Deals & People November 22, 2017

Retirement Industry People Moves

Nikki Newton is appointed president of Ivy Distributors Inc.; John Hancock Retirement Plan Services forms a new leadership team charged with enhancing the delivery of large customized retirement plans.

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New president for Ivy Distributors Inc.

As Thomas Butch steps down as executive vice president and chief marketing officer of Waddell & Reed Financial Inc., and as president of Waddell & Reed Inc. (WRI) and Ivy Distributors Inc. (IDI), the company announced the appointment of Nikki Newton as the new president of IDI.

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IDI is a subsidiary that supports the distribution of the Ivy Funds. Newton, who has 25 years of industry experience and has been with the company since January 1998, currently serves as head of global relationship management for IDI, covering national accounts and consultant relationships, as well as institutional sales.

In the new role, Newton will lead wholesale and institutional distribution, and sales and product development, as well as manage strategic relationships.

Also effective immediately, Shawn Mihal will become president of WRI, a registered broker/dealer subsidiary that offers securities and insurance products and investment advisory services through financial advisers located throughout the U.S. Mihal currently serves as chief operating officer of WRI, after joining the company in March 2015 as chief regulatory officer and chief compliance officer. Mihal has 18 years of industry experience and will be responsible for all aspects of the company’s broker/dealer operations.

In conjunction with these appointments, the company announced several additional changes to its executive team: Brent Bloss is promoted to the role of chief operating officer, and Benjamin Clouse will be appointed chief financial officer to succeed Bloss in 2018.

John Hancock Retirement Plan Services creates large plan team

John Hancock Retirement Plan Services (JHRPS) announced the formation of a cross-functional leadership team charged with enhancing the delivery of customized retirement plans that meet the unique needs of clients in the large plan market.

The team includes Thomas Shanley, divisional vice president, strategic relationship management and large market segment lead; Christopher Messina, vice president of institutional sales; and Willson Moore III “Chip,” national consultant relations.

According to the firm, coordination among the team, which had occurred informally prior to the announcement, serves to provide a more seamless experience for advisers and consultants. The structure will deliver “on-point business strategy and service to clients that have a large participant base, multiple plan types, along with operational, risk mitigation, and fiduciary challenges.”

Each member of the new team brings decades of experience. Shanley is responsible for formally establishing John Hancock RPS large plan segment’s strategic direction and overseeing execution of the comprehensive service model. Previously, he served as vice president, relationship manager both at JHRPS and New York Life Retirement Plan Services. Shanley has more than 22 years of experience in the financial services industry with an emphasis on corporate retirement plans. He holds a bachelor’s degree from Rhode Island College, holds a FINRA Accredited Retirement Plan Consultant (ARPC) designation and maintains his FINRA Series 7 and 63 registrations.

With more than 20 years’ experience in the retirement services industry, including more than 17 years in implementation, new business, and sales, Messina is responsible for facilitating the development of strategic partnerships with intermediaries and new clients dedicated to the large plan market. He received a bachelor’s degree in economics from the University of Massachusetts at Lowell and a master’s in business administration from the F.W. Olin Graduate School of Business at Babson College. In addition, he maintains FINRA Series 6 and 63 registrations and a Massachusetts life insurance registration.

Moore, who joined the organization in 2016 with more than 30 years of retirement plan industry experience, is focused on building and engaging relationships with the top-tier U.S. national and regionally oriented retirement plan consultants and investment advisers serving the large and mega plan market segment. He received a bachelor’s degree in political science from Ripon College, and maintains both FINRA Series 7 and 63 registrations. 

Compliance November 22, 2017

401(k) Excessive Fee, Self-Dealing Suit Filed Against Wells Fargo

The suit questions the use of actively managed versus passively managed funds. It also suggests that collective trusts and separate accounts are better vehicles than mutual funds for retirement plans.

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On the heels of a win for Wells Fargo in a lawsuit accusing it of self-dealing and imprudent investing of its own 401(k) plan’s assets by funneling billions of dollars of those assets into Wells Fargo’s proprietary target-date funds (TDFs), another participant has filed an excessive fee and self-dealing lawsuit.

The new lawsuit claims the plan’s fiduciaries breached their duties of loyalty and prudence to the plan and its participants by failing to establish and use a systematic and unbiased review process to evaluate the performance and cost, regardless of their affiliation to Wells Fargo, of the investment options in the plan’s portfolio. Throughout the complaint, the plaintiff alleges that the plan’s fiduciaries’ lack of a systematic and unbiased review process caused plan participants to pay an unnecessarily high expense ratio for investments, not just for Wells Fargo proprietary funds, but for the nonproprietary funds which comprised the proprietary funds, as well as other nonproprietary funds.

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According to the complaint, as a result of plan fiduciaries’ breaches of duty under the Employee Retirement Income Security Act (ERISA), participants paid higher than necessary fees for both Wells Fargo-branded and managed investment options and certain non-proprietary investment options for years.

The lawsuit says defendants’ lack of a systematic and unbiased review of the plan’s investment options resulted in:  including higher cost and poorly performing proprietary investment options in the plan to the detriment of plan participants, failing to use the plan’s enormous size (between $22.8 billion and $39.4 billion in assets to negotiate lower fees for both proprietary and non-proprietary investment options included in the plan, maintaining a proprietary money market fund alongside a better performing and significantly cheaper stable value fund, and failing to switch higher cost and poorly performing investment options for cheaper and better performing options available in the market.

“Even though the Plan is and has been one of the largest in the country, Defendants maintained investment options that charged Plan participants fees that were significantly higher than were available to a plan of its size. Moreover, Defendants engaged in self-dealing by selecting and maintaining proprietary investment options that both cost more than and underperformed other mutual funds available in the market, which cost Plan participants millions of dollars in excessive fees and poor performance,” the complaint says.

The suit questions the use of actively managed versus passively managed funds. It also suggests that collective trusts and separate accounts are better vehicles than mutual funds for retirement plans.

The complaint also says, “for both the proprietary and nonproprietary investment options, the expense ratios Plan participants paid did not meaningfully decline, if at all, even though the Plan’s assets substantially increased throughout the Class Period. Accordingly, the fees paid by Plan participants were excessive and unreasonable. Moreover, the high fees of the proprietary investment options and the sheer size of the assets Plan participants maintained in the proprietary funds guaranteed Wells Fargo and its affiliates tens of millions in profits from fees.”

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