Deals and People April 12, 2019

Retirement Industry People Moves

Northern Trust names foreign exchange sales head; MassMutual adds head of benefits practice; Transamerica implements series of promotions; and more.

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Art by Subin Yang
Art by Subin Yang

Art by Subin Yang

Northern Trust Names Foreign Exchange Sales Head

Northern Trust has announced that Ernesto Arteta has been named head of foreign exchange sales, Americas.

Arteta has over 25 years of experience in sales, trading, structuring and portfolio management of fixed income and foreign exchange cash and derivatives. Based in Chicago, he will lead a team of sales managers located in the Americas responsible for driving growth through Northern Trust’s range of FX solutions for institutional investors and investment managers across the region.

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MassMutual Adds Head of Benefits Practice

MassMutual has appointed a new leader for its voluntary and executive benefits businesses in support of employers and their employees.

Shefali Desai has been named head of worksite, a new position reporting to Teresa Hassara, head of workplace solutions for MassMutual. Desai, a 19-year veteran of MassMutual, is now responsible for management and ongoing development of the full worksite portfolio, including voluntary benefits and executive benefits. Worksite provides protection benefits such as life, disability, critical illness and accident insurance through employers.

As head of worksite, Desai will focus on the end-to-end customer journey, including web experience, underwriting process, operations, client acquisition and customer communications.

Previously, Desai had led MassMutual’s workplace strategy. She has also held leadership roles in retirement plan sales management, customer support roles, financial management, and mergers and acquisitions

A graduate of Babson College, Desai holds Series 7, 24 and 63 FINRA registrations.

Transamerica Implements Series of Promotions   

Transamerica has announced that Blake Bostwick will lead its workplace solutions business line as president. Transamerica’s workplace solutions team provides employer-sponsored retirement plans and insurance benefits to U.S. organizations of all sizes.

Bostwick is a 17-year veteran with Transamerica, and has previously led multiple functional areas for Transamerica, including operations, marketing, product and technology. In his new role, he will continue reporting to Mark Mullin, Transamerica president and CEO.

Bostwick is joined by Kent Callahan, who will lead workplace solutions distribution and client engagement as senior managing director. Callahan managed Transamerica’s retirement plans team from 2003 to 2015, and the employee benefits team from 2009 to 2012. He previously oversaw a portfolio of U.S. businesses and Latin American joint ventures. Callahan will report to Bostwick in his new role.

Also reporting to Bostwick, Phil Eckman has been named chief operating officer of workplace solutions. Eckman is a 23-year veteran of the organization, who most recently headed Transamerica’s customer experience and advice center. Eckman now will expand his responsibilities to lead workplace solutions operations.

Ascensus Renames TPA Solutions Group

Ascensus has announced that its TPA Solutions group will become FuturePlan by Ascensus.

FuturePlan by Ascensus will encompass 42 locations throughout the country and service more than 34,000 plans with 30 different recordkeeping partners. The group’s expertise includes defined contribution plans, defined benefit traditional and cash balance plans, employee stock ownership plans, specialty plans, and 3(16) fiduciary services.

“FuturePlan by Ascensus gives advisers and plan sponsors a new way of thinking about retirement plan administration,” says Jerry Bramlett, who heads the group. “We’re able to provide high-touch, local service backed by the tremendous resources of a large national organization, including a deep bench of talent, significant ongoing technology investments, data security infrastructure, in-house ERISA expertise, and many other advantages.”

Insight Investment Creates Consultant Head Role

Insight Investment has announced that Jon Morgan is now head of Consultant Relations, North America, a newly-created role. Morgan will help develop Insight’s consultant relationships as the firm responds to pension plan sponsors seeking strategies for liability and liquidity needs. He will also cover consultant-supported platforms and retail offerings.

“In addition to supporting defined benefit solutions, Jon will play a key role in building consultant advocacy for Insight’s fixed income and multi-asset strategies such as Core Plus and Broad Opportunities,” says Jack Boyce, head of Distribution for North America at Insight. Insight’s business has been built on a reputation for investment quality, demonstrated by the fact more than 80% of our global assets under management are consultant-intermediated. We rely on consultants to undertake the deep analysis required to identify what differentiates a leading manager from a good one.”

“In my view, there are few asset managers who can have a conversation about LDI on the same level as Insight,” says Morgan. “We believe plans are becoming more liability-aware and interested in approaches making use of customized benchmarks, derivatives and new cash-flow management strategies. In the retail market, there is opportunity for a manager that can provide fresh ideas for the future, particularly around outcome-oriented approaches to investing in core asset classes such as fixed income and multi-asset.”

Morgan joins from BlackRock where he was most recently director of Global Consultant Relations. He will be based in New York and report to Paul Hamilton, global head of Consultant Relations.

Nationwide Increases Distribution and Sales Team with New Hires  

Nationwide has expanded its distribution and sales team with two new hires.  

Scott Ramey is joining Nationwide’s retirement plans business to lead efforts serving and expanding relationships with the company’s existing public-sector partners and plan sponsors. He will report to Eric Stevenson, who continues to lead all distribution and sales efforts for Nationwide’s retirement plan business and was recently promoted to senior vice president.

Ramey has more than 25 years of experience in financial services, most recently as senior vice president of workplace solutions at Transamerica. Prior to that role, he led institutional sales for Transamerica.

The second addition to the team is Jennifer Yellot, who will serve as a client acquisition director, reporting to Rob Bilo. Yellot will oversee large, public-sector acquisitions in the Midwest United States. She joins Nationwide with over 15 years of experience in retirement plan sales. Most recently, she served as a vice president of tax-exempt sales at Prudential. Prior to working at Prudential, she held sales roles at Aspire, Transamerica and Empower.

Ramey received his undergraduate degree from John Carroll University, and holds Series 7, 24, 26, 63, Life, Accident and Health licenses. Yellot has a bachelor’s degree from Pennsylvania State University. Additionally, she holds FINRA Series 6, 63, and 26 licenses.

SMA Executive Joins Franklin Templeton

Franklin Templeton has hired Brian Silverman as its new head of separately managed accounts (SMAs). Reporting to Pierre Caramazza, head of the U.S. financial institutions group, Silverman will be responsible for overseeing business development and strategy for the firm’s U.S. SMA business. He will lead a team servicing the SMA business and partnering with the broader U.S. distribution group, as well as with marketing, product development and investment management.

Silverman has over 25 years of experience in financial services, with a focus on the managed accounts industry. He joins from BlackRock Financial, where he spent the past 11 years focusing on platform and product development in the SMA business line, and previously held positions at Goldman Sachs and Morgan Stanley. Silverman earned his bachelor’s degree in psychology from Muhlenberg College and his master’s in finance from Fordham University Gabelli School of Business. 

Compliance April 12, 2019

ESG, Proxy Voting Trends Unlikely to Shift on Executive Order

The ultimate impact of President Trump’s new executive order is likely to be more symbolic than substantive when it comes to the real-world activities of retirement plan fiduciaries and investment managers. 

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This week the White House issued an executive order on the evolving topic of proxy voting and environmental, social and governance investing programs being put into practice by retirement plans subject to the Employee Retirement Income Security Act (ERISA).

In the order, the Trump Administration says its intent is to “promote energy infrastructure and economic growth.” To this end, the order covers 10 sections that describe the Administration’s vision for greater exploitation of natural resources as a driver of economic growth.

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For the retirement plan industry, Section 5 of the executive order is probably most significant. As this section details, the majority of financing in the United States is conducted through its capital markets.

“The United States capital markets are the deepest and most liquid in the world,” the order states. “They benefit from decades of sound regulation grounded in disclosure of information that, under an objective standard, is material to investors and owners seeking to make sound investment decisions or to understand current and projected business.”

Here the order cites the Supreme Court’s 1976 decision in TSC Industries Inc. vs. Northway, which determined that environmental, social and governance (ESG) information is “material” to investment decisions of fiduciaries if “there is a substantial likelihood that a reasonable shareholder would consider it important.”  

According to the executive order, the United States capital markets have “thrived under the principle that companies owe a fiduciary duty to their shareholders to strive to maximize shareholder return, consistent with the long-term growth of a company.”

After laying this out, the order gets prescriptive: “To advance the principles of objective materiality and fiduciary duty, and to achieve the policies set forth in subsections 2(c), (d), and (f) of this order, the Secretary of Labor shall, within 180 days of the date of this order, complete a review of available data filed with the Department of Labor by retirement plans subject to the Employee Retirement Income Security Act of 1974 in order to identify whether there are discernible trends with respect to such plans’ investments in the energy sector.”

Furthermore, within 180 days of the date of this order, the Secretary “shall provide an update to the Assistant to the President for Economic Policy on any discernable trends in energy investments by such plans. The Secretary of Labor shall also, within 180 days of the date of this order, complete a review of existing Department of Labor guidance on the fiduciary responsibilities for proxy voting to determine whether any such guidance should be rescinded, replaced, or modified to ensure consistency with current law and policies that promote long-term growth and maximize return on ERISA plan assets.”

Experts Anticipate Order Impact Could Be Muted

In written commentary discussing the new executive order, George Michael Gerstein, co-chair of the fiduciary governance group at Stradley Ronon, suggests the impact of the executive order is likely to be more symbolic than substantive when it comes to the real-world activities of retirement plan fiduciaries and investment managers. 

“Less than one year ago, the DOL released Field Assistance Bulletin 2018-1, in which the DOL clarified its views on how shareholder engagement could be conducted in a manner consist with ERISA’s fiduciary duties,” Gerstein observes. “Proxy voting and other forms of engagement are fiduciary functions under ERISA.”

According to Gerstein, the application of ERISA’s fiduciary duties in this context is “ultimately a function of materiality and cost, each positively related to the other, so that as the perceived materiality of an issue on investment performance that is the subject of engagement increases, a fiduciary has more rope to incur costs on its meetings with the board, etc. The converse is also true.”

With this in mind, should the DOL respond to this executive order by implementing a narrower interpretation of what ESG risks are material to a company’s performance, this could in theory drive less engagement on those risks by retirement plan fiduciaries.

“A more probable result, however, is that fiduciaries already evaluating ESG risks will continue parsing whatever ad hoc disclosures are volunteered by the companies, and may point to statements made by prominent individuals and institutions on the materiality of these risks,” Gerstein says.

Shifting Perspective on ESG and Proxy Voting in ERISA Plans

Earlier commentary shared by David Levine, principal with Groom Law Group, provides some helpful context for understanding the potential impact of the new executive order.

As Levine explains, the DOL’s Field Assistance Bulletin 2018-01 (issued under the Trump Administration) puts a new spin on the earlier and more legally significant Interpretive Bulletin 2016-01, in which the Obama Administration directed the DOL to operate under the assumption that proxy voting and shareholder engagement can be consistent with a fiduciary’s obligation under ERISA.

The new Trump-inspired spin, in essence, says that the DOL primarily characterized proxy voting and shareholder activism activities as permissible under ERISA because they typically do not involve a significant expenditure of funds, Levine explains. In other words, with President Trump in charge, the DOL now operates under the assumption that it is not always appropriate for retirement plan fiduciaries to routinely incur significant expenses and to engage in direct negotiations with the board or management of publicly held companies with respect to which the plan is just one of many investors.

Similarly, according to Levine, FAB 2018-01 states that another Obama-era Interpretive Bulletin (IB 2015-01) was not meant to imply that plan fiduciaries, including appointed investment managers, should routinely incur significant plan expenses to, for example, “fund advocacy, press, or mailing campaigns on shareholder resolutions, call special shareholder meetings, or initiate or actively sponsor proxy fights on environmental or social issues relating to such companies.”

Finally, Levine says, FAB 2018-01 uniquely cautions fiduciaries who believe there are special circumstances that warrant “routine or substantial” shareholder engagement expenditures to document an “analysis of the cost of the shareholder activity compared to the expected economic benefit (gain) over an appropriate investment horizon.”

“Thus, DOL has signaled that, as a matter of enforcement, it will require additional documentation regarding significant expenditures of plan assets for shareholder proxy voting activities,” Levine says.

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