Retirement Industry People Moves

Aegon Asset Management Hires Distribution Head; TRA Acquires Virginia TPA Firm; American Century Investments Names Senior Retirement Strategist; and more.

Art by Subin Yang

Art by Subin Yang

Aegon Asset Management Hires Distribution Head

Aegon Asset Management has named Christopher Thompson the U.S. head of distribution. Over the course of his more than 30 years in the asset management industry, Thompson has led institutional and intermediary sales, client service, marketing and product management. He started at Aegon Asset Management on April 1. 

Thompson is responsible for developing and managing the overall distribution strategies for the U.S. marketplace, including institutional and intermediary sales, consultant relations, client service, marketing and product management. He is also a member of the firm’s executive committee.

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“Chris brings deep experience in sales, marketing, product development and investment management to the firm,” says Gary Black, U.S. CEO. “Our distribution efforts will benefit from his direction and leadership as he shares the best of Aegon Asset Management’s investment strategies with existing and new markets, globally.”

Prior to joining Aegon, Thompson served as senior managing director and head of the Americas client group at AllianceBernstein. He also held positions at Columbia Threadneedle Investments, Putnam Investments and BEA Associates/CS First Boston Investment Management.

“This is an exciting opportunity to introduce Aegon AM’s investment strategies to new audiences and expand its reach into multiple markets,” says Thompson.

TRA Acquires Virginia TPA Firm

The Retirement Advantage, Inc. (TRA) has acquired Gillespie & Company of Virginia, a third-party administration firm, headquartered in Danville, Virginia.

“We are pleased the Gillespie & Company staff are joining TRA and will be able to continue to provide the exceptional guidance and service their clients have grown accustomed to,” says TRA President Matt Schoneman.

“Our organizations are similar in many ways and have an outstanding track record for exceptional customer service,” says Kay Gillespie, founder and president of Gillespie & Company of Virginia. “We are excited about the possibilities this acquisition offers to the clients of both organizations.”

“Over the past two years, TRA has successfully integrated six TPA’s with our firm,” adds Schoneman. “Adding Gillespie & Company enhances our already strong position as a leader in the retirement services industry and complements our high-touch, relationship-based service model. We’re committed to growing our business. Tapping into Gillespie & Company’s network will allow us to develop new relationships in the region.”

American Century Investments Names Senior Retirement Strategist 

Glenn Dial has joined American Century Investments as senior retirement strategist, where he will help further the firm’s commitment to delivering resources and thought leadership in the target date and retirement income space. Dial reports to Rick Luchinsky, senior vice president, head of financial institutions and retirement.

“We are thrilled to have Glenn join our mission of ultimately helping retirement plan participants achieve their long-term goals and supporting our partners in this process,” Luchinsky says.

Dial joined American Century from Allianz Global Investors where he was a managing director and head of retirement strategy. Prior to that, he served as executive director, national sales manager of investment only defined contribution for J.P. Morgan Chase.

Dial holds a bachelor’s degree in finance from University of Central Florida and a master’s from Crummer Graduate School of Business at Rollins College in Orlando.

Transamerica Increases Workplace Solutions Team with Three Hires

Transamerica has added three workers to the company’s workplace solutions team. Michele Laffert joined the company as regional director of client engagement, Brian Nickolenko joined as senior manager of business development, and Gabe Chamberlin was promoted to TPA vice president for the Midwest region.

Laffert manages a team of client executives that focuses on mid-market retirement plans in the company’s western region. She reports to Craig Haase, director of client engagement, workplace solutions. Laffert has a master’s degree from Bay Path University.

Nickolenko oversees the business development efforts for retirement plans across the country and reports to Charmaine Hughes Lee, director of business development, workplace solutions. Nickolenko earned a master’s degree from Fairfield University.

Chamberlin supports TPA professionals in the Midwest region and reports to Joshua MacDonald, senior manager, TPA development. He holds a bachelor’s degree from Buena Vista University.

The American Academy of Actuaries Names Senior Pension Fellow

The American Academy of Actuaries has named Linda Stone, a leading pension actuary and nonprofit volunteer, as the Academy’s senior pension fellow, beginning May 20.

In this new role, Stone will help shape and communicate the Academy’s work on pension, Social Security, and other retirement security issues to the public, policymakers, and the news media. “With a variety of experience in both private practice and nonprofit roles, Linda brings a deep knowledge that will add valuable, objective actuarial perspective to the contemporary dialogue on retirement policy issues,” says Academy Executive Director Mary Downs

Stone was with WillisTowersWatson and predecessor firms for over 25 years, where she was the east region retirement practice leader responsible for all retirement clients and staff. Before that, she was leader of the Mid-Atlantic retirement practice. She previously served as a Policy Board of Directors member at the American Benefits Council, and, through her volunteer position as a fellow with the nonprofit Women’s Institute for a Secure Retirement (WISER), has frequently spoken at conferences across the country. In February 2019, she testified before the U.S. Senate Special Committee on Aging.

Stone is a graduate of St. Joseph’s University (SJU), a member of the SJU College of Arts and Sciences Advisory Board as well as its Actuarial Science Industry Advisory Board, and past board member of The Forum of Executive Women.

Volatility Is Not a Bad Word

Making sure plan participants understand the positive aspects of volatility can help them avoid poor trading decisions during periods of negative returns.

Over his career in the financial services industry Bob Browne, chief investment officer at Northern Trust, has often been asked about the prospect of an impending recession.

Most recently, he hears a lot of questions about the U.S. trade dispute with China, as well as more generalized concerns about the rate of global growth.

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“Investors are always asking about the prospect of a recession,” he says. “What I tell them today is that, in our five-year outlook, we do foresee the potential for some slowing down of global growth. But let me be clear. Growth may moderate over the next five year period but we do not see a high likelihood of a recession.”

Browne and his team expect that, over the coming five years, growth will trend toward the structural potential of the global economy, which in their estimation is about 2%. This is not far from the published expectations of the U.S. Federal Reserve, Browne notes.

“When I am asked about the volatility that occurred in late 2018, I tend to say that it seems that the Fed made a mistake by raising rates again in the fourth quarter,” Browne says. “As you remember, the Fed was signaling at that time that they would potentially go to 3% rates in the relatively near future. That caused some broad concern among investors, but it seems the market volatility inspired the Fed to pause, which is why things have calmed down.”

Despite the escalating trade dispute between China and the U.S., Browne highlights how U.S. and global economic data has been strong. Here in the U.S., GDP growth reached 3.2% in the first quarter.

“Modest growth and low inflation, we expect, will continue to be the main themes in 2019,” Browne says. “We are, in fact, over-weight risk in the market today.”

Asked to reflect on the way investors have reacted to market volatility in the last year—many have sold equities at depressed prices to buy fixed-income investments at a premium—Browne says he commiserates with clients’ concerns. It is always scary to see the dollar value of one’s portfolio drop quickly over the course of a few days or weeks.

“But I am constantly reminding people that the best a lot of them ever felt about the markets was probably in late 2007, and the worst they ever felt was probably in March of 2009,” Browne said. “Those investors who have stayed the course during the last decade have been rewarded handsomely. The Great Recession was an extreme example, but we have to remember that, when you feel somewhat uncomfortable, that’s often the time to find the best buying opportunity for long-term investors. Long-term horizons give you a lot of flexibility and opportunity during periods of volatility.”

Sequence of Returns Risk Requires Its Own Conversation

According to Elle Switzer, director of annuity product management for CUNA Mutual Group, it is an unfortunate fact that the term “volatility,” which in itself is strictly neutral, is commonly interpreted negatively by novice investors. Making matters worse, the term is thrown around rather injudiciously by some commentators, who fail to describe both the positive and negative impacts of volatility on markets in the long-term.

“It’s one of those words that in a strict technical sense is neutral, but nonetheless it gets a bad rap,” Switzer writes in a newly published white paper on the topic, called “How Investors Can Take Control of Volatility.” “Did your car fire right up this morning? That’s because the stuff in the tank is volatile. The 401(k) account doubled over the last decade? That, too, was volatility in action.”

As Switzer explains, volatility can be good or bad, but for most people—especially casual investors such as those with a default workplace retirement plan—the connotations of volatility are entirely negative. Switzer says this is especially true when it comes to financial markets.

“The term suggests flashing red numbers, downward sloping charts, or 1929 black-and-white pictures of Wall Streeters who have lost everything,” she says.

Switzer’s theory is that the idea of volatility invokes the feeling of not being in control, which is a natural source of distress for most people, especially when it comes to money matters. While perhaps no amount of preparation can completely eliminate the anxiety that comes with market gyrations, Switzer says, a little knowledge and advanced planning can help ensure casual investors stay on course through any storms that may come their way.

According to Switzer, apart from understanding the benefits of diversification and the fact that volatility is the fundamental source of market growth in the long-term, “a little informed historical perspective” can help take the edge off volatility.

“It was big news in early 2018 when the Dow Jones Industrial Average suffered its largest one-day point loss ever,” Switzer recalls. “’Dow plunges 1,175 points in wild trading session’ was the breathless headline on CNBC. However, market veterans knew that because the market had grown so large, the February 5, 2018 selloff, in percentage terms, didn’t even register in the top 20.”

Switzer’s analysis points out that, from 1990 to 2011, the Standard & Poor’s 500 posted an average annual gain of 7.6%, while the average daily close of the VIX Volatility Index during the same period was 20.6%.

“On the other hand, in the following seven years, from 2011 to 2018, the average annual gain for the S&P 500 was 10.9%, while the daily VIX average was just 15.2%,” she writes. “With the longevity and relative calm of the current bull market, it would be understandable if investors have grown accustomed to slow steady gains and perhaps forgotten what market anxiety feels like. But they would do well to remember that the current environment is not the norm.”

Switzer emphasizes that, for the retirement audience, the most important part of this conversation is probably addressing sequence of returns risk, which in a sense is a much bigger challenge for individual investors than volatility itself.

“This is the potential risk to individual savers whose retirement windows fall at a discrete and totally random period on the timeline—sometimes when the market is marching higher—and sometimes when it is falling,” Switzer says. “While the impact of the sequence of annual returns on an investment makes no difference over time if the assets are not touched, it can have a big effect if the investor is taking distributions along the way.”

Solutions commonly floated to the sequence of returns risk issue include simply ramping down equity risk within the five years before and after the retirement date. Others point to the potential use of short term liquidity buckets, which could be invested in cash or stable value products and funded in advance during healthy markets. These funds could serve as a retirees’ primary income source during down-periods in the market, when participants want to avoid locking in their losses by making withdrawals from equity funds.

Keeping Sequence of Returns Risk in Perspective

While pretty much every investment manager working in the retirement plan space will talk about the importance of addressing sequence of returns risk, they also say this risk can be over-hyped and cause investors to be too timid.

According to an analysis published by analysts with T. Rowe Price, called “A Different Perspective on Sequence-of-Returns Risk Around Retirement,” poor returns experienced close to retirement can indeed impact the likelihood of premature exhaustion of portfolio assets. As a result, many investors understandably pay close attention to movements—particularly downward movements—in their account balances as they approach retirement.

“Some investors intuitively may gravitate toward strategies that prioritize stable portfolio balances around retirement,” the analysts write. “However, a singular focus on the impact of market movements around retirement does not capture the complete picture when it comes to factors that potentially could lead to premature exhaustion of portfolio assets. One needs to consider the full range of risks and their impact on retirement outcomes over the entire investment life cycle.”

According to the T. Rowe Price analysts, focusing solely on the potential for short‑term losses near retirement does not take into account an investor’s complete financial situation.

“Investors face other significant risks―including the risk that an overly conservative portfolio will not achieve the growth required to sustain a desired level of post-retirement income. In our view, investors are more likely to achieve their goals by balancing these different risks, both before and after retirement,” they write.

According to the T. Rowe Price analysis, conventional wisdom assumes that in the event of a large draw-down near retirement, investors with relatively conservative asset allocations will be better off because a conservative portfolio will mitigate the impact of a negative portfolio shock.

“However, this discounts the possibility that following a more growth‑oriented strategy during the accumulation phase could provide a larger portfolio balance going into retirement (i.e., the distribution phase),” the analysis states. “In other words, the benefit of having a larger accumulated balance going into retirement may outweigh the negative impact of even a large market decline close to or soon after retirement. While a more growth‑oriented portfolio might experience a relatively larger percentage loss in a market downturn, it likely still will be worth more in dollar terms, even after that decline.”

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