Deals and People April 7, 2017

Retirement Industry People Moves

Segal names Public Sector Market director; Securian expands retirement business; Lockton opens new office; and more.

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Marsh & McLennan Agency Acquires Advisory Firm

Marsh & McLennan Agency (MMA) announced that it has acquired RJF Financial Services, a retirement advisory firm based in Brooklyn Park, Minnesota.

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All RJF Financial employees, including its president and founder Jim McQuillan, will join MMA and continue to work out of the firm’s existing office in suburban Minneapolis.

“I have known and worked with Jim McQuillan and his firm for more than two decades and couldn’t be happier to formalize our business relationship,” says Bill Jeatran, CEO of MMA’s upper Midwest region. “RJF Financial’s experienced and principled people are the right team to expand MMA’s retirement services capabilities into the upper Midwest.”

McQuillan added, “Our team is excited about the additional resources we can now bring to our clients, and eager to help build and grow the MMA retirement services practice in the Minneapolis area and throughout the upper Midwest.”

NEXT: Segal Names Public Sector Market Director

Segal Names Public Sector Market Director

The Segal Group has named Andrew D. Sherman its new national public sector market director, effective May 1, 2017. Sherman will succeed Cathie G. Eitelberg, who is retiring after more than two decades with Segal.

Sherman has decades of industry experience behind him including 30 years spent at Segal. He currently manages the firm’s public sector consulting for its Boston and Hartford offices. He has also been the firm’s multiemployer health practice leader and he has served on the Board of Directors for the past 10 years. He is the lead consultant to a number of large public sector employee benefit plans including city and state health plans. He earned his bachelor’s degree from Brandeis University in Waltham, Massachusetts and a master’s degree in public policy with a concentration in health care policy from Harvard University.

“Andrew has a deep understanding of public sector issues,” said CEO David Blumenstein. “He is dedicated to our clients and assuring benefit security for their plan participants. I am confident that Segal Consulting’s public sector practice will continue to thrive under his leadership.”

He would assume the position from Eitelberg who has been with the firm for 40 years. She joined Segal from the Government Finance Officers Association (GFOA), where she was the chief tax lobbyist and the founder and director of the GFOA’s Pension and Benefits Center.

NEXT: CAPTRUST Financial Advisors Grows Business

CAPTRUST Financial Advisors Grows Business

CAPTRUST Financial Advisors, an independent wealth management and retirement plan advisory firm, announced Windsor Financial Group has joined the CAPTRUST family. Based in Minneapolis, Minnessota, this firm provides investment and wealth planning for individuals and institutional clients.

"In CAPTRUST we have found a long-term partner that cares about our clients, and about looking after their interests in a fiduciary capacity, as much as we do," says Windsor Financial Group Founder, Tyron K. Estlick.

Windsor President David O. Koch adds, "A firm with our thirty-year history of doing right by clients owes it to them to find an excellent fit for them above all—not just a good fit for us. We know that CAPTRUST shares our values and passion for our profession, and we look forward to what the future holds," he said. 

NEXT: Securian Expands Retirement Business

Securian Expands Retirement Business

Brody Geist has joined Securian Financial Group as a regional sales vice president with the company’s Retirement Plans division. He will focus on providing retirement plan solutions to small and mid-size employers throughout Utah, Colorado and Wyoming.

Prior to joining Securian, Geist served as a retirement services district sales manager with the Major Accounts division of ADP. He holds Series 6 and 63 registrations and earned a bachelor’s degree from St. Cloud State University in Minnesota.

“Brody is an outstanding addition to our sales team, which we are continuing to expand due in part to the enthusiasm for our open architecture platform as well as the recent addition of an optional platform level ERISA 3(38) fiduciary service on our Signature Series investments,” said Vince Giordano, Securian’snational vice president of retirement plan sales.

NEXT: Lockton Expands Business

Lockton Expands Business

Lockton is planning to open a new office in Greenville, South Carolina, with a focus on consulting clients on employee benefit programs. Marti Smith and Erin Sottile are set to join the firm on April 15 to lead the newly-formed South Carolina Employee Benefits Practice.

Smith comes onboard as producer tasked with expanding the business and advising clients on employee benefits strategies. Sottile comes in as account executive of employee benefits with the responsibility to advise clients on program implementation techniques, as well as consulting them on their health and welfare programs.

"Marti and Erin are both respected employee benefits professionals with diverse skills who help clients solve business challenges," says Doug Hutcherson, president of Lockton's Southeast operation. "They will be a great addition to our new office starting April 15 as we expand our operations into the Greenville region."

Smith has more than 20 years of experience in employee benefits, human resources and the financial services industry. She recently worked at Willis Towers Watson. Sottile is an experienced employee benefits account executive, working with an array of clients on long-term benefits planning as well as day-to-day operational issues for human resources clients. 

Compliance April 7, 2017

Judge Deals Blow to Vanguard Fund Comparison in Self-Dealing Case

Ultimately, Putnam Investments prevailed in a lawsuit claiming it and its retirement plan fiduciaries engaged in prohibited transactions by offering proprietary funds in its plan.
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U.S. District Judge William Young of the U.S. District Court for the District of Massachusetts, ultimately agreed with Putnam Investments that prohibited transactions claims against its retirement plan fiduciaries are time-barred under the Employee Retirement Income Security Act’s (ERISA)’s three-year statute of limitations, saying the plaintiffs “were well aware that the parties involved were all Putnam entities.”

However, Young’s discussion on two points could impress findings of other court’s addressing pending ERISA excessive-fee or self-dealing cases.

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John Brotherston and Joan Glancy brought suit against Putnam Investments and plan fiduciaries of the Putnam retirement plan accusing them of self-dealing to promote that firm’s mutual fund business and maximize profits at the expense of the plan and its participants. The complaint says Putnam loaded the plan exclusively with its own mutual funds, without investigating whether plan participants would be better served by investments managed by unaffiliated companies.

Previously, Young denied a motion to dismiss the lawsuit against Putnam, saying the plaintiffs allege facts sufficient to state plausible claims.

According to Young’s current judgement, between 2009 and 2015, more than 85% of the plan’s assets were invested in Putnam mutual funds, which pay management fees to Putnam. By the end of 2015 Putnam had converted its investments in 25 Putnam mutual funds from Y shares to R6 shares, which are cheaper.

The plaintiffs claim the payment of fees by Putnam mutual funds to Putnam is a prohibited transaction under ERISA. But, the defendants note that fees are paid out of mutual fund assets rather than plan assets, and argue that cash held in mutual funds are not assets of the plan.

The plaintiffs contend that ERISA’s intent to protect participants mandates a broad definition of “plan assets.” But the judge noted the 1st U.S. Circuit Court of Appeals decision in a Fidelity float income case adopted a narrow approach to identifying plan assets for the purposes of ERISA’s prohibited transactions provisions. “The Plaintiffs’ argument that the management fees paid from the value of the mutual fund shares owned by the plan (which are plan assets) is, therefore, precluded by First Circuit case law,” Young wrote. The judge ruled the prohibited transaction claim fails as a matter of law.

The court opinion also noted that net expense ratios of Putnam plan’s investments ranged from 0% to 1.65%. The plaintiffs argue these fees were materially higher than investment fees paid by other funds. They relied on an expert that compared the Putnam mutual funds’ average fees to Vanguard passively managed index funds’ average fees. Young found this comparison flawed. Vanguard is a low-cost mutual fund provider operating index funds “at-cost.” Putnam mutual funds operate for profit and include both index and actively managed investments. Young said the expert’s analysis “thus compares apples and oranges.” Young ruled that the Putnam mutual funds pay reasonable management fees to Putnam.

In light of Young’s ruling, it is interesting to note that several pending excessive-fee or self-dealing suits also compare a plan’s proprietary investments to Vanguard investments.

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