Greetings and 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 - 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!
Almost immediately after the OMB published the DOL’s fiduciary rule with some parts effective September 23rd, a lawsuit was filed by the Federation of Americans for Consumer Choice representing annuity and insurance firms in a Texas US District Court, the same district where the previous rule was negated, asking the court for a preliminary injunction.
Reports are that FSI, which represents brokerage firms, will join or file their own lawsuit.
Meanwhile acting DOL Secretary Su took heat from republicans over the rule in a congressional hearing asking for her immediate resignation.
Questions remain whether firms can wait to begin changing policies and procedures and what will happen if republicans win the Whitehouse and choose not to defend the rule which will be easier than revoking it.
The job market cooled in April reporting a healthy 175,000 new jobs, down from 303,000 in March with unemployment up a tick but still below 4% led by the Education & Healthcare sectors which added 95,000 positions. Business services was down 4,000.
Some experts called it the “Goldilocks Report” – not too hot and not too cool – with some hoping it will cause the Fed to eventually lower interest rates which they recently held steady due to concerns about inflation.
Though we can no longer call this a war for talent, there is still pressure on employers to hire and retain the right workers with retirement plans a key strategic weapon.
JP Morgan reported a data breach to the Maine attorney general which affected sensitive information about 451,000 plan participants including Social Security and bank routing numbers.
Like previously reported data breaches, the culprits were third parties this time employed by or agents of the bank’s customers not entitled to see the data.
More to come as participants and providers deploy more third parties to help manage the plans and participant assets.
After successfully acquiring the practices of their own advisors, LPL announced a $400 million fund to buy external practices called “liquidity and succession” closing on their first acquisitions. Deals are typically 8-10 times EBITDA deploying $10-$20 million with the firm committed to supporting the next generation of advisors.
LPL added over 1,300 new advisors over the last year which now totals over 22,000. Look for other independents to jump in further fueling the already hot advisor M&A market.
As small to mid-size defined contribution plan sponsors wake up, finding service people and organizations that they can trust becomes critical.
These plan sponsors are in difficult positions, most thrown into their jobs with little to no training and limited resources still grappling to understand the roles and responsibilities of advisors, record keepers, TPAs and fund companies. In this phase of awakening, the focus is on competence and knowledge but as they get more aware and comfortable, they will be asking, “Who can I trust?”
Read my recent WealthManagement.com column about how RPAs are at the crux of the transition and, if they can win the trust of clients, there is no limit to where these relationships could lead fueling the convergence of wealth and retirement at work.
So those were the most important stories from the past week. I listed a few others I thought were worth reading covering:
- Acting DOL Secretary takes heat at Congressional hearing about new fiduciary rule
- Alternative investments continue to struggle to get on 401(k) plan menus
- Are CITs really cheaper than mutual funds or is it a shell game?
- Cerulli quantifies the benefits of technology for advisors
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.
