Products August 15, 2017

Tool From Principal Offers Suggestions for Retirement Plan Design

The modeling tool assesses plan health and makes suggestions for improving it.
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In an effort to provide real-life retirement planning scenarios, Principal Financial Group announced the launch of its retirement modeling planner, designed to assess and improve retirement plan health and overall retirement readiness for participants.

While the tool aims to power effectiveness by providing steps to improve plan health, deliver estimated costs on matching contributions, and stress the impacts of retirement readiness, it’s the all-in-one, single platform that highlights its efficiency, according to Principal.

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“The advanced modeling planner provides a single platform to model best practice plan design features,” says Jerry Patterson, senior vice president for retirement and income solutions at Principal. “Plan sponsors and their advisers can conduct automatic enrollment, auto-escalation, and stretch-match formulas–in real time with real client data–to identify the most beneficial retirement solutions for their business and employees.”

The 2017 Principal Retirement Readiness Survey found most employees didn’t mind if their employers added automatic enrollment or discussed savings advice, a stark contrast to previous employer fears about employee backlash when setting steep default savings rates. Eighty-four percent of employees surveyed said they approved of auto-enrollment with a 6% starting deferral percentage.

“We believe in partnering with plan sponsors to promote best practice plan design features, which often result in life changing impacts for their participants. For many plan sponsors, the story sounds great, but it’s not enough to drive them to action. They need to understand the specific financial impacts to their organization and employees,” says Patterson. “This planner helps plan sponsors and the advisers that serve them, turn that ‘story’ into an actionable strategy for their specific workforce.”

According to Principal, the platform is “being rolled out in a phased approach,” with plan sponsors with eligible plan employees in a single location, including employees in 401(k), 403(b) and 457 plans, will have access to the tool first—provided all participants are subject to the same automated plan provisions. The modeling tool will be available to plans with participants in multiple locations by the end of the year.

In Practice August 15, 2017

Many Asset Managers, B/Ds Don’t Trust Compliance Programs

In addition, many are not confident in their firm’s cybersecurity.
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A large percentage of senior executives in financial services do not believe their firms would adequately survive the scrutiny of a regulatory exam, according to the results of a survey released by Cipperman Compliance Services (CCS).

The survey of executives at asset managers, alternative managers and broker-dealers (B/Ds) also revealed widespread concerns over cybersecurity protections.

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Forty-three percent of alternative managers, such as hedge or private equity funds, do not believe their compliance programs are up to exam standards; an additional 32% of B/Ds and 25% of asset managers are concerned they might not pass an exam.

Results show nearly half (48%) of asset managers indicate they spend more on legal counsel than on compliance programs. Among alternative managers, 71% spend more on legal counsel, and among B/Ds, 73% spend more on legal counsel. “The survey results raise significant questions about the effectiveness of increased spending in recent years on internal compliance resources,” CCS says.

When asked their attitudes toward compliance, 61% of respondents view the function as a part of doing business, such as meeting regulatory requirements or attracting and retaining clients. This equates to an 18% upswing from 43% in 2016.

“Because compliance has become so important to protecting the franchise, firms need to bring in third-party experts in the same way they have traditionally retained outside lawyers and auditors.  One bad exam and penalty could do irreversible damage to the reputations these managers have built,” says Todd Cipperman, founding principal of CCS.

Cybersecurity remains a large concern, despite increased media and regulatory focus. Nearly two-thirds (64%) of B/Ds reported they are not confident in their firm’s cybersecurity, and 43% of alternative asset managers said the same. While more than half (51%) of asset managers indicated they are confident in their firm’s cybersecurity, still one-quarter said they are not.

“Internal compliance officers might not have the comprehensive skills to address the technical requirements of an adequate cybersecurity program,” says Robert Prucnal, president of CCS.  “Firms should consider bringing in experts who can take a more objective view of the IT environment.”

Full survey results may be found at https://cipperman.com/. A free sign-up is required.

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