Products September 17, 2015

Investment Product Launches for the Week

Expanded institutional trading capabilities from CAPIS and Invest ‘n Retire; a multi-asset income fund from Fidelity; and a flexible QLAC from New York Life.
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Capital Institutional Services, known as CAPIS, has formed a strategic partnership with Invest ‘n Retire LLC, through which the firms will offer institutional clients access to CAPIS’ 24-hour global agency trading desk and custody services.

Invest ‘n Retire provides investment managers with recordkeeping solutions, trading services and custody arrangements through their software as a service model, with the goal being to achieve lower costs than traditional service providers.

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CAPIS is “a women-owned independent agency broker that specializes in global agency trading, independent research and commission management programs for institutional investors,” according to the company.

“CAPIS is one of the few remaining independent agency brokers in the industry, which is appealing to us,” explains Darwin Abrahamson, chief executive officer at Invest ‘n Retire. “Because of CAPIS’ reputation and experience in global trading along with their ability to help our clients reduce their costs, we are pleased to partner with them to offer our clients an industry-leading platform along with industry-leading trading services.”

NEXT: A Multi-Asset Income Fund by Fidelity

Fidelity Investments announced the launch of the firm’s first multi-asset income fund, “designed to meet the growing demand among American investors for income.”

Fidelity Advisor Multi-Asset Income Fund is available only through financial advisers, in share classes A, C, T and I. The fund is described as “an income-oriented strategy that seeks to provide a combination of income and capital appreciation.” A flexible mandate allows the managers to invest across the entire spectrum of income-producing securities, Fidelity says, including investment-grade bonds, non-investment-grade bonds, and dividend-paying equities.

The fund’s benchmark index is the Barclays Aggregate Bond Index. It also has a secondary composite benchmark, equal to 50% S&P 500 Index and 50% Barclays Aggregate Bond Index.

“In today’s low-yield environment, many advisers are looking beyond traditional bond categories to find income. However, stretching for yield can increase risk,” explains Scott Couto, president of Fidelity Financial Advisor Solutions. “Our new fund can help advisers and their clients balance income potential and risk, because it has the flexibility to invest where the best income opportunities exist—regardless of asset class, sector, or geography.”

The firm says the Fidelity Advisor Multi-Asset Income Fund brings Fidelity’s experts in income investing together in a single fund. Adam Kramer, who has 15 years of investment experience and manages high-yield, convertible, and preferred securities asset, is the lead manager. He will work closely with two co-managers, Ford O’Neil and Jim Morrow.

According to lead manager Kramer, in seeking to achieve the fund’s investment objective, there are four primary goals in managing the fund: i) provide a high level of current income; ii) provide capital preservation in declining markets; iii) provide capital appreciation in rising markets; and iv) add alpha through both asset class and security selection.

NEXT: New York Life Adds to QLAC Capabilities

New York Life has launched a new income annuity, Mutual Income, designed to offer clients the opportunity to directly participate in the company’s mutual structure. Separately, New York Life has expanded its income annuity options available on tax-qualified savings.

Both innovations, according to the firm, are meant to address the growing demands of retirees and pre-retirees.

With the launch of New York Life Mutual Income Annuities and the availability of deferred income annuities as Qualifying Longevity Annuity Contracts (QLACs), New York Life wants to “give pre-retirees and retirees the guarantees they want and the ability to customize retirement income to meet their needs,” says Dylan Huang, managing director at New York Life.

Mutual Income works much like a traditional income annuity, the firm says, through which income can begin immediately or be deferred until a future start date of the client’s choosing.

“As with other income annuities, a client invests a lump sum with an insurer, and receives an income stream that’s guaranteed for life. But unlike traditional income annuities, the total income amount is not capped at the guarantee,” New York Life explains. “As policy owners, New York Life’s Mutual Income clients will also be eligible for annual dividends that can be used to increase their retirement income beyond the guaranteed amount.”

Huang adds, “We believe the purchase pattern that we see in our non-qualified sales indicates that there will be even more interest in deferred income annuities now that the income start-date is permitted beyond the age of 70½. When pre-retirees have no restrictions around the income start date, they are using the flexibility that deferred income annuities afford to create retirement income tailored to their specific needs.”

Compliance September 17, 2015

Is Your Plan Adviser Helping You with Compliance?

Retirement plan sponsors are usually not experts in compliance, while advisers and consultants are, so sponsors may want to rethink how they engage advisers.
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“It is hard for [retirement plan] sponsors to keep a handle on all they have to do from a compliance standpoint,” says Nancy Gerrie, a partner at McDermott Will & Emery in Chicago.

“In my 25 years in the business, I have seen the number of duties for plan sponsors grow exponentially, particularly on the Department of Labor side and with investments. Even our most sophisticated clients have a hard time keeping up,” she tells PLANSPONSOR.

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But, there is help for plan sponsors, if they know where to find it. For example, Gerrie’s firm went through numerous audit information request letters from the Department of Labor (DOL) and Internal Revenue Service (IRS) to see which issues each agency is auditing, and added up which retirement plan compliance issues seem to be cropping up the most. “We ranked them from most easily to least easily addressable and came up with internal controls our clients can use,” she says.

“It’s all a matter of good plan hygiene and governance,” Gerrie adds. “One would hope plan sponsors are having a once-a-year or more often review of their plan’s investment funds and other plan data. If not, they could be in breach of their fiduciary duty.” She says, at a minimum, the retirement plan’s adviser should be reviewing funds with the sponsor once a year, but, ideally more often. And she suggests, once a year would be a good time to review other things, such as plan document updates, the plan’s definition of compensation and how the plan sponsor is keeping track of loans and loan defaults, just to name a few. “We have developed a model calendar for plan sponsor committee meetings on a quarterly or semi-annual basis, which provides a laundry list of what they should be looking at.”

Gerrie also suggests that if the plan has greater than 100 participants and requires an annual financial audit, plan sponsors should sit down with that auditor and go through the report. “The auditor should be pulling samples and checking some of these same issues, and sponsors can review that and identify areas of weakness and address them,” she says.

NEXT: Getting help needed from advisers

In a typical advisory agreement, the retirement plan adviser isn’t given responsibility to make sure plan sponsors comply with all DOL and IRS regulations, notes Adam Pozek, a partner at DWC ERISA Consultants in Salem, New Hampshire. While some advisers’ service offering is based on ongoing counseling, on the other end, some advisers only provide investment help. It depends on the level at which sponsors engage an adviser, he says.

It doesn’t hurt for an adviser to send retirement plan sponsors compliance reminders, but that duty usually falls to the plan providers, Pozek adds. But, he says, one way an adviser can add value for plan sponsors is as a coordinator. “Advisers can get plan sponsors and recordkeepers or third-party administrators together to discuss who is responsible for what.”

Scott Liggett, JD, director of ERISA compliance, Lawing Financial, Inc. in Overland Park, Kansas, says some advisers do take on the role of reminding plan sponsors about compliance; his firm does. “It is helpful to have advisers send reminders or nudges about such things as the timing of testing, whether the plan sponsor has sent census data to the recordkeeper, reminders to have the Form 5500 filed on time to avoid penalties,” he states. “We are experts, plan sponsors, usually, are not.”

The trend now is more advisers are serving as Employee Retirement Income Security Act (ERISA) co-fiduciaries with plan sponsors, notes Liggett. But, the level at which plan sponsors are receptive to training and education will dictate an adviser’s level of involvement.

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