Products June 20, 2019

Investment Product and Service Launches

Morgan Stanley builds low-minimum impact portfolio suite; American Century Investments decreases ETF management fee; Sun Life Financial consolidates asset management businesses; and more.

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Art by Jackson Epstein
Art by Jackson Epstein

Art by Jackson Epstein

Morgan Stanley Builds Low-Minimum Impact Portfolio Suite

Morgan Stanley Wealth Management announced the launch of a new suite of Impact Portfolios with a $10,000 minimum on its Investing with Impact platform. These portfolios aim to provide investors with an accessible solution to help integrate impact objectives into an investment plan without sacrificing performance potential. The six Portfolios utilize a range of Investing with Impact objectives including restriction screening, environmental, social and governance integration, and thematic investing.

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The Impact Portfolios leverage Wealth Management Investment Resources’ intellectual capital including asset allocation advice, portfolio construction resources, manager analysis, risk management and ongoing portfolio monitoring to provide clients with a diversified multi-asset class portfolio. The portfolios comprise mutual funds and exchange-traded funds (ETFs).

“At Morgan Stanley we are committed to integrating environmental, social and governance (ESG) factors across our core businesses, and we use our platform as a global financial services provider to mobilize and scale capital in ways that deliver sustainable growth and long-term value,” says Lisa Shalett, chief investment officer for Morgan Stanley Wealth Management. “We’ve seen impact investing can deliver competitive market returns when investors choose to integrate positive environmental and social impact over the long term, and this new suite addresses heightened investor demand to align values with their portfolios.”

Through the companies that the Impact Portfolios invest in Morgan Stanley is trying to contribute to the development of solutions to the world’s most pressing environmental and social problems, such as those outlined by the United Nations Sustainable Development Goals (SDGs). In addition to SDG 14, the Impact Portfolios include alignment with several of the 17 SDGs including 6 (Clean Water and Sanitation), 7 (Affordable and Clean Energy), 8 (Decent Worth and Economic Growth), 10 (Reduced Inequalities) and 13 (Climate Action).

The Impact Portfolios are part of Morgan Stanley Wealth Management’s firm-discretionary program, which is led by Paul Ricciardelli, head of Wealth Advisory Solutions. The Impact Portfolios complement other higher minimum Investing with Impact firm-discretionary portfolios launched in 2015.

American Century Investments Decreases ETF Management Fee

American Century Investments has reduced its American Century Diversified Corporate Bond Exchange Traded Fund’s (KORP) management fee from 0.45% to 0.29%. The fee reduction for KORP was effective June 14.

“With KORP now exceeding $60 million and attracting steady flows, we decided to reduce the fees in order to provide better value to investors,” says Edward Rosenberg, senior vice president and head of ETFs for American Century Investments. “Our goal has always been to provide a lineup of ETFs that apply our unique insights to solve common investment problems.”

KORP is an actively managed corporate bond fund designed for investors seeking current income. The fund emphasizes investment-grade debt while dynamically allocating a portion of the portfolio to high yield in a single, systematically managed portfolio. By integrating fundamental and quantitative expertise, the portfolio management team strives for enhanced return potential versus traditional capitalization-weighted passive portfolios.

The fund is co-managed by Charles Tan, Jeffrey Houston, Le Tran and Gavin Fleischman. Senior Vice President and Global Fixed Income co-chief investment officer Tan joined American Century in 2018. Vice President and Senior Portfolio Manager Houston has been with the company since 1990. Vice Presidents and Portfolio Managers Tran and Fleischman joined the firm’s fixed income team in 2004 and 2008, respectively.

American Century offers a suite of ETFs that include American Century Quality Diversified International ETF (QINT), American Century STOXX U.S. Quality Growth ETF (QGRO), American Century STOXX® U.S. Quality Value ETF (VALQ) and American Century Diversified Municipal Bond ETF (TAXF). STOXX is a registered trademark of STOXX Ltd. All of the firm’s ETFs feature institutional-quality management that draws on the American Century’s fundamental and quantitative expertise.

Sun Life Financial Consolidates Asset Management Businesses

Sun Life Financial Inc. announced the establishment of SLC Management. SLC Management combines the organization’s affiliated fixed income institutional asset management businesses—Prime Advisors, Ryan Labs Asset Management and Sun Life Institutional Investments (U.S. and Canada)—as well as Sun Life’s general account, into a new autonomous asset management business. SLC Management also replaces the Sun Life Investment Management brand globally, effective immediately.  

“The launch of SLC Management builds on the organic growth that we’ve achieved since the establishment of our business and on the acquisitions of Ryan Labs, Prime Advisors and Bentall Kennedy,” says Steve Peacher, president, SLC Management. “This next step underlines our commitment to putting our clients at the heart of everything that we do. It enhances the strength, breadth, and seamless functioning of our investment strategies so that we can further achieve the investment objectives of our institutional clients.”

SLC Management will have two related, but distinct pillars—a fixed income pillar and a real estate pillar. The fixed income pillar will operate under the SLC Management brand name and will include the affiliates currently known as Prime Advisors, Ryan Labs Asset Management and Sun Life Institutional Investments (in both the U.S. and Canada). The real estate pillar will be comprised of the merged operations of SLC Management’s Bentall Kennedy business with GreenOak Real Estate (to be named “BentallGreenOak” upon close). 

Each of the portfolio management teams within SLC Management will retain investment autonomy while having access to a global credit analyst team of 40 experienced colleagues. This structure allows the teams to focus on driving investment performance for SLC Management’s clients, a structure the firm believes creates additional value for clients.

Adds Peacher, “Every change to our business is one that we feel will enhance our capabilities for our clients, who we share a common purpose with, which is to manage assets to meet long-term financial obligations. Sun Life has done this successfully for over 150 years and believe that we are uniquely placed to support them going forward. SLC Management supports and advances Sun Life’s vision of creating a global asset management firm that provides differentiated investment strategies to meet the evolving needs of investors.”

Empower Revamps Dynamic Retirement Manager Platform

Empower has designed a new variation of its Dynamic Retirement Manager (DRM) offering that integrates low-cost, index-based investments from State Street Global Advisors’, the asset management business of State Street Corporation.

In this offering, plan sponsors start with target-date funds (TDFs) from State Street. When the time is right for participants, their savings will transition into a customized managed account solution, managed by Advised Assets Group, LLC (AAG), a registered investment adviser, using the same underlying investments offered by State Street.

“We are on a mission to revolutionize the workplace retirement savings programs we offer our customers,” says Edmund F. Murphy III, president and CEO of Empower Retirement. “We recognize that developing value-aligned partnerships brings us to better outcomes for American workers who are saving for their retirement.”

With this solution, Empower says advisers no longer have to choose between target-date funds (TDFs) and managed accounts. DRM provides employees a glide path in the target-date series. Then, when the employees reach a certain age, they easily transition into a more personalized managed account based on their individual circumstances while still using the investment options that they already know and trust.

In April, Empower announced it had designed an offering within its DRM program that integrates the American Funds Target Date Retirement Series, which is an actively managed target-date series.
Administration June 20, 2019

Misunderstanding Retirement Plans Affects Participant Savings Behavior

Research reports find a large proportion of employees don’t understand their retirement benefits—with some not even realizing they are participating—and better communication is needed to help participants take the best savings actions.

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Analyzing data from its 2019 Universe Benchmarks report and its 2019 Health and Financial Wellbeing Mindset Study together, Alight Solutions found employees in general don’t understand the broad-based benefits offering from employers.

In spite of finding better participation and savings rates by employees in retirement plans, employees said they trust their employers but want a better understanding of the retirement plan.

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According to Virginia Maguire, vice president of wealth product strategy at Alight Solutions in Atlanta, with automatic enrollment and escalation, Alight found plans offering automatic enrollment have an average participation rate of 87%. And in 2018, the average plan participant’s contribution rate remained at 7.9%; however, among participants who were also contributing in 2017, the average rate increased from 8% to 8.4%, largely a result of the growing popularity of automatic escalation.

An unpublished survey from Fisher Investments found while most participants think they know enough about their 401(k), 71% of survey respondents failed a basic 401(k) quiz.

“We have all understood the value in automatic plan design in overcoming participant inertia, but if plan sponsors don’t communicate to participants about the features of the plan, participants aren’t engaged and not taking the behaviors plan sponsors want them to,” Maguire says, adding that it is also important to make sure default savings rates are adequate.

According to Maguire, there are also similar communication issues about plan investments. Not surprisingly, she says, target-date funds (TDFs) are used by three-quarters of participants. However, a finding she was surprised about is that, on average, participants hold about five asset classes—they use TDFs, but also put funds in other investments because they hear the diversification message. They do not understand that TDFs address the diversification issue.

Alight Solutions also found that only 8% of workers are contributing the maximum amount allowed to both their 401(k) plan and their health savings account (HSA), but the Health and Financial Wellbeing Mindset Study found that about one-quarter actually believe they are contributing the maximum. In addition, almost 10% of workers contribute to a 401(k) without realizing it, and 12% of workers receive employer matching contributions but are not aware.

These misperceptions and lack of knowledge cause problems for participant savings behaviors. For example, Maguire says, if participants think they are contributing the maximum amount allowed, they will not increase their savings. While she finds that 10% of participants not realizing they are contributing is not surprising, given the trend of automatic enrollment and participants not paying attention to pay stubs or reading retirement plan disclosures, it means these participants are not at all engaged in their retirement savings. As for those who don’t know they are getting a match, Maguire says what can help are communications telling them they are not saving enough to get the full match and tools to get them to choose auto escalation.

According to the Fisher Investments study, 81% of employers think their plans provide sufficient financial information, while only 57% of employees agree. And, Alight found employees don’t feel confident about their financial wellbeing in general, and not understanding retirement plans is a component of that.

Alight found one-third of employees struggle with where to go to find financial information, Maguire says. Seventy-eight percent of employees said decision tools would help with their retirement savings and financial wellbeing, and 70% said spending and saving assistance tools would help.

Getting more personal with benefit education

A survey from Colonial Life found employees who work at the smallest U.S. businesses understand their employee benefits the best. In a survey of 1,506 full-time U.S. employees, 47% of employees who work for companies with fewer than 100 employees report understanding their benefits “very well.” Only one-third of workers at larger businesses report understanding their benefits that well.

Colonial Life attributes this to a personalized focus in benefits education. Employers with more than 100 workers are more likely to depend on email (58%), websites (49%) and mailed packages (30%) to educate employees about benefits, according to the survey While 34% of businesses smaller than 100 employees also rely on email, they focus more attention on personalized individual and group meetings with HR professionals.

Nearly 25% of employees at the smallest businesses say individual meetings with benefits experts are available to them, compared to just 14% at employers with more than 100 workers. And 37% of the smallest employers have group meetings with HR professionals to discuss benefits, compared to just 29% of larger employers.

That is why Maguire says some of the most valuable things all employers can do is drive employees to their benefits website, hold seminars and webinars. More than half (56%) of employees surveyed by Alight Solutions said that would help.

“A seminar or webinar onsite is more personal. We’ve seen those be extremely useful,” Maguire says. “Also, it would get to those who are contributing to the plan but don’t realize it.”

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