Data & Research December 5, 2016

Reforms in United Kingdom Offer Guidance for U.S. Policy

Retirement reforms being implemented in the UK through 2018 represent an important testing ground for government-backed savings efforts. 
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Faced with a daunting retirement savings shortfall, U.K. policymakers instituted a series of reforms that has expanded retirement plan coverage for workers, and a new issue brief offers a detailed analysis for U.S. policymakers about the initiatives.

“The United Kingdom’s New Retirement Savings Program,” an issue brief from the National Institute on Retirement Security (NIRS), co-authored by John A. Turner, director of the Pension Policy Center, and Jennifer Erin Brown, NIRS manager of research, explains that the U.K. reforms require all employers to automatically enroll their employees in a retirement savings account. Also, employers are required to contribute to the retirement plan if an employee participates, although individuals can opt-out. The U.K. also sponsors its own retirement plan—the National Employment Savings Trust (NEST)—so all employers are able to offer their employees a plan.

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The new reforms are being phased in over time and will be fully implemented by 2018. During the remainder of 2016 and in 2017, U.K. employers with 30 or fewer employees will enroll their employees in a plan. Already, the U.K. has expanded coverage by six million workers. A total increase in coverage of nine million workers is expected when the program is fully implemented in 2017.

“U.S. policymakers would be wise to examine the reforms the U.K. has implemented. We have a deep and serious retirement savings shortfall in the U.S., and legislative efforts that attempted to move the needle on retirement savings and coverage have failed,” says Brown.

“Ten years ago, Congress clarified that employers could use automatic enrollment features to nudge employees to save for retirement. But sadly, the rate of retirement plan coverage is lower today than it was in 2006,” says Diane Oakley, NIRS executive director. “The experience across the pond is proof for policymakers of the power of auto-enrollment when it’s working at full capacity. In fact, many U.S states that are taking steps to help working Americans have a financial stability in retirement are considering similar automatic enrollment practices.”

The issue brief may be downloaded from here.

In Practice December 5, 2016

Advisers Looking to Technical Solutions Ahead of DOL Rule

A new survey finds that as implementation of the DOL’s fiduciary rule approaches, more than half of advisers expect to increase investment in client service and compliance technology.
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Moving into 2017, financial advisers are keeping a close eye on the Department of Labor’s Conflict of Interest Rule, which goes into effect in April. 

A new survey by the SEI Advisor Network reveals that compliance and compressed fees are the top concerns for advisers as implementation of the rule draws closer, with 24% of advisers citing each as a major priority. The next biggest concern is increasing revenue.  

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In order to enhance compliance practices and otherwise ease the transition towards more fee-based business, advisers are increasingly turning to technology. The survey found 55% of advisers expect to boost investments in technology throughout 2017.

Recently, several firms have been launching different software tools and programs to help advisers comply with the fiduciary rule. Such services have been led by companies like RIXtrema, AssetMark, Advicent, as well as SEI and Redtail, among others.

Thirty-percent of advisers said they are also considering outsourcing the legal and compliance aspects of their business. And despite speculation that a Donald Trump presidency will halt the DOL rule in its tracks, many advisers are still moving forward with improving compliance capabilities—a move encouraged by SEI.

“We believe advisers need to continue to prepare for the DOL rule despite current speculation that it will not come to fruition because of the incoming administration,” says Wayne Withrow, executive vice president of SEI and head of the SEI Advisor Network. “These survey results demonstrate that the rule is impacting advisers’ considerations in several aspects of their business when looking at 2017, which is one reason we are seeing advisers re-evaluate their infrastructure, increase attention to client-facing activities and focus on the outsourcing of non-client facing activities.”

When asked what keeps them up at night, 24% of advisers said that regulations like the DOL fiduciary rule are their greatest concern. Furthermore, the survey found that only 11% of advisers feel ready for the implementation of the rule, while 41% feel that they are almost ready.

“Even with the level of unpreparedness felt by financial advisers, the survey results imply that they are considering the necessary steps to plan, execute and comply by converting to a fee-based model to get in front of the rule with clients top of mind,” says Withrow.

The financial adviser survey was conducted in October and November 2016 with 275 advisers working with SEI, and attending SEI’s regional Strategic Advisor Conferences.

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