Investing March 3, 2017

Auto Enrollment Fueling TDF Dominance

A new study by Vanguard offers insight into TDF adoption trends
Reported by

The target-date fund (TDF) continues to be a dominating force in the defied contribution (DC) space. Adoption is being fueled in large part by automatic enrollment and its role as a default investment, according to a new report by Vanguard.

The firm finds that participation in the TDFs it manages has nearly doubled in the last five years with 46% of participants investing in a single TDF. Vanguard projects that by 2021, 75% of participants will be invested in a professionally managed account. The TDF is now a common fund in DC plans with 92% of plans offering it in 2016, compared with just 58% of plans in 2007.

Get more!  Sign up for PLANSPONSOR newsletters.

Adoption of automatic enrollment by Vanguard plan sponsors has more than tripled since 2007. By year-end 2016, 45% of Vanguard plans had adopted automatic enrollment, and six in 10 of all Vanguard participants were in plans with automatic enrollment. Among plans with more than 1,000 participants, two-thirds had adopted automatic enrollment by 2016.

The TDF’s role as a qualified default investment alternative (QDIA) has also driven adoption, and Vanguard notes it offers “additional fiduciary protection.” According to the paper, 81% of new entrants invested in TDFs in 2016, as opposed to 30% in 2017.

Vanguard says, “Together, these two trends are a positive shift for plan participants, many of whom lack the time, willingness and investment expertise to build and manage their own retirement portfolio. By design, TDFs provide participants with sophisticated, built-in advice and a disciplined approach to risk-taking, helping to remedy the problem of extreme allocations and asset erosion over time.”

The Vanguard study also offers some insight into TDF investor behavior and participant demographics. Sixty-five percent of these participants are “pure investors,” meaning they invest in a single TDF. The firm found these people to be “more likely to be younger, lower-wage, shorter tenured participants with lower 401(k) account balances than other investors. Sixty-three percent of single-TDF investors were younger than 45.”  

The rest of participants are “mixed investors” who contribute to a TDF and other investments, or rarely a mix of different TDFs—suggesting participants may be steering away from TDF misuse.  Vanguard also found that the mixed investors are “very much like non-target-date investors in terms of their demographic and portfolio characteristics.”

The firm points out several TDF benefits for participants including TDF glide paths, which tend to decrease risk as a participant ages, and steer away from extreme equity exposure – something Vanguard says is common among do-it-yourself investors. Among pure target-date investors, the vast majority have equity allocations ranging from 51% to 90% of their portfolios.

The full paper can be found at institutional.vanguard.com

Deals and People March 3, 2017

Retirement Industry People Moves

Milliman hires Employee Benefits senior consultant; USI Insurance acquires Carolina First Associates; Westminster Consulting hires senior consultant; and more.
Reported by

GW&K Appoints New Partners

GW&K Investment Management (GW&K), an investment management firm offering active equity and fixed income investment solutions, has named Robert L. Gray, James M. McCarthy, and Brian T. Moreland as partners of GW&K. 

Get more!  Sign up for PLANSPONSOR newsletters.

“We are very pleased to have Bob, Jim and Brian as partners of the firm,” says Harold G. Kotler, chief executive officer and chief investment officer. “In an investment environment that continues to change and present new challenges, we are happy to have professionals of their caliber help us provide a broad spectrum of top-tier investment solutions and resources for our clients. We look forward to their continued success.” 

Since joining the firm in 2001, Gray has developed many of GW&K’s strategic distribution relationships and serves as head of national accounts. He earned his bachelor’s degree from Denison University.

McCarthy, who joined the firm in 2003, is director of GW&K’s client service group and has managed key relationships in the firm’s Private Client business. He earned a bachelor’s degree from Marist College, and a master’s degree in finance from Boston College. He has also earned the CFA designation, and is active in several industry organizations including the CFA Institute and the CFA Society Boston.

Moreland joined the firm in 1998 and he serves as a portfolio manager for the municipal bond team and as a member of GW&K’s Investment Committee. He graduated from Boston College with a bachelor’s degree in finance and earned the CFA designation. He participates in many industry organizations including the Boston Municipal Analysts Forum, the National Federation of Municipal Analysts and the CFA Institute.

NEXT: Milliman Hires Employee Benefits Senior Consultant

Milliman Hires Employee Benefits Senior Consultant

Jeffrey Nipp has joined global consulting and actuarial firm Milliman as a senior consultant in its Employee Benefits unit. He will be tasked with evaluating, researching, constructing, and monitoring multi-asset class portfolios, with an emphasis on public pension plans. Nipp has more than 30 years of experience having worked for Invesco, BlackRock, Watson Wyatt and Towers Perrin.

"Jeff is a valuable addition to the Employee Benefits practice at Milliman with a varied range of experience that will be an asset to the firm,” says Rich Wright, principal at Milliman. “He has a proven track record of successfully meeting clients' needs and is widely respected in the industry. We're excited to have him join our team."

Nipp says, "I'm thrilled to join an organization that places such a high value on independence and excellence. This role will allow me to focus on producing the best results for clients, and to do so at a firm which has a reputation for thoughtful analytical work that is second to none in the industry."

NEXT: USI Insurance Acquires Carolina First Associates

USI Insurance Acquires Carolina First Associates

USI Insurance Services (USI) has acquired Carolina First Associates, an employee benefits insurance adviser. Carolina First Associates and its employees will remain at their current location in Hickory, North Carolina. Terms of the transaction were not disclosed.

"Since 1980, Carolina First Associates has built its reputation on helping businesses navigate the intricacies of evaluating and purchasing employee benefit plans, wellness programs and employee education and communication strategies,” says James W. Dunn, USI Southeast regional chief executive officer. “Their consultative approach to cultivating long-term relationships aligns perfectly with the USI ONE Advantage and we are thrilled to welcome Sam and his team to USI. We look forward to continuing to invest in the Carolinas and to bringing our game changing approach for delivering solutions to clients, associates and local communities."

Samuel E. Rhodes, principal and owner, Carolina First Associates, adds: "Our depth of experience in the ever-changing era of health care reform has helped us to understand and overcome the high costs and limited options faced by most businesses. With this acquisition, our clients will continue to enjoy this high touch, specialized customer care, but now they can tap into USI's expanded suite of employee benefits, retirement consulting and personal risk solutions. We are excited to be joining a nationally recognized company and to playing an important role in growing USI's footprint in this strategic growth marketplace."

NEXT: Westminster Consulting Hires Senior Consultant

Westminster Consulting Hires Senior Consultant
 
Matt Barber has joined Westminster Consulting as a senior consultant. He will lead the firm’s new business unit Westminster Workplace Solutions, which is dedicated to providing advice and guidance services to retirement plan participants.

Before joining Westminister, he served as wealth adviser and founder of Barber Financial for more than 10 years. He earned his bachelor’s degree from SUNY Fredonia, where he majored in business. Barber has received the industry designation of Accredited Investment Fiduciary (AIF).

Westminster Consulting provides fiduciary advice, counsel, and investment analysis to boards of directors, trustees, investment committees, and more.

«