Alight CEO to Step Down; Firm Searches for Successor

The large recordkeeping firm announced that Stephan Scholl will continue as CEO and director until his replacement is confirmed. 

Alight Inc. announced in its second quarter earnings report on Tuesday that Stephan Scholl will step down as CEO and member of the board, effective after the board names a successor.  

Scholl will continue as CEO and director during the search process. The board of directors has also appointed Dave Guilmette, an independent director, as vice chair of the board. Guilmette will work closely with Scholl to “ensure a smooth transition.” 

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According to Alight, one of the biggest retirement plan recordkeepers, the recent sale of its payroll and professional services segment—a $1.2 billion deal—falls in line with the CEO change.  

The firm’s recent Form 8-K filing with the Securities and Exchange Commission stated, “Scholl’s departure is not related to a disagreement with the company on any matter relating to its operations, policies or practices.” 

According to Heather Balsky, a research analyst at Bank of America who also covers Alight, the board has been searching for a new CEO for the last few months.  

“It’s looking for a new CEO with benefits industry experience and [who]’s comfortable with technology,” Balsky wrote in a report this month. “We view this transition positively as we think [Alight’s] strategy and execution could benefit from a CEO that has direct industry experience.” 

Balsky also wrote in her analysis that BofA is “a bit disappointed” after another quarter of Alight’s sales guidance falling short of the bank’s expectations.  

“In our view, [Alight] needs to hit its revised plan for the stock to work,” Balsky wrote. “We think the new CEO (to be determined) has an opportunity to refine the company’s approach to forecasting.” 

On a positive note, Balsky found that Alight’s recurring revenues are poised for improved sequential growth as it continues to build its pipeline.  

Activist hedge fund investor Starboard Value LP has also recently pressured Alight to make leadership changes, as it nominated four directors to join Alight’s board in February, later withdrawing those nominations in a “cooperation agreement” with Alight. The firm then announced on May 6 two new independent directors to join the board. As of May, Starboard held 7.2% of Alight’s outstanding common stock. 

According to the second quarter earnings report, Alight’s revenue decreased 4.1% to $538 million in the second quarter of 2024, down from $561 million in the prior-year period. The decrease was driven by lower volumes, net commercial activity and project revenue within Alight’s Employer Solutions segment and the wind-down of its Hosted Business segment operations.  

Gross profit in Q2 was $167 million, or 31% of revenue, compared to $187 million, 33.3% of revenue, in the prior-year period. According to the report, the decrease in gross profit was primarily driven by lower revenue, partially offset by productivity savings.  

Looking ahead to the second half of 2024, Alight expects revenue of $1.207 billion to $1.232 billion. 

Chair of the Board William P. Foley II thanked Scholl in a statement and recognized his work during the COVID-19 pandemic and overseeing the development of the Alight Worklife platform for employee well-being and benefits.  

“With the divestiture behind us, we are well positioned to deliver differentiated benefit services to our clients and profitable growth with significant margin and cash flow expansion for our shareholders,” Foley stated. “Stephan’s continued efforts and support through this transitionary period will help our next CEO hit the ground running with a substantially improved financial and operating model.” 

Alight is the third-largest defined contribution recordkeeper by both assets and participants, following Fidelity and Empower in both categories, according to PLANSPONSOR’s 2024 Recordkeeping Survey. 

Market Sell-Off Sent 401(k) Trading to Highest Since Pandemic

Monday’s market rout caught enough attention to send a relatively high number of 401(k) investors to safer assets, according to Alight tracking.

Market declines come and go. But Monday’s sharp sell-off appeared to spook even everyday 401(k) savers more than usual, with trading activity hitting its highest mark since the pandemic spooked markets back in March 2020.

Trading activity in 401(k) plans held by recordkeeper Alight surged to 8.3 times the average daily volume, according to Rob Austin, head of thought leadership for Alight Solutions. Net trading on August 5 made up 0.08% of balances; for comparison, the net trading for all of July was 0.09%, according to Alight.

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Austin, who tracks trading through Alight’s 401(k) Index, notes that people are most likely to trade in their retirement plans when market indices fall by 2% or more in a day; on Monday, the three major U.S. indices each fell by more than 2.5%.

The 401(k) traders “overwhelmingly sought safety” in their choices, according to Austin, with stable value funds, bonds and money markets accounting for most inflows.

Meanwhile, outflows were primarily from large-cap U.S. equity funds, along with target-date funds, though to a lesser extent.

By Tuesday, the markets had begun to settle, regaining some ground. But Austin notes that many 401(k) traders may hold those safer assets, at least for a while.

“Trading activity often settles, but much depends on how the market responds,” he says. “Historically, people are much more likely to quickly react when stocks fall, and they often don’t buy back into equities until well after they have rebounded.”

He also noted, as did many retirement saving experts that PLANSPONSOR spoke to on Monday, that plan sponsors will likely be communicating a message of calm to participants, without overstepping their role.

“Many plan sponsors will provide communications on the importance of staying the course and not reacting to daily swings in the market, but they also don’t want to accidentally become a fiduciary by providing specific advice,” he said.

There’s no question trading by investors outside of 401(k)s was running rampant on Monday, in part due to a soft employment market report that came out Friday morning, August 2. Retail brokerages Charles Schwab and Fidelity Investments both reported issues on their trading platforms, with website Downdetector, which tracks online service outages, noting a high volume of problem reports from customers.

Alight is the third largest defined contribution recordkeeper by both assets and participants, following Fidelity and Empower in both categories, according to the Recordkeeping Survey by PLANSPONSOR.

 

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