Deals and People August 30, 2019

Retirement Industry People Moves

SageView Advisory adds consultant to Phoenix division; Lockton selects retirement expert for Southeast practice; Prudential Financial announces series of hires and promotions; and more.

Reported by
Art by Subin Yang
Art by Subin Yang

Art by Subin Yang

Principal Global Investors Hires CEO for Principal Funds

Kamal Bhatia has joined Principal Global Investors as the new president and CEO of Principal Funds. Bhatia assumes responsibility for the global platform covering U.S. funds, European and Asian UCITS and global exchange-traded funds (ETFs). He will lead the strategic growth and management of the global platform supported by distribution, product, marketing and operations.

“As we continue to invest in and evolve our platform, Kamal brings significant asset management experience across multiple business platforms,” says Pat Halter, chief executive officer and president Principal Global Investors. “In addition to being a strong cultural fit, Kamal brings a seasoned understanding of evolving customer needs to help us take advantage of new opportunities to grow our global platform.” 

Never miss a story — sign up for PLANSPONSOR newsletters to keep up on the latest retirement plan benefits news.

“Our goal is to meet our clients with a variety of capabilities that service their needs and exceed their expectations,” says Bhatia.

Bhatia comes to Principal from OC Private Capital, a joint venture between Oppenheimer Funds and Carlyle, where he served as CEO and chairman of the Board. Previously he has held senior management roles at OppenheimerFunds, TIAA-CREF Asset Management, Mellon Asset Management and Citigroup. He holds a master’s degree from Washington University in St. Louis and bachelor’s degree from Indian Institute of Technology in Kanpur.

SageView Advisory Adds Consultant to Phoenix Division

SageView Advisory Group has hired TJ Arcuri as a retirement plan consultant in Phoenix, Arizona.

Arcuri specializes in collaborating with retirement plan sponsors to offer programs in the defined contribution (DC), defined benefit (DB) and non-qualified plan space. Prior to joining SageView, he was a senior institutional relationship manager at Vanguard. 

Arcuri holds a bachelor’s degree in finance and minor in economics from the University of Delaware, and a master’s degree from Arizona State University with a dual emphasis in finance and international business. 

Lockton Selects Retirement Expert for Southeast Practice

Lockton’s Southeast Practice diversified its consulting services with the addition of retirement expert, Michael Blake, to its Florida-based team.

Blake, a 34-year industry veteran, holds a graduate degree from the George Washington University and several FINRA securities registrations, including the Series 63, 65, 7 and 24. He will advise retirement plan sponsors on plan design, administration, and fiduciary risk mitigation.

“Our clients expect sophisticated analytics that can help them manage their risk,” says Manoj Sharma, chief operating officer of Lockton’s southeast-based practice. “This includes a comprehensive analysis of their retirement plan. Michael’s expertise will help us provide an even more holistic perspective on client risk and deliver more complete recommendations.”

“Having a disciplined, defined process to oversee investments is one of the most important things retirement plan sponsors can do to protect themselves from fiduciary risk,” says Pam Popp, president of Lockton’s national retirement practice. “Michael will not only help clients monitor their funds, he will help them implement fiduciary best practices for overall plan governance, as well.”

Prudential Financial Announces Series of Hires and Promotions

Prudential Financial, Inc. has announced that Andrew Sullivan will succeed Stephen Pelletier as executive vice president and head of U.S. Businesses.

Sullivan will report to chairman and CEO Charles Lowrey, effective December 1. Pelletier will retire following a 27-year career with the company, in which he led Group Insurance and Prudential Annuities, and founded Prudential’s international asset management businesses, now PGIM Global Partners.

“Today’s appointments accelerate the momentum that the existing U.S. leadership team has created over the past several years. Andy and his executive team will continue to bring a broader set of financial wellness solutions to more people in new ways,” says Lowrey. “Our conviction in this strategy, and the significant opportunity it represents for expanding our market reach, has never been stronger.”

The company also announced three new appointments, effective December 1, to its U.S. Businesses executive team: Phil Waldeck, current president of Prudential Retirement and pioneer of Prudential’s Pension Risk Transfer business, will succeed Andy Sullivan as head of the Workplace Solutions Group. Yanela Frias, current head of Investment and Pension Solutions within the Retirement business, will be elevated to president of Prudential Retirement. She will be succeeded by Scott Gaul, current senior vice president, Sales and Strategic Relationships, Prudential Retirement; and Dylan Tyson, current CEO of Prudential of Taiwan.

Kent Sluyter, current president of Prudential Annuities, will retire, following a 38-year career at Prudential, during which he has held various leadership positions, including president and CEO of Individual Life Insurance and Prudential Advisors.

Pelletier, former executive president, will remain in an advisory role until April 1, 2020.

UBS Head Selected to Lead Asset Management Team  

Following more than ten years in the Group Executive Board of UBS, Ulrich Koerner has decided to step down from his current roles as president, Asset Management and president, UBS Europe, Middle East and Africa.

Suni Harford will join the Group Executive Board of UBS and succeed Koerner as president of the Asset Management division.

Harford joined UBS in 2017 in her current role as head of Investments for UBS Asset Management. During her time at the company, she led Asset Management’s integrated Investments capabilities, driving performance for its clients. Harford joined UBS following a 24-year career at Citigroup Inc., the last nine of which she was the regional head of Markets for North America. She started her Wall Street career at Merrill Lynch & Co. in investment banking.

Investing August 30, 2019

Mixed TDF Investors’ ‘Sophistication’ May Be Hurting Them

Research explored the allocation decisions of 30,516 mixed target-date fund (TDF) investors to determine which types of investors are more susceptible to mixing TDFs and how they mix them.

Reported by

Target-date funds (TDFs) are designed to simplify investing for participants in defined contribution (DC) plans, especially in plans that use them as the default investment. However, there are potentially more than 10 million participants in DC plans today combining a TDF with other plan investments, commonly referred to as “mixed target-date fund investors,” according to a report from Morningstar.

“Combining target-date funds with other investments may not seem problematic at first glance, [but] it can diminish (or eliminate) the target-date fund’s potential benefit,” David Blanchett, head of Retirement Research at Morningstar Investment Management LLC, says in the report, “Mixed Target-Date Fund Investors: Is There a Method to the Madness?”

For more stories like this, sign up for the PLANSPONSOR NEWSDash daily newsletter.

Blanchett explored the allocation decisions of 30,516 mixed target-date fund investors to determine which types of investors are more susceptible to mixing target-date funds and how they mix them, with the hope of using the results to reduce the incidence of mixed target-date fund investing.

While the incidence of mixed target-date fund investing has improved over the years, still, many participants who are older, with higher salaries, balances and deferral rates choose to put a portion of their balances in other investments. Similar to other investors who decide to self-direct their accounts (compared with default investors), they would generally be classified as more sophisticated. However, Blanchett says when comparing mixed target-date fund investors to other self-directors, mixed target-date investors appear to be slightly less sophisticated.

A Vanguard study earlier this year found nearly one-third mix TDFs with other investments and “are pursuing what appear to be reasonable diversification strategies.” Blanchett agrees, but says their allocation decisions tend to make them more aggressive than a TDF with an appropriate vintage (that is, target retirement year). Their allocations are consistent with a retirement year that is 10 years later than the actual vintage they should be in. He found mixed TDF investors tend to have less than half of their portfolio in the TDF and overwhelmingly combine the TDF with equity funds. For example, the average allocation of mixed TDF investors is 37% TDFs, 49% equity funds, and 13% bond funds.

Blanchett cites a 2017 study that estimated the majority (55%) of participants who mix TDFs with other investments do so out of choice, while the remainder (45%) stem from plan sponsor decisions, such as including employer contributions in company stock, nonelective contributions to the plan’s default fund, and so on. A 2011 study from Vanguard found the same.

Additionally, the 2017 study cited found half of the mixed TDF investors become mixed at enrollment, while one-third were not invested in a TDF but added it to their portfolio at some point.

Blanchett also cites a 2016 Financial Engines study which found participants who were mixed TDF investors thought doing so could lead to outperformance; were concerned about “putting all their eggs in one basket,” despite the TDFs are already incredibly diversified (and 82% reported knowing as such); and were seeking greater personalization than the TDF alone could provide.

Blanchett suggests an investor who would like a more-aggressive allocation would generally be better off moving along the TDF glide path by selecting a vintage with a higher risk level than mixing the TDF with equity (or bond) funds from the core menu. For example, if a participant thought the equity allocation in the 2025 TDF vintage was too conservative, he could select the 2050 vintage to achieve this more-aggressive risk level. “While moving along the glide path results in a mismatch between the actual and expected target dates, it keeps the participant entirely in a professionally managed portfolio,” Blanchett says.

Alternatively, he suggests plan sponsors nudge those participants who are not allocating to the TDF in its entirety toward some type of in-plan advice solution, such as personalized advice or managed accounts.

«