Deals and People May 29, 2020

Retirement Industry People Moves

TRA adds newest regional sales consultant; Mercer selects responsible investment leaders; Newport acquires TPA business at Huntington National Bank; and more.

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Art by Subin Yang
Art by Subin Yang
Art by Subin Yang

TRA Adds Newest Regional Sales Consultant

The Retirement Advantage Inc. (TRA) has hired Pam Mayer as its latest regional sales consultant, covering a territory that includes Arizona, South California, Hawaii, New Mexico and Nevada. Mayer will report to her predecessor, Darin Erdmann, TRA’s national sales manager.

“Pam brings great energy and career experience in retirement plan solutions,” Erdmann says. “She has a great reputation for service, and we’re excited to welcome her to the TRA team.”

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Mayer’s main role at TRA will be expanding the company’s client base in the western region by designing customized retirement plan solutions that reduce taxable income for business owners, as well as increasing engagement of financial advisers, accountants and other professionals.

Mayer has worked in the financial services and retirement plan industry for over 25 years. For the past several years, she has held executive roles as a vice president with the ERISA Advisory Group. She has also held sales and service roles with VOYA and TransAmerica.

“TRA is an organization that continues to raise the bar in the retirement plan industry,” Mayer says. “I’m thrilled to join an accomplished team and company with a rich history of innovation in the industry. I am passionate about providing the highest quality products and the ultimate in service to our clients and proud to be a part of TRA’s continued bright future.”

“With her expertise in retirement plan sales strategy, adviser practice management, marketing and communications, Pam will enhance the service and support we’re able to provide to our advisers in the region,” Erdmann says. “We are delighted to have her join our team.”

Mayer is a graduate of Ursinus College, has her certified employee benefit specialist (CEBS) and cash balance consultant (CBC) designations and is a certified continuing education instructor.

Mercer Selects Responsible Investment Leaders

Mercer has appointed David Fanger and Monika Freyman as the company’s new heads of Responsible Investment for the United States and Canada, respectively. 

Fanger brings over 20 years of financial services experience to the role, which includes consulting organizations on financial strategy, investment and retirement solutions, mergers and acquisitions (M&As) and risk management. Prior to joining Mercer, he spent over 10 years with Pacific Life, including roles where he was responsible for merger and acquisition valuations, and he most recently was the CEO of sustainable fintech company Swell Investing. He previously worked at Mercer, where he was responsible for advising Fortune 500 pension plan sponsors on funding, plan design and asset-liability management strategies. He is a Chartered Financial Analyst (CFA) charterholder, a fellow of the Society of Actuaries, a member of the American Academy of Actuaries and holds a master’s degree from UCLA Anderson School of Management and a bachelor’s degree in actuarial science from Ball State University.  

He is based in Los Angeles and reports to Helga Birgden, partner and global business leader for Responsible Investment.

Freyman brings 20 years of investment and sustainability experience to the role. Prior to joining Mercer, she spent 10 years with Boston-based advocacy group Ceres. She launched the Ceres Investor Water Hub and was lead architect of the Investor Water Toolkit. Freyman also developed responsible investment projects with Harvard’s Kennedy School and Trillium Asset Management, in addition to holding previous positions in emerging market fixed income and equities. 

Freyman is on the Board of Regents of the CFA Institute’s Global Seminar and is a contributing author to the CFA’s Enterprising Investor series. She is a CFA charterholder, and holds a bachelor’s degree of commerce in finance from the University of British Columbia, a master’s degree from Loyola University Chicago and is a National Science Foundation award winner.

A part of Mercer’s Wealth business in Canada, she is based in Vancouver, British Columbia, and reports to Birgden.

Newport Acquires TPA Business at Huntington National Bank

Newport has entered into an agreement with Huntington National Bank to assume its retirement recordkeeping and administration business. Huntington will continue to serve as plan adviser for its retirement plan services clients.

Upon closing, and subject to customary conditions, the business—which currently provides recordkeeping and administration services to more than 600 plans with approximately $1.7 billion of assets under administration—will operate as part of Newport. The transaction includes Huntington’s third-party administration (TPA) business, and a team of Huntington employees, who provide these services, will join Newport.

“With Huntington, we have a partner who shares our values and our commitment to providing the best possible support to clients and their retirement plan participants,” says Newport chief executive officer Greg Tschider. “We look forward to introducing our company to Huntington’s clients and welcoming our newest employees to the Newport team.” 

Eagle Asset Management Appoints Portfolio Managers

Eagle Asset Management has promoted two executives to enhance its Small Cap Core Strategy and SMID Cap Core Strategy investment teams. 

Jeffrey Reda, CFA, has been appointed portfolio manager on the Small Cap Core Strategy, effective May 1. Having joined Eagle in 2010, Reda has more than 18 years of investment experience and was previously a senior research analyst on the Core Team, covering industrials and energy. 

Doug Fisher has been promoted to portfolio manager on the Small/Mid Cap Core Strategy, also effective May 1. Fisher has 27 years of investment experience and joined the firm in 2015. He has served as portfolio manager of the Micro Cap Core Strategy and as a senior research analyst for the Core Team, covering the health care sector. 

Both Fisher and Reda report to managing director and portfolio manager Todd McCallister, CFA. He and portfolio manager Scott Renner continue their current roles on both teams.

“Jeff and Doug each have made significant contributions to the Core Team, and their promotions to portfolio manager follow Eagle’s tradition of rewarding excellence,” says Edward Rick, head of Investments of Eagle Asset Management and executive vice president of Carillon Tower Advisers. “The wealth of investment experience that both bring helps us continue successfully identifying smaller companies with potential for our clients, as well as strengthen our already robust portfolio management team.”

OneAmerica Hires Relationship Senior Director

OneAmerica has hired industry veteran Hank Zoller as relationship senior director.

Zoller reports to Alan Blaskowski, Retirement Services relationship management leader, in developing a program and strategy to accommodate more business in that segment.

“Hank’s proven track record in working with retirement plan advisers and their clients of this size strengthens our large market approach, and his skills complement our commitment to high-touch service for large, complex relationships,” Blaskowski says. “We’re combining what we do well—relationships—with what Hank does well, using his skills and significant experience in client and retirement plan adviser engagement to win new business.”

Prior to joining OneAmerica, Zoller worked with retirement plan clients during nearly nine years with Schwab Retirement Plan Services, where he most recently served as vice president of advice, education services and communications consulting. He previously worked 14 years for Bank of America Merrill Lynch, overseeing consultant relations.

Zoller intends to replicate his formula for implementing a client relationship management group and platform. “It’s a thrill to be joining OneAmerica and build on the qualities that are catalysts in their momentum in working with large market consultants and retirement plan sponsors,” he says. “OneAmerica has excellent leadership, the right priorities, an award-winning client focus and a reputation for delivering outstanding participant and sponsor outcomes.”

ASI Appoints Former Wealth Management Head to North American Distribution Lead

Aberdeen Standard Investments (ASI) has promoted Mickey Janvier to head of North American Distribution.

Janvier will manage all facets of distribution in North America and Canada and lead the North America Distribution team, reporting to global sales director Alex Hoctor-Duncan, with a second line of accountability to Chris Demetriou, CEO of the Americas. 

Janvier was previously head of wealth management business development for the Americas region. He is based in the Philadelphia office and has been with the company since 2011, joining from Brandywine Global, where he was a senior vice president for 12 years. Mickey received his undergraduate and master’s degrees from Drexel University’s LeBow College of Business.

 “Mickey has been at the forefront of our efforts to accelerate our ambition with key strategic intermediary distribution partners in recent years,” Demetriou says. “He has built a highly functioning team to cultivate strong client relationships and has demonstrated expertise across both the wealth management and institutional landscape.  We have ambitious growth plans for the region and it’s fantastic to have someone with Mickey’s knowledge of our business and the broad commercial marketplace in this position to help drive our strategy forward.”

Compliance May 29, 2020

Plan Sponsor, Provider Sued for Adding Untested CITs to 401(k)

The 92-page complaint includes a number of other allegations, including that the plan sponsor was motivated by its relationship with the provider for its defined benefit plans.

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Participants in the Schneider Electric 401(k) Plan have sued plan fiduciaries and Aon Hewitt Investment Consulting for breach of fiduciary duties and prohibited transactions under the Employee Retirement Income Security Act (ERISA).

In an email, Aon Hewitt said, “As a matter of company policy, we don’t comment on litigation matters.” Schneider Electric has not yet responded to a request for comment.

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According to the complaint, instead of acting in the exclusive best interest of participants, the defendants selected and retained proprietary Aon Hewitt collective investment trusts (CITs) that only benefited Aon Hewitt, including by investing more than $3 billion of participants’ retirement savings in the newly created and untested Aon Hewitt Index Retirement Solution target-date funds (TDFs). The complaint also said that instead of using the plan’s bargaining power, the defendants caused unreasonable expenses to be charged to the plan and participants for recordkeeping, investment management and managed account services.

The court document said that in January 2016, Schneider Electric and the plan’s investment committee contracted with Aon Hewitt to be the discretionary investment manager for the plan. In February 2017, Aon Hewitt completely restructured the investment lineup for the plan and three other Schneider Electric benefit plans: the Schneider Electric USA Inc. Coordinated Bargaining Employees’ Retirement Savings Plan, the Industrial Repair Services 401(k) Plan, and the Schneider Electric Supplemental Defined Contribution Plan.

Besides using Aon Hewitt’s proprietary funds in the new lineup, the plaintiffs claim that the plan’s Aon Hewitt funds were new investment options with no performance history. They were created by Aon Hewitt in “partnership with Schneider Electric.”

The complaint explains that as a non-depository bank, Aon Trust Company LLC maintains the Aon Hewitt collective investment trusts and is the trustee of the funds. Both Aon Trust Company and Aon Hewitt are wholly owned subsidiaries of Aon Consulting Inc. Aon Trust Company hired Aon Hewitt as the investment adviser to perform investment advisory and investment management services with respect to each fund. Both Aon Trust Company and Aon Hewitt charge a fee for their respective trustee and investment advisory services.

The plaintiffs allege that, as the investment adviser of these collective investment trusts, Aon Hewitt had a direct conflict of interest between acting in the exclusive best interest of plan participants as the plan’s discretionary investment manager while also seeking to grow its collective investment trust business and maximize its revenue through investment advisory fees. The complaint says the investment of plan assets in Aon Hewitt’s proprietary funds resulted in Aon Hewitt earning more than $600,000 annually in additional revenue.

The defendants are also accused of using plan participants’ retirement assets to seed the untested Aon Hewitt Index Retirement Solution target-date funds at the expense of plan participants. The plaintiffs say there was no loyal or prudent reason to replace the Vanguard target-date funds previously used in the plan. They also contend that without a performance history to consider in evaluating the merit of the Aon Hewitt index target-date funds, the defendants could not make a reasoned determination that these funds were prudent or in the best interest of plan participants compared to Vanguard’s target-date funds. “Selecting investment options for plan participants that have no performance history is imprudent,” the complaint states. It also says adding the funds violated the plan’s investment policy statement (IPS).

The defendants are accused of making sure the new target-date funds were seeded with participant assets by mapping those in a removed fund that did not make a new investment election to one of the target-date funds and by making the funds the plan’s qualified default investment alternative (QDIA). “It is well known in the investment industry that when plan fiduciaries eliminate a fund and transfer (or map) the assets to another fund, few 401(k) participants undo that movement because participants rarely make trades in their plan account,” the complaint states.

The plaintiffs attempt to prove their point by noting that as of December 31, 2016, only $975.2 million was invested in the plan’s existing Vanguard target-date funds, but by December 31, 2017, more than $3 billion of the plan’s $3.9 billion in assets (or 77%) was invested in Aon Hewitt’s target-date funds.

The complaint also says at the time of selection, the Aon Hewitt index target-date funds charged up to 33% more than the Vanguard Retirement Trust target-date funds. Based on the amount invested in the Aon Hewitt index target-date funds as of December 31, 2017, participants paid almost $500,000 each year in additional expenses, according to the lawsuit. The plaintiffs add that the Aon Hewitt target-date funds are even more expensive now.

It is also alleged that from their inception, the plan’s Aon Hewitt Index Retirement Solution Funds have significantly underperformed and continue to underperform the Vanguard Target Retirement Trust Plus funds that were removed from the plan. And defendants are also accused of causing the plan to invest in proprietary actively managed Aon Hewitt funds with insufficient performance track records.

According to the complaint, the Schneider Electric defendants exercised their discretionary authority over the plan’s investments in October 2017 by adding to the plan five Vanguard index mutual funds that Aon Hewitt previously removed from the plan. However, the Schneider Electric defendants selected the higher-cost institutional shares rather than the lower-cost Institutional Plus shares that were available and were previously provided to participants with respect to four of the funds.

In addition, the Schneider Electric defendants assessed a separate asset-based “recordkeeping expense” (1 basis point) on the Vanguard index mutual funds, which was paid to Aon Hewitt purportedly for overseeing and monitoring the Vanguard index funds. Participants were not charged a separate asset-based expense when the Schneider Electric defendants provided the lower-cost shares of the index funds prior to 2017.

The plaintiffs also allege a quid-pro-quo relationship between Schneider Electric and Aon Hewitt. They say “it is evident that the Schneider Electric defendants allowed Aon Hewitt to add its proprietary funds to the plan for Aon Hewitt’s interest and not for the exclusive interest of plan participants, and, in return, Aon Hewitt reduced the cost to Schneider Electric of the corporate benefits plans for which Schneider Electric was liable. Following the 401(k) plan’s 2017 fund changes, Aon Hewitt-affiliated entities substantially reduced the expenses charged on Schneider Electric’s corporate pension plans. According to the Forms 5500 for the Coordinated Bargaining Pension Plan, Aon Consulting reduced its compensation for the corporate plan by 31% in 2017, and 70% in 2018, compared to the expenses paid in 2016. For the Schneider Electric Pension Plan—paid for by the company, Aon Consulting reduced its expenses by 38% in 2017, and 79% in 2018, compared to the expenses paid in 2016. The additional revenue that Aon Hewitt collected from the plan’s investment in the Aon Hewitt collective investment trusts more than offset the reduction in expenses charged to the Schneider Electric pension plans. Thus, plan participants subsidized Schneider Electric’s corporate expenses,” the complaint states.

In addition to equitable relief, the plaintiffs are asking the court to order the defendants to:

  • reform the plan to include only prudent investments;
  • reform the plan to obtain bids for recordkeeping and to pay only reasonable recordkeeping expenses; and
  • reform the plan to obtain bids for managed account services and to pay only reasonable managed account service fees if the fiduciaries determine that a managed account services is a prudent alternative to target-date or other asset allocation funds.

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