Data & Research November 18, 2016

Slow and Steady Wins the Savings Race

CFP Board identifies this type of saver as confident about their retirement prospects.
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The Certified Financial Planner (CFP) Board of Standards surveyed American savers and found that those who have taken a slow and steady approach to saving throughout their lifetime are in the best position when it comes to retirement. The CFP Board identifies this 22% of the people it surveyed as “Confident Savers.” They have a median income range between $50,000 and $100,000, have fewer children living at home, participate in their employer’s retirement plan and expect Social Security will be an important source of income in their retirement years. They are also twice as likely as other groups to meet with a financial planner.

Confident Savers make saving money their No. 1 financial goal, with 60% saying it is extremely important to save. Eighty-eight percent of them save each and every month. On average, they began saving at age 25, and they value outside financial expertise.

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“These four basic qualities can help anyone reach financial security,” says Eleanor Blayney, CFP Board consumer advocate. “Confident Savers are the tortoises—not the hares—in life’s financial contest. They don’t have to push and sweat as retirement comes near. They can take it easy in those final laps.”

The survey also found that 75% of Confident Savers say they understand how best to save money, 65% think they are saving enough to provide themselves a confident retirement, and 45% think credit card debt is one of the most important types of debt to pay off. Conversely, only 16% are somewhat concerned about their ability to save, and only 12% say they are behind in meeting their retirement goals.

Outside of these Confident Savers, the survey found that 48% don’t have enough money to save after paying their monthly bills. Thirty-five percent report that their household income has decreased significantly. Just over one-third, 34%, say that debt prevents them from saving. Thirty percent has experienced a major medical expenditure. The CFP Board identified the other groups as Concerned Strivers (27%), Stretched Worriers (26%) and Tentative Savers (24%). Before year-end, the CFP Board will release more detailed findings on these other three groups.

The CFP Board surveyed 1,000 people online in May.

The Markets November 17, 2016

Larger Institutional Clients Embracing OCIO Service

Outsourced chief investment officer assets managed with discretion have more than doubled to nearly $1.3 trillion over the past five years, according to Cerulli Associates. 
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A new report from Cerulli Associates, “U.S. Outsourced CIO Function 2016: Opportunities for Providers to Support Institutions Across Client Segments,” highlights the very strong growth experienced by outsourced chief investment officer (OCIO) providers in recent years.

The informative publication is actually Cerulli’s “first report focused on the OCIO market,” a fact that in itself suggests change in the OCIO landscape, including in market sizing, forces of growth, and demand and needs across client segments. In particular, Cerulli finds the segment of the market in which the OCIO provider actually takes discretion over client assets—as oppposed to just offering advice—has grown impressively, with such mandates doubling in volume to reach nearly $1.3 trillion over the past five years.

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“The growth of the outsourcing market stems from increasingly complex and volatile capital markets, regulatory changes, resource constraints, and demand for improved governance,” Cerulli explains. “As a result, institutions seek timelier decision-making, deeper manager due diligence, and greater oversight of portfolio risks.”

According to Cerulli Associates, the vast majority (85%) of OCIO providers surveyed expect significant new business opportunities from institutions looking to move from an advice-only advisory relationship to a more discretionary OCIO solution.

NEXT: Much wider use of OCIO

“Institutions of all size cohorts are using the OCIO model,” adds Michele Giuditta, associate director at Cerulli. “To date, smaller investors with less than $250 million in assets have been the most frequent adopters of an OCIO solution; however, several OCIO providers indicated there is a trend of outsourcing mandates moving upmarket.”

In fact, Cerulli says some providers believe that this is partly due to new client segments, such as defined contribution (DC) plans and healthcare institutions showing greater interest in OCIO services.

“Others have cited an increase in demand from nonprofits with greater than $100 million in assets," Giuditta explains. “Cerulli's propriety survey data also identified a greater use of the OCIO model by larger institutions.”

Compared to last year's survey results, OCIOs have increased their proportion of clients with greater than $1 billion in assets under management, the Cerulli data shows. While corporate defined benefit (DB) plans and nonprofit institutions have been the greatest users of the outsourcing thus far, the OCIO service arrangement clearly has a lot to offer other groups of clients as well.

“It can work for nearly any pool of assets,” Giuditta concludes. “Healthcare institutions, for example, are grappling with many challenges and relying more heavily on investment performance to meet their goals … Anticipated outsourcing growth for DC plans is also high, primarily due to the expected implementation of the Department of Labor (DOL) Conflict of Interest Rule in 2017; the 'DB-ization' or institutionalization of DC plans; and the prominence of 401(k) fee-related lawsuits in recent years.”

Additional information on obtaining Cerulli research reports is available here.  

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