Products August 19, 2021

Investment Product and Service Launches

Natixis Investment Managers combines businesses to single division; Morningstar Retirement Manager to support Allianz Life annuity products; and DriveWealth teams up with HSA provider.

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Art by Jackson Epstein

Natixis Investment Managers Combines Businesses to Single Division

Natixis Investment Managers has unified several sub-branded businesses related to direct indexing, overlay and multi-asset portfolios, along with its consulting business, under a single division called “Natixis Investment Managers Solutions.”

The combined business has $45 billion in assets under administration (AUA) and will be led by co-heads Curt Overway and Marina Gross.

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“The tremendous growth of our business has led to a need for a more streamlined approach. We are confident that the newly unified Natixis Investment Managers Solutions will offer clients an even better experience while helping them continue to meet long-term financial goals,” says David Giunta, CEO of Natixis Investment Managers in the U.S.

As a result, the firm’s direct indexing capabilities, formerly housed in its Active Index Advisors (AIA) division, will now be provided as part of Natixis Investment Managers Solutions and the AIA name as a division will be retired. Similarly, the integrated portfolio implementation capability, formerly under Managed Portfolio Advisors (MPA), will now be offered by the new division, and the name MPA will be retired. The firm says the changes will be seamless for clients and their accounts, as well as their legal contracts, and all current Natixis employees of the individual sub-brands have become employees of the unified business division.

In addition to direct indexing and integrated portfolio implementation, the combined Natixis Investment Managers Solutions division provides capabilities such as model portfolios, which encompass standard and customized strategies managed by specialized teams. Model portfolios offer a more consistent investment process for clients and allow advisers more time to address client needs. Also within the newly combined business sits the Natixis Sustainable Future Funds, which are designed for retirement investors who want to generate sustainable long-term returns.

“Natixis has been a leading provider of innovative investment solutions for nearly two decades. Bringing these capabilities together under one roof as Natixis Investment Managers Solutions represents our continued efforts to deliver best-in-class investment solutions for our clients,” Overway says.

“By unifying our innovative products and investment solutions under the leadership of a single team, we are seeking to provide the most seamless, top-notch experience for our clients,” Gross adds.

Morningstar Retirement Manager to Support Allianz Life Annuity Products

Allianz Life Insurance Co. of North America has teamed up with Morningstar Investment Management LLC to help individuals allocate their retirement savings to its annuity products through the Morningstar Retirement Manager service. The Allianz Lifetime Income+ Annuity with the Lifetime Income Benefit will be the first Allianz Life product to be added as Allianz Life enters the defined contribution (DC) market.

Morningstar Retirement Manager is a managed accounts and advice service that helps individuals at every stage of their retirement journey with personalized and independent advice on how much to save, how to invest, when to take Social Security and more. The service will even manage an individual’s investment strategy on an ongoing basis.

The addition of the Allianz Life annuity means Morningstar Retirement Manager users with access to the annuity through their retirement plan can contribute to a new product designed to help them mitigate against risk in retirement via guaranteed income. Only individuals whose retirement plan offers both Morningstar Retirement Manager and the Allianz Life annuity will have access to this expanded service offering.

“Morningstar Investment Management is an established leader in retirement services that will help us reach many more people seeking guaranteed income options as part of their retirement plan,” says Matt Gray, head of employer markets, Allianz Life. “Through Morningstar Retirement Manager, individuals receive recommendations to help ensure that they are allocating the right amount of their investable assets to guaranteed income at the right time for what could likely be a lengthy retirement.”

Allianz Life recently announced its entry into the DC market. Allianz Lifetime Income+ is a fixed index annuity that offers innovative design features including growth potential, protection from market loss and guaranteed lifetime income through the lifetime income benefit, which has the potential to increase annually for life to help address the effects of inflation.

“As a new entrant into this market, our relationship with Morningstar Investment Management puts in place an immediate and strong infrastructure that will enable us to better reach and serve the growing defined contribution market,” Gray adds. “This relationship will serve to simplify the integration of annuities into sponsored plans, which is an important step in making guaranteed income options more widely available.”

“Morningstar Retirement Manager has been helping retirees spend down their retirement savings in a sustainable way for over a decade,” says Brock Johnson, president of global retirement and workplace solutions, Morningstar Investment Management. “Our ability to help individuals determine how to allocate to guaranteed income products like Allianz Life Income+ gives us more flexibility to help individuals achieve their retirement goals.”

DriveWealth Teams Up With HSA Provider

DriveWealth LLC, which specializes in fractional investing and embedded finance, has announced a partnership with health savings account (HSA) provider SavingsOak.

Through this partnership, SavingsOak is leveraging DriveWealth’s comprehensive investing infrastructure, offering a broad array of modern investment options. Participants will be able to invest small amounts on a dollar equivalent basis (i.e., fractional shares) in balanced, diversified portfolios of U.S. equities and exchange-traded funds (ETFs).

SavingsOak’s offering provides an opportunity to invest unused funds in HSAs to better manage health care costs.

“We’re thrilled that SavingsOak has leveraged the consultative support of DriveHSA, while integrating DriveWealth’s comprehensive brokerage platform,” says Stan Smith, managing director of DriveHSA. “We believe SavingsOak will be extremely successful based on its deep expertise and how it’s looking at HSAs through the lens of the participant versus that of the platform provider. It also brings a fresh set of ideas and tools centered on the value of investing within an HSA account, which can help drive a more engaging end-user experience.”

“At SavingsOak, our goal is to build the retirement savings platform for the 99%, guided by the foundational belief that investing in one’s health and finances should be done as a comprehensive strategy,” says Neeraj Mathur, founder and CEO of SavingsOak. “As such, having best-in-class investment capabilities and experience is one of our top priorities. As a leader in modern brokerage infrastructure, DriveWealth is playing a critical role in helping us achieve our mission.”

Compliance August 19, 2021

Court in DST Systems Case Rejects Settlements While Certifying Class

The long-running case, in which investment adviser Ruane, Cunniff & Goldfarb is also a defendant, concerns investments of retirement plan assets in Valeant Pharmaceuticals stock.

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The U.S. District Court for the Southern District of New York has filed a ruling in an Employee Retirement Income Security Act (ERISA) fiduciary breach lawsuit that names as defendants Ruane, Cunniff & Goldfarb Inc. (RCG), in its role as a fiduciary investment adviser, and DST Systems, in its role as a retirement plan sponsor.

The underlying challenge in this case was filed back in September 2017, naming a host of defendants, including the advisory committees of the DST Systems Inc. profit-sharing and 401(k) plans, as well as the compensation committee of the DST Systems board of directors. The plaintiffs are employees and retirement plan participants at DST Systems who argue the defendants pursued “an exceptionally imprudent investment strategy” with respect to a significant portion of their retirement assets. They claim that, as a direct result and consequence of these allegedly imprudent investment decisions and related misconduct, the plan has suffered losses well in excess of $100 million.

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Specifically, the plaintiffs suggest that RCG and DST breached their fiduciary duties under ERISA by concentrating “an enormous and imprudent” amount of the plan assets in the Valeant Pharmaceuticals International Inc. stock (VRX), which caused the plan to suffer more than $100 million in losses when VRX’s share price declined in 2015, following a well-publicized fraud scandal involving the company.

Settlements to resolve this and a related lawsuit were presented to the federal court in January, even though Judge Andrew L. Carter Jr. of the U.S. District Court for the Southern District of New York was also presiding over a distinct lawsuit filed by then-Secretary of Labor Eugene Scalia against Ruane, Cunniff & Goldfarb. At the time, Scalia took issue with a condition in two of the settlement agreements that sought to bar his department from litigation.

Now, the District Court has ruled on various motions in the still-unfolding case, including the plaintiffs’ motions for leave to file a third amended complaint and for class certification. Other pending motions included preliminary approval of the class action settlement agreements.

In sum, the new ruling states that the plaintiffs’ motions to file a third amended complaint and for class certification are granted, while their motions for preliminary approval of the class action settlements are denied.

The ruling explains that the District Court finds the U.S. 2nd Circuit Court of Appeals’ recent ruling in a closely related case, known as Cooper v. Ruane Cunniff & Goldfarb Inc., has made clear that the claims at issue in this matter are not covered by arbitration agreements which the plaintiffs have signed.

In Cooper, the 2nd Circuit found that a plaintiff’s claim for breach of fiduciary duty on behalf of the plan did not relate to his employment and thus did not require arbitration under the terms of the arbitration agreement.

“Here, arbitration claimants [similarly] put forth several arguments,” the new ruling states, highlighting the fact that some participants in the plan want to pursue arbitration or alternative litigation to resolve this matter. “The arbitration claimants argue that the 2nd Circuit did not have the opportunity to consider the plan’s adoption of the arbitration agreement which states that ‘the arbitration policy applies to all claims arising out of or relating to the plan,’ and since the agreement was adopted, Cooper is inapposite. The arbitration claimants further argue that they are not seeking to bring claims on behalf of the plan. Rather, the arbitration claimants argue that they are asserting individual claims in arbitration for the fiduciary breaches that damaged the value of their individual plan assets in their defined contribution [DC] plans. The court finds both of these arguments unavailing.”

Put another way, the arbitration provision that RCG and DST used to compel arbitration is the same provision that was before the 2nd Circuit, as well as the arbitration provision that is at issue in this matter. Thus, the District Court is not in a position to question what was before the 2nd Circuit, and the lower court does not find that the 2nd Circuit applied a counter-textual reading to the arbitration agreement, as the arbitration claimants suggest.

Even if the lower court were to consider the plan’s adoption of the amended arbitration agreement, the ruling states, the court would still find that claims for fiduciary breach are not covered by the arbitration agreement. For context, the arbitration claimants argue that the named plaintiffs’ claims are atypical of the proposed class, as they are not bound by the arbitration agreement and thus cannot represent the absent class members, the majority of which are bound by arbitration agreements and/or currently in arbitration proceedings.

Moving beyond these matters, the ruling goes into an extensive discussion of the requirements of class certification. In the end, it concludes the following: “As the requirements of Rule 23(a) are met, the class is properly certified under Rule 23(b)(1)(B). Plaintiffs purport to bring this action as a breach of fiduciary duty brought under Section 1132(a)(2) on behalf of the plan. The allegations in the complaint intend to remedy fiduciary breaches and other misconduct on behalf of the plan. Allowing multiple actions, each of which would seek similar or the same relief from the defendants on behalf of the plan, would potentially prejudice individual class members and would threaten to create incompatible standards of conduct for the defendants. These are issues that Rule 23(b)(1) seeks to avoid. … In sum, because the management of the plans has an effect on all plan participants, the class is properly certified under Rule 23(a) and Rule 23(b)(1)(A) or 23(b)(1)(B).”

Later on, the court grants plaintiffs leave to file a third amended complaint “only to the extent of adding class allegations.”

Finally, the ruling observes that the plaintiffs have concurrently moved for preliminary approval of a class action settlement with the RCG and DST defendants.

“The court will not approve the agreements,” the ruling states. “The plaintiffs’ settlement agreements include an injunctive provision that states: ‘In further aid of and to protect the court’s jurisdiction to review, consider, implement and enforce the settlement, the court preliminarily enjoins and bars (i) plaintiff releasors, the secretary and any person purporting to represent them or pursue claims on their behalf, and (ii) any participant who has been excluded from the settlement class, from bringing or prosecuting in any forum any claim that arises from, relates to or is connected with: (i) the conduct alleged in the complaint.’ While the plaintiffs argue that the purported bar order/injunction is a commonplace provision in class action settlements, the above provision is far more than a common bar order and cannot be approved by this court.”

The full text of the ruling is available here.

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