Products June 29, 2016

Advicent Launches ‘Narrator’ and Advice Tools

The new adviser support tools from Advicent are aimed at helping firms respond to the Department of Labor’s fiduciary rulemaking. 
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Advicent has launched two new tools, Narrator Clients and Narrator Advisor, designed to empower advisory firms to deliver more collaborative and proactive client-adviser relationships at a time of regulatory upheaval.  

According to the firm, these new tools “provide advisers a way to remain compliant and offer advice with the client’s best interest in mind.”

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“Financial planning software was often regarded as nice to have, but the Department of Labor (DOL) is now driving it to be a need-to-have,” the firm suggests. “If advisers want to remain relevant in the digital world and remain compliant to new legislation, they need to re-think the way they work.”

Advicent suggests that incorporating the Narrator product line into a firm’s workflow “empowers an easier transition to the new DOL standards. The transparency offered with the online portal gives the client access to their financial plan 24/7, bolstering their confidence in the strategy and increasing their likelihood to stick to the plan presented. In addition, clients will feel more involved and connected to the planning process while the adviser will simultaneously meet the expectations of the new regulation. Advicent also understands that remaining compliant can be costly, which is why the tools offered easily scale to fit organizations of all sizes.”

Phil Cunningham, CEO of Advicent, tells advisers the tool suite can “pay for itself when the adviser capitalizes on the cross-selling opportunities and the ability to uncover held away assets.” By providing a comprehensive and in-depth financial plan, the client will feel more secure with their financial future, he suggests, adding that advisers will further be able to “present their options with confidence by utilizing our robust calculation engine that will provide accurate projections with retirement planning and asset management.”

More information is at www.advicentsolutions.com.  

Data & Research June 29, 2016

DC Plan Participants More Diversified in Investments

Millennials are the most diversified generation, according to a five-year analysis of Wells Fargo's book of business.
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Over the past five years, the number of participants in defined contribution (DC) plans administered by Wells Fargo that satisfied the minimum investment diversification goal has increased 26.2%.

As a general rule, Wells Fargo considers a participant to be “diversified” if the participant is invested in a diversified investment solution such as a target-date fund, managed account product, or a comprehensive advice program. If a participant chooses to self-manage their investments, Wells Fargo considers the participant to be “diversified” if the participant invests in at least two different classes of equity funds and one fixed income fund, and has less than 20% invested in employer stock.

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Millennials are the most diversified generation at 83.6%, compared to 79.6% for Generation X and 76.7% for Baby Boomers. Wells Fargo attributes this to more Millennials being defaulted into their plan’s qualified default investment alternative (QDIA). Wells Fargo says having a QDIA is a key driver of diversification for plan participants.

Eighty-four percent of Wells Fargo-administered DC plans have a QDIA and, of those, 82% use either a target-date fund series or managed account program as their QDIA. On average, 72% of participants in Wells Fargo’s book of business are invested in their plan’s QDIA. The data shows that participants not invested in QDIAs tend to have much lower chances of meeting the diversification goal—only 37% of participants not invested in QDIAs reach the diversification goal.

For segments of the existing employee populations that entered the plan before auto-enrollment in a QDIA was in place, Wells Fargo says targeting specific participant segments with diversification messaging can be a cost-effective way to drive positive participant behavior and is a recommended best practice.

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Among Wells Fargo-administered plans, participation has increased by 19% in the last five years. Increases can be seen across all demographic segments.

The higher the income, the more likely the employee is participating; however, there is positive movement at all income levels. For example, participation went from 30.6% in 2011 to 47.9% in 2016 (56.5% increase) for participants earning less than $20,000 per year, while participation went from 73.6% in 2011 to 81.4% in 2016 (10.6% increase) for those earning $100,000 or more.

Baby Boomers have the highest participation rate, currently at 65.9%. However, Millennials and Gen Xers have gained ground in their participation rates over the last five years as well. Most notable is the 32.1% growth in Millennial participation. Wells Fargo attributes this to the impact of automatic enrollment.

Contribution rate is the slowest moving category with a 7.3% increase since 2011, but is still growing across most demographic segments.

While income is a factor in reaching the 10% contribution rate goal, it is worth noting that workers earning less than $20,000 had a higher percentage of participants meeting the 10% goal than workers in the $20,000 to $39,000 income range. Workers earning $100,000 or more who contribute 10% or more represent the “most improved” group with a 15.3% increase since 2011. The next largest increase came from workers in the $40,000 to $59,000 income range where workers contributing 10% or more increased 8.3%.

Baby Boomers have the highest percent of participants contributing 10% or more—currently 44.5%. However, the percentage of Millennials and Gen Xers reaching the 10% goal has increased more over the last five years, with the former increasing by 23.8% and the latter by 18.5%.

The study report may be downloaded from here.

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