Products November 17, 2016

Investment Products and Service Launches

Charles Schwab Updates CTF Prices; Northern Trust Asset Management Strengthens Liquidity Solutions Team.
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Charles Schwab Updates CTF Prices

Charles Schwab has announced changes to its collective trust funds (CTFs), particularly its target-date fund (TDF) offerings.

Schwab offers two series of sub-advised CTF TDFs, which are exclusively available to 401(k) plans and other qualified retirement plans through Charles Schwab Bank. Schwab Indexed Retirement Trust Funds (SIRT) offer passive, index-based strategies. Schwab Managed Retirement Trust Funds (SMRT) provide a blend of active and passive strategies. 

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 As of November 1, the following pricing changes were implemented:

  • Expense ratios on Unit Class I of SIRT funds were reduced from fourteen basis points (0.14%) to eight basis points (0.08%) with no minimum investment required, regardless of where the plan is record-kept. This aligns with the pricing of Schwab Target Index Funds, which were launched in August and are among the lowest-cost target date mutual funds available to retirement plans, with an across-the-board expense ratio of eight basis points and no minimum investments, regardless of plan size. 
  • Minimum investments for Unit Class V of SMRT funds have dropped from $300 million to $100 million. No minimum investment is required for plans with more than $400 million in total plan assets. 
  • All minimums for Unit Class IV of SMRT funds have been removed. Previously, defined contribution investment only (DCIO) off-platform plans had to either be $100 million in size or make a $25 million investment. Now, the no-minimum rule applies for both on- and off-platform plans.

The firm says these changes make Schwab target-date CTFs more accessible, and are consistent with the broader effort at Schwab to offer target-date funds at exceptional value.

NEXT: Northern Trust Asset Management Strengthens Liquidity Solutions Team 

Northern Trust Asset Management Strengthens Liquidity Solutions Team

Northern Trust Asset Management has created the new position of senior liquidity specialist, focused on expanding the firm’s offerings of liquidity-management solutions to institutional clients. Peter Schenck will fill the position.   

Based in Chicago, Schenck will focus on creating customized investment solutions for large clients in the corporate, insurance and non-profit segments. Coming from BlackRock, Schenck brings 26 years of experience in the investment-management industry to the table.  

The firm says it hopes Schenck's fixed-income experience and track record of enhancing client relationships will help deliver compelling and thoughtfully constructed liquidity solutions for clients. He will work closely with Chris Van Alstyne, an institutional sales veteran dedicated to the liquidity business; and Jennifer Hoffenkamp, who was recently named client liquidity solutions manager with a focus on product development and client service.

Before being head of the markets, exchanges and insurance team in the cash management group at Blackrock, Schenk worked at Banc One Capital Markets. He specialized in international fixed-income sales. He earned his bachelor’s degree from Villanova University and an M.B.A. from Fordham University.

Northern Trust is a global asset-management firm serving institutional and individual investors in 29 countries, with $946 billion in assets under management (AUM) as of September 30, 2016.

Data and Research November 17, 2016

Scorecard Finds Increase in Plan Engagement Among Millennials

A new report by Bank of America Merrill Lynch credits Millennials to the increase in employee enrollment and contribution in retirement savings plans.  

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As 401(k) plan engagement continue to rise, so does participation among Millennials. The “Plan Wellness Scorecard,” a recent report by Bank of America Merrill Lynch, finds that among the 24% increase in employees that enrolled and contributed to their company’s retirement savings plan during the first half of 2016, Millennial participants (those aged 21 to 34) produced more contribution rates than any other age group.

The report highlights automated financial benefit plan features as key reasons for the upsurge, with 46% of new enrollments generated by simplified enrollment strategies, such as automatic enrollment or Express Enrollment. The study reports auto-enrollment has increased 33% since 2015, while Express Enrollment has risen 42%. Higher auto-enrollment default rates have also gained participants (up 41% since 2016), in addition to auto-increase (up 153% since 2012).

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While included in the same generation, the report reveals unique and dissimilar savings behaviors among older (ages 28 to 34) and younger (ages 21 to 27) Millennials. For example, older Millennials are increasingly more likely to participate in their employer’s retirement savings plan than younger ones, at 60% versus 38%, respectively. Once a plan features auto-enrollment, however, participation in younger Millennials jumps to 78%, versus 88% of the age group’s older members.

“We’re continuing to see Millennials take control of their finances and be more proactive with retirement as they recognize the implications of living longer as well as the benefits of saving early,” says John Quinn, head of Institutional Product and Platform Management at Bank of America Merrill Lynch. “Having the right plan design features leveraged by engagement practices can shape employees’ long-term investment strategies, as well as improve participation among younger generations.”

In order to surge engagement and plan participation, the report encourages plan sponsors to adopt simpler processes including auto-enrollment and auto-default for all employees, not just limited to new hires; apply auto-increase features to help workers grow savings over time; and team with plan providers to offer a variety of resources to employees, such as offline and digital enrollment and account management tools. In fact, mobile features have helped drive engagement with Millennials, as over half (55%) of all mobile enrollments have been completed by participants between ages 21 to 34.  

More information on the scorecard can be found here.

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