A warm welcome to this week’s edition of 401k Real Talk. This is Fred Barstein contributing editor at WealthManagement.com’s RPA omnichannel and CEO at TRAU, TPSU & 401kTV coming to you from steamy Jupiter - I review all of last week’s stories and select the most important and interesting ones providing open honest and candid discussion you will not get anyway else. So let’s get real!
JD Power’s 2024 Financial Advisor Satisfaction Study with over 4,000 advisors showed that employee based broker dealers like wirehouses rated higher than independents due in part to gains in compensation, technology and support while indy advisors cited poor leadership at their firm.
Stifel led all employee based firms followed by Raymond James & Associates and Edward Jones; independents were led by Commonwealth, Raymond James Financial Services and Cambridge.
More advisors are moving to pure RIA models and both RIA and RPA aggregators are picking off the top independent firms leaving the remaining indy advisors perhaps feeling a bit left out while many independents are owned or being acquired by PE firms which usually leads to cost cutting and senior management turnover.
While mutual funds and ETFs assset weighted expense ratios dropped 3.4% to 36bps last year and are at their lowest price point in history according to a Morningstar report, the 2023 decrease which was just half of the decline in the previous year.
Price pressure plagues passive as well as active funds but consumer costs may not be dropping due to fees paid to advisors as the importance and value of advice continues to grow.
Fund fee pressure is especially rampant in DC plans due to litigation, fiduciary concerns and the proliferation of CITs as well as the exodus to passive investing. Larger active managers can lower their management fees putting pressure on smaller competitors.
Is the recent US Supreme Court case overturning the Chevron decision a major sea change for our country which places more power in the hands of courts over regulators to interpret ambiguous laws? Chair Foxx of the Committee on Education and the Workforce intends to insure that the Biden administration adheres to limitations promising robust oversight if they do not in letter to 8 agencies including the DOL & PBGC.
Foxx cited past gross and abusive overreach which she hopes will be curbed by the recent court case.
And while Justice Kagan in dissent predicted a tsunami of lawsuits echoed by many ERISA experts, Encore Fiduciary’s Dan Aronowitz welcomes the restraints claiming that the DOL overstepped their ERISA jurisdiction with their fiduciary rule and doubts that more lawsuits against DC plan sponsors will be filed.
Citing inflation and increased benefit costs, a LIMRA study indicates that employees are cutting back willing to spending 20% less than two years ago.
Even as healthcare benefits rise, workers are not likely to forgo them putting pressure on saving for retirement but also an opportunity for advisors to help workers maximize their benefit spending as just 54% were satisfied with employer communications. Look for more employers to deploy high deductible healthcare giving rise to HSAs.
IRA rollovers are a huge business for many wealth advisors with close to or over $800 billion exiting DC plans annually. While some RPAs focus on rollovers, most see them as lost revenue opportunities. But with the new DOL fiduciary rule, the potential for in-plan retirement income and fintechs like Pontera and Future Capital, will IRA rollovers diminish or evolve?
Read my recent WealthManagement.com column about while harvesting IRA rollovers, most with modest balances, may not be a great business for RPAs, it is just one of many services that advisors can offer participants in the plans they manage to form relationships leading to more lucrative engagements as the convergence of wealth, retirement & benefits at the workplace continues to gain momentum.
So those were the most important stories from the past week. I listed a few others I thought were worth reading covering:
- Encore says industry overreacting to overturning of Chevron
- Bain Capital buys Envestnet
- Vanguard leans into consultant and advisor relations as new CEO takes over
- Clearing misconceptions about CITs
- Prime Capital and Pensionmark rebrand
Please let me know if I missed anything or if you would like to comment. Otherwise I look forward to speaking to you next week on 401k Real Talk.