401(k) Assets Rebound 15% Amid Critiques

Recent data shows an uptick in assets held in 401(k) accounts even as the national conversation turns to savings gaps.

In 2023, 401(k) assets rose about 15% year-over-year to hit $7.4 trillion, the second highest mark in history after 2021’s $7.9 trillion, according to a recent update by the Investment Company Institute.

Meanwhile, the average balance for 401(k) savers was up 19% to $134,128 at the end of last year due in large part to market performance, according to Vanguard’s most recent data. The median balance, which helps strip out the higher account balances, was also up 29%, though at a much lower $35,286.

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But while the numbers have risen, sentiment around the 401(k) has been taking knocks recently. The headline in a May 20 piece in the New York Times Magazine asked, “Was the 401(k) a Mistake?” The piece goes on to consider arguments made in 2021 for a government matching program in savings plans and a more recent suggestion of a reduction or end to the 401(k) tax benefit. That story came after Politico published in April a two-year investigation detailing the 401(k) lobby. That outlet concluded, in part, that the findings “called into question the fundamental effectiveness of the 401(k) system for large segments of the population.”

The retirement industry has been responding to the discussions. This April, leaders of the National Association of Plan Advisors national conference noted the importance of combatting 401(k) critiques ahead of tax policy decisions expected in 2025. In a recent piece in MarketWatch, Ed Murphy, the CEO of Empower, cited the ICI as well as Federal Reserve data showing dramatic growth of retirement savings for middle and lower-income families alike.

“While there are legitimate concerns about Americans’ savings for their post-work years, the hyperbole obscures the reality that the 401(k) system has been one of our most successful, bipartisan public-private initiatives,” he wrote.

Meanwhile, the industry has been largely supportive of federal and even state legislation working to expand workplace plan access—with a combination of tax incentives, mandates, and policy such as mandatory automatic enrollment for new plans.

In the private industry, data certianly shows a gap in tax-advantage saving plan availability and use. According to the most recent statistics from the U.S. Bureau of Labor Statistics, 67% of private industry workers have access to a defined contribution retirement plan, with just 49% contributing; 15% of access to a defined benefit plan, with about 11% participating.

Growth Continues

Chris Horne, vice president, customer success and operations at Human Interest, reveals a different picture of retirement plan growth. He says the digital 401(k) provider has been booking over a thousand new retirement plans every month.

“The retirement industry is known for moving slowly,” Horne says. “But in the last couple of years there have been a lot of changes, and we’ve sought to find ways we can iterate on that by using technology and learnings from what plan sponsors want.” 

Don MacQuattie, senior vice president of institutional fiduciary solutions at Raymond James, points to the $10.5 trillion in savings Americans hold in defined contribution plans that show how “wildly successful” the system has been in helping people save.

“What the industry needs to do is get back to where we started, which is working to continue to expand coverage both to employers and to participants as well,” he says. “We want to make sure people have access to a plan, are in the plan, and are allocating properly to the plan. We in the industry have done a great job with that, and for those who are [criticizing] the 401(k), I’m sorry, but I’m just not seeing that.”

MacQuattie, who oversees Raymond James’ retirement plan advisement team and has served in various industry association roles, sees three parties responsible for improving the system: the retirement industry (advisers and providers), the governement and plan sponsors. In order to progress, however, he says the industry must be clear about what gaps it is looking to address and how it is going to get there.

In terms of the government, MacQuattie believes federal legislation, including the SECURE 2.0 Act of 2022, has made great progress when it comes to more employers offering plans. Likewise, he believes the retirement adviser industry has made progress in easing those plan startups by offering 3(38) and 3(21) fiduciary capabilities, providing both the expertise of plan design and management to a plan sponsor while shouldering fiduciary liability.

The biggest gap remains, he believes, for small businesses with 50 or fewer employees. Here, he notes that the industry is working to provide them with easier plan access, including the creation of pooled employer plans.

Bridging the Gap

Ted Schmelzle, 2nd VP for Retirement Plan Services at The Standard, believes PEPs are a major development in coverage expansion in part because they take the “inertia” out of setting up an individual plan. He notes that, for The Standard, the vehicle is not focused on startup plans or even small plans, but plan sponsors “of all sizes” who see the value in a customized plan with large plan benefits.

“To the extent that employers learn about this there is no hesitation in terms of fitting their plan size,” he says. “There’s no reason you should ever outgrow a PEP if it’s designed properly.”

There is a different problem, however, when it comes to addressing the savings gap for participants, says Raymond James’ MacQuattie. For workers who have plan access, he sees the issue largely one of education and support.

“You can have the prettiest website and best fund lineup—but if a participant is checked out it’s all for not,” he says. “[The retirement industry] needs to engage with participants and plan sponsors to really make that workplace plan hum.”

MacQuattie notes the success of innovations such as target date funds and more recently the promise of managed accounts. But ultimately, he believes the industry has work to do in educating and engaging participants to manage budgeting and financial concerns with decisions around saving and security; a task that will be best done through partnerships between advisers, providers, recordkeepers and plan sponsors.

“There’s no secret to building long-term wealth and security, and it’s incumbent upon us in this industry to help that plan participant population,” he says.

 

Mariner Begins Market Push as $230B Retirement, Wealth Advisory

The head of Mariner’s new institutional retirement division says plan sponsor demand for wealth services was part of the decision for the deal with Mariner Wealth.

AndCo Consulting, an institutional retirement plan advisory firm founded in 2000, had a longstanding commitment to keeping client interests first.

When the firm merged with wealth manager Mariner earlier this year, the decision was made in part with that client focus in mind, says Mike Welker, former CEO of AndCo and now national managing director of Mariner Institutional, the division created through the merger announced in February.

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“Plan sponsors had been asking about whether we could provide more services to participants,” Welker says of the firm’s decision-making around the acquisition. “We were not looking to do a deal necessarily, but it was really positioning what was a strategic decision for the organization over the next five to ten years.”

Mike Welker

Mariner, which has about 1,691 associates working with individuals and small firms, has completed the combination with what is now Mariner Institutional less than two months ago, according to Welker. That includes the roughly 100 people now working in Mariner Institutional focused traditional and retirement plan advisory services. The February deal also included the acquisition of smaller Fourth Street Performance partners, bringing on a total of more than $100 billion in assets under advisement.

That combined force now puts Mariner at about $230 billion in AUA and assets under management enterprise-wide, as of year end 2023. The entire firm is under the leadership of CEO and President Marty Bicknell, who founded the wealth advisory division in 2006.

As head of the new Mariner Institutional, Welker notes that the firm will continue to operate in many ways as it had before, only now with a national team of financial advisers.

“One of the synergies we both saw was the fact that Mariner hadn’t focused on serving the institutional marketplace and we didn’t focus on the individual marketplace,” Welker says. “We saw how Mariner served their clients very well—in part by providing services and not focusing on pushing product—and felt there was a good cultural fit. They saw the same with us in the institutional space, and so by coming together we felt we could meet the combined needs of our clients.”

Market Trend

With the move, Mariner launched itself into the ranks of wealth and workplace retirement consulting firms positioning themselves to serve both plan sponsors and the participants amassing wealth through their retirement plans. Some similarly styled competitors share the same headquarters in Overland Park, Kansas, including Creative Planning and Prime Capital Investment Advisors.

Welker says Mariner and AndCo were in talks well before signing earlier this year, and even though they are just two months into full operations, are finding business connections among clients on both sides of the aisle.

“Mariner is very purpose driven and value based, which totally aligns with our previous organization,” Welker says. “Having those cultures mesh has gone well and has allowed for a positive integration so far.”

Before the merger, Welker’s team would be providing services in defined contribution plan design, fund lineup, fee benchmarking, and all its core focus areas and capabilities. But when a client came to them asking for participant services and individual planning referrals, which Welker says was becoming more common, the firm often “had to say no.”

“With this acquisition we can now bring experienced and trained wealth advisers to meet the needs of our clients,” he says.

Meanwhile, Mariner’s wealth division can now have in-house experts for wealth clients who have their own businesses, or perhaps serve as trustees on endowments and foundations in need of institutional plan services.

Disciplined Process

Welker notes that, while there is now a wealth side of the house, Mariner Institutional will be focusing on plan sponsor services and offerings, with care being taken regarding plan sponsor participants and the wealth business.

“We might make clients aware of our service offerings, but we don’t plan for our advisers to be directly soliciting. We would pursue if it is requested by the plan sponsor; if the client isn’t interested, then we’re not going to push it.”

Welker says that structure is possible because of the “client-centric” ethos of the division and entire firm. He notes an “open architecture” approach when it comes to working with plan sponsors, so if they prefer a different provider or partner, then Mariner Institutional can help guide them there.

“If something is not good for the client then you shouldn’t talk about it,” he says. “That’s how we keep happy clients and client retention.”

That said, Welker does see a growing demand for individual wealth management emerging from the institutional retirement space. As the defined contribution plan has become a source of savings for people, so do the complexities around managing it.

“A lot of plan sponsor clients are asking us about what we can do for participant education, financial wellness, and what tools we can provide,” he says. “We’re here to bring the apporopriate resources and experience to solve client issues and to do whatever works for the plan for a strong outcome.”

And even though the merger is still fresh, Welker notes that Mariner Institutional may bring on more talent provided it fits the culture and approach.

“We’re going to continue to grow while meeting the needs of the market that requires these services,” he says.

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