end of the year—with trades moving in similar volumes in opposite directions.

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The Alight Solutions 401(k) Index shows the fourth quarter of 2018 brought 17 days with above-normal trading volumes within 401(k) plans; according to the firm, these days mostly concentrated around days when the stock market lost ground.

The firm notes that, since the inception of this index in 1997, there have been only seven quarters with more than 17 days of above-normal trading activity. Participants in Q4 2018 completed net transfers amounting to 0.55% of starting balances, which is the highest percentage since the third quarter of 2016. During the quarter, more than two-thirds of trading days showed net trading movement from equities to fixed income—representing ill-timed flights to safety amid stock market price dips.

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Indeed, according to the index, stable value funds received 70% of the quarterly inflows, while money market funds received 21% and bond funds received 7%. On the flip side, asset classes with the most trading outflows included target-date funds (54%), large U.S. equity funds and (16%) and mid-sized U.S. equity funds (13%).

Full Index Results for 2018

Alight Solutions has also published a full year-end update of the 401(k) Index, calling 2018 “an interesting year for trading activity among retirement plan investors.”

“On the one hand, participants were very active during the year, with 46 days of above-normal daily transfer activity—the highest number of above-normal days in the last five years,” the firm says. “This is much higher than the 13 days of above-normal trading in 2017. On the other hand, net trades in 2018 amounted to only 1.42% of total plan balances, making 2018 a record low year for trading activity in the over 20-year history of the index.”

According to Alight Solutions, the discrepancy can be attributed to the fact that many of the high trading activity days were concentrated around the beginning and end of the year—with trades more or less moving in similar volumes in opposite directions.

“Investors started the year in January with a rush to equities,” the firm says. “The first seven trading days of the year and 18 of the first 28 trading days were elevated with nearly universal movement from fixed-income investments to equity funds. However, investors reversed this trend in December when Wall Street plummeted.”

After reflecting contributions, trades and market activity, 401(k) investors ended 2018 with 66.6% in equities, down from 68.8% at the beginning of the year.

Products January 8, 2019

Risk International Offers to Share Fiduciary Responsibility for Health and Welfare Benefits

"Our services have always met a fiduciary standard in principle and have enabled us to drive significant year-over-year savings for our clients, with an average savings of $1,650 per employee in 2018," says Eric Krieg, president of Risk International’s Employee Benefits Advisory division.

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Risk International’s Employee Benefits Advisory division (RIBA) will provide what it says is the first-of-its-kind fiduciary advisory service, an evolution of the division’s conflict-free advisory services that have driven millions of dollars in benefits and health care cost savings for clients over the past five years.

Through its fiduciary role, RIBA provides expert guidance that is in complete alignment with its clients’ best interests. Although fiduciary advisers can be found in the retirement plan arena, Risk International says this is the first time a fiduciary service is being made available to optimize and protect employee benefits plans.

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According to the company, a critical element of an employer’s fiduciary responsibility is its ability to avoid conflicts of interest and demonstrate diligence that plan costs (with ever-increasing employee cost sharing) are being well managed. In today’s benefits and health care economy, this responsibility is increasingly difficult for employers to meet because procuring and managing health and welfare benefits doesn’t follow standard supply chain practices. Without a fiduciary adviser, employers are unable to access impartial expert guidance and representation.

“Our services have always met a fiduciary standard in principle and have enabled us to drive significant year-over-year savings for our clients, with an average savings of $1,650 per employee in 2018,” says Eric Krieg, president of RIBA. “By taking on a formal co-fiduciary role, we now provide the highest duty of care by law in our client advising and advocacy, setting a standard that is unreachable by industry stakeholders with inherent conflicts of interest. As the industry exposes employers to more and more fiduciary risk, we empower our clients to fully exercise their rights. This changes the game in favor of our clients’ and their employees’ interests, compelling the deepest disclosure and accountability from all service providers. It puts our clients in the driver’s seat, gets them to a better place faster, and gives them the control to stay there. Quite simply, we see an emerging risk management issue, and we won’t let our clients be exposed or compromised.”

According to Krieg, RIBA is able to achieve better results than the traditional benefits scheme thanks to this co-fiduciary representation combined with its BEST Platform (Benefits Excellence System and Tools), which is a performance management process that departs from dependence on the broker/carrier product-driven cycle.

For more information about how RIBA’s services help employers cut costs and reduce risk without cost-shifting to employees or reducing benefits, contact RIBA@riskinternational.com or call (216) 255-3400.

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