Products August 25, 2016

Investment Products and Service Launches

Schwab Reveals 8-bps Passive TDF With No Minimum; MetLife Stable Value Solutions Fund Added to Modelxchange.

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Schwab Reveals 8-bps Passive TDF With No Minimum

Schwab Target Index Funds are available to retirement plans of all sizes at 8 basis points with no minimums, and to individual investors at 13 basis points with just a $100 minimum.

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Charles Schwab Investment Management announced the launch of Schwab Target Index Funds, described as a new series of index-based target date mutual funds constructed with low-cost Schwab ETFs as underlying investments.

Explaining the new product to PLANSPONSOR, Jake Gilliam, senior multi-asset class portfolio strategist at Charles Schwab Investment Management, suggested the new funds are the lowest-cost target date mutual funds available to employer-sponsored retirement plans, with an across-the-board expense ratio of just eight basis points (0.08%) and no minimum investment requirements regardless of plan size.

“Until now, receiving the most competitive pricing on target date funds could require a $100 million minimum investment or more from retirement plans,” he adds. “Outside of retirement plans, Schwab Target Index Funds are also among the lowest-cost target date mutual funds available to individual investors at 13 basis points (0.13%) with only a $100 minimum investment.”

According to Schwab, the new series includes funds with target retirement dates between 2010 and 2060 in five-year increments.

“Today marks an important day of democratization for employers, retirement plan participants and self-directed individual investors,” said Marie Chandoha, president and chief executive officer of Charles Schwab Investment Management. “With Schwab Target Index Funds, every retirement plan gets the same low price with no investment minimums. That means plan participants no longer have to pay for a more expensive target date fund just because they work at a smaller company.”

The underlying assets in Schwab Target Index Funds are primarily Schwab’s market-cap index ETFs, each of which has the lowest operating expenses in its respective Lipper category. “It is the result of this construction that allows CSIM to offer the new funds at such low prices,” Gilliam said, adding that the asset allocations in Schwab Target Index Funds are “generally about 5% more invested in equities compared with the market average at the beginning of the glide path, but moving to become about 5% more conservative near the retirement date.”

Schwab also offers TDFs as collective trust funds (CTFs), and makes them available exclusively to 401(k) plans and other qualified retirement plans through Charles Schwab Bank. Among them are Schwab Indexed Retirement Trust Funds (SIRT), which offer passive, index-based strategies. Effective November 1, 2016, plan sponsors also will be able to access the SIRT funds for eight basis points (0.08%) with no minimum investment required, which aligns with the pricing of the new mutual fund Schwab Target Index Funds.

More information is available at www.csimfunds.com.

NEXT: MetLife Stable Value Solutions Fund Added to Modelxchange

MetLife Stable Value Solutions Fund Added to Modelxchange

MetLife today announced the addition of Wilmington Trust’s MetLife Stable Value Solutions Fund, “an offering with Wilmington Trust funded by MetLife group annuity contracts,” to Mid-Atlantic Trust Company’s ModelxChange platform.

MetLife Stable Value Solutions Fund is described as the first stable value option available for ModelxChange, which is one of the original platforms of its kind that allows 401(k) professionals to incorporate investment models into a retirement plan through a single interface.

“Making available the MetLife Stable Value Solutions through Mid-Atlantic Trust Company’s ModelxChange innovative platform makes it easy for professional money managers, investment advisors, and plan record keepers to select stable value as the capital preservation option for a 401(k) plan and incorporate the fund into their models,” says Thomas Schuster, vice president and head of Stable Value and Investment Products with MetLife.

Available only in defined contribution (DC) plans, stable value products are uniquely structured to maximize returns while preserving principal, in large part because they are designed specifically for the defined contribution market.

“Stable value has over a 40-year track record, which has allowed decision makers to evaluate these funds over various economic environments,” Schuster says. “Most plan sponsors want to provide a capital preservation option within their DC plans and stable value funds have routinely yielded both significantly higher returns and less volatility than its principal competitor in the capital preservation space, money market funds.”

“By making stable value available through ModelXChange, plan sponsors will have the opportunity to learn more about these funds,” adds Warren Howe, national director, Stable Value Markets, MetLife. “This is especially important since the new rules from the U. S. Securities and Exchange Commission regulating money market funds are going into effect in October 2016, making now a great time for plan sponsors to take a closer look at stable value.”

For more information, visit www.metlife.com. 

Data and Research August 25, 2016

Only 29% of Families on Track to Reach Their College Savings Goal

However, 529 plan ownership reaches record high of 41%.
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Seventy-two percent of American families are saving for their children’s higher education, a 24% increase from 58% in 2007, when Fidelity Investments’ College Savings Indicator Study was first published.


Also encouraging, 41% of families are invested in a 529 college savings plan, a 62% increase from the 26% measured in 2007.

The median amount saved for college this year is still a modest $3,000, but this is double the figure from 2007. Among 529 plan owners, 45% have increased their contribution rate in the past 12 months. However, 49% are not sure they will reach their college savings goal, and only 29% are actually on track to achieve that goal. Half of parents of children in 10th grade or higher say that looking back over the past 10 years, they could have saved an average of $200 more each month for their child’s college education.

Forty-one percent of parents are working with a financial professional, up from 21% in 2007. Although 70% of parents think that family contributions will be helpful for saving for college, only 28% of grandparents have asked how they can help pay for their grandchildren’s college education, and only 39% of parents have asked family and friends to contribute to their college savings account in lieu of special occasion gifts.

“For many families, finding an extra $50 or $100 per month may seem out of reach, but these extra dollars could potentially boost college savings by nearly $20,000 or even $40,000,” says Keith Bernhardt, vice president of college planning at Fidelity. “This potential could be a powerful motivator to consider strategies to carve out additional savings.”

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