Products March 4, 2021

Investment Product and Service Launches

Northern Trust partners with Two Sigma; Lockton and Morningstar team up to offer adviser managed accounts; and firms launch TDFs with guaranteed income.

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Art by Jackson Epstein

Art by Jackson Epstein

Northern Trust Partners With Two Sigma

Northern Trust has entered into a strategic agreement with Two Sigma to offer Venn, a cloud-based investment analytics platform, to its clients. Venn by Two Sigma will help Northern Trust provide asset allocators with portfolio insights and analytics designed to help investment teams make more confident asset allocation, manager selection and quantitatively driven investment decisions. 

Through this strategic relationship, Northern Trust clients can gain access to Venn to take advantage of advanced portfolio analytics tools. Northern Trust has enabled certain data flows through the Venn platform via application programming interfaces (APIs), allowing clients to benefit from the integration with both Northern Trust’s Front Office Solutions and Investment Risk and Analytical Services offerings.

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“Our Whole Office ecosystem delivers global asset allocators and asset managers scale, efficiency, flexibility and optionality, ultimately enabling more informed investment decision making,” says Pete Cherecwich, president of corporate and institutional services at Northern Trust. “Northern Trust is committed to providing additive value to our asset allocator clients. Two Sigma’s Venn is highly regarded within the industry. We believe that the combined expertise and synergies across our two organizations will improve operational efficiency and analytical capabilities for our mutual clients.”

Two Sigma’s Venn helps investment teams better understand investment risks and opportunities across a diversified multi-asset portfolio, delivered through modern, cloud-based software.

“Venn is designed to help investors better understand and manage their risks in ways they could not before,” says Jake Dwyer, general manager of Venn by Two Sigma. “We are excited to expand our relationship with Northern Trust, bringing Venn’s capabilities to a broader group of sophisticated asset allocator clients.”

Lockton and Morningstar Team Up to Offer Adviser Managed Accounts

Lockton Investment Advisors LLC has teamed with Morningstar Investment Management LLC to provide adviser managed account services. 

“In the rapidly evolving retirement space, our clients continue to lean on Lockton as a consultative advisory leader,” says Pam Popp, president of Lockton’s retirement practice. “The growing demand for personalized support to help multi-career workers reach financial security spurred our innovation and relationship with Morningstar Investment Management. We’re proud to offer a customizable retirement service that is designed to help participants and meet employer goals.”

Lockton’s new service, FinanceGPS Managed Accounts, provides an alternative to target-date funds (TDFs), expanding the investment focus beyond the employee’s projected retirement date. The service creates personalized portfolios that integrate additional data, including the employee’s location, savings rate, gender, outside assets and long-term goals. Additionally, employees can receive personalized savings rate advice and guidance to set an income strategy during retirement.

”Morningstar Investment Management’s expertise, technology and focus on helping participants meet their retirement goals is impressive,” says Tom Simonson, a senior Lockton retirement adviser. “Helping employees achieve their retirement goals is paramount to our role as advisers and teaming with Morningstar Investment Management will allow us to expand on that commitment. FinanceGPS Managed Accounts enables our clients to offer their employees an advice alternative supported by the same fiduciary rigor used for the plan itself.”

Initial clients are expected to be live on the new platform in June.

Firms Launch TDFs With Guaranteed Income

American Century Investments, Lincoln Financial Group, Nationwide, Prime Capital Investment Advisors, SS&C Technologies, Wilmington Trust and Wilshire have launched a new in-plan target-date series with guaranteed income for life.

Called “Income America 5ForLife,” this new solution, which is designed to be used as a plan’s qualified default investment alternative (QDIA), strives to address the need for guaranteed monthly retirement income.

“Working together with our retirement industry partners, we developed the ‘Income America’ consortium to offer a defined contribution [DC] solution that helps plan participants concerned about outliving the money they’ve set aside for retirement,” says American Century Investments President and Chief Executive Officer Jonathan Thomas. “Our recent 2020 Retirement Plan Participant study indicates that more than 80% of participants would keep their assets in their retirement plan if they had an income option. We believe Income America provides an innovative approach to helping more people achieve a successful and comfortable retirement.”

Income America is a series of portfolios built on a target-date glide path designed by American Century and held in a portable, non-proprietary, multi-manager collective investment trust (CIT). It is available as both a traditional series of target-date portfolios, called Income America, and as a companion series of target-date portfolios with an in-plan guaranteed lifetime withdrawal benefit (GLWB), known as Income America 5ForLife. Either series can be used as a plan’s QDIA.

“By partnering on this important new solution, we look forward to continuing to help retirement plan participants not just understand how to save for the retirement they envision but help them take those savings and translate them into a monthly check that will last through retirement,” says Jamie Ohl, executive vice president, president, workplace solutions, head of life and annuity operations, Lincoln Financial Group. “As more Americans rely on their workplace retirement plan as their primary savings vehicle, it is more important than ever that we focus on the outcomes that will help them build financial security—because in planning for retirement, the ultimate outcome is income.”

Compliance March 4, 2021

Reading Into the SEC’s 2021 Enforcement Priorities

The ongoing implementation of Regulation Best Interest gets top billing in the SEC’s recently published 2021 examination priorities list, though recent evidence suggests the regulator’s focus on share class disclosures remains a chief concern. 

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The Division of Examinations at the U.S. Securities and Exchange Commission (SEC) has published its 2021 list of examination priorities, offering the advisory and asset management industry a telling glimpse into the market regulator’s plans for the coming year.

Likely unsurprising to most who follow the SEC and the U.S. Department of Labor (DOL), one of the top priorities on the list is making sure firms are complying with Regulation Best Interest (Reg BI) and the related DOL fiduciary rule. More surprising—or at least a newer development—is the division’s enhanced focus on climate change and its impact on equity market participants.

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“The division will focus on compliance with Regulation Best Interest, Form CRS [Customer Relationship Summary], and whether registered investment advisers [RIAs] have fulfilled their fiduciary duties of care and loyalty,” the SEC’s priorities statement explains. “The division will examine whether firms are appropriately mitigating conflicts of interest and, where necessary, providing disclosure of conflicts that is sufficient to enable informed consent by retail investors.”

Next come several items related to cybersecurity, operational resiliency and the ongoing proliferation and development of financial technology innovations, including digital assets. Notably, the SEC links the publication of disaster-related and climate change-related data to this examination priority.

“The division will continue to review business continuity and disaster recovery plans of firms, but will shift its focus to whether such plans, particularly those of systemically important registrants, are accounting for the growing physical and other relevant risks associated with climate change,” the priorities list says. “As climate-related events become more frequent and more intense, the division will review whether firms are considering effective practices to help improve responses to large-scale events. The division will also review whether registrants have taken appropriate measures to: safeguard customer accounts and prevent account intrusions, including verifying an investor’s identity to prevent unauthorized account access; oversee vendors and service providers; address malicious email activities, such as phishing or account intrusions; respond to incidents, including those related to ransomware attacks; and manage operational risk as a result of dispersed employees in a work-from-home environment.”

Many other items are cited on the full priorities list, including projects to analyze and prevent money laundering and to assess the equity markets’ overall structural integrity.

The publication of the 2021 examination priorities list comes the same week that the Biden administration’s nominee for SEC chair, Gary Gensler, fielded nearly three hours of questions from the Senate Banking Committee. Many of the same topics covered in the newly published 2021 priorities list came up during the hearing, but it stands to reason that, should Gensler win Senate approval, his input could reshape and/or reshuffle the Division of Examination’s priorities. The same can be said of the potential influence of Boston Mayor Marty Walsh on the DOL’s SEC-adjacent priorities, should he win approval from the Senate as the next secretary of labor.

Something else to consider is that the SEC also announced this week that its enforcement staff had secured a final judgment in the U.S. District Court for the District of Massachusetts in a case involving Bolton Securities Corp. Underlying the case are SEC allegations that Bolton Securities failed to disclose material conflicts of interest related to mutual fund 12b-1 fees and principal trading compensation generated from client investments. Though it does not admit any wrongdoing in its settlement with the SEC, the firm has agreed to pay approximately $450,000 in disgorgements, interest and a civil penalty.

As sources have suggested, such cases underscore the fact that the SEC, even as it seeks to promote and prioritize its rollout of the Reg BI package, continues its focus on curtailing the use of mutual fund share classes that pay a “Rule 12b-1 fee” when a lower-cost share class for the same fund was available to clients.

Finally, this week’s SEC action also included an announcement of the creation of a dedicated “Climate and ESG Task Force” within the Division of Enforcement. The SEC leadership says the new group will be led by Kelly Gibson, the acting deputy director of enforcement, who will oversee a “division-wide effort with 22 members drawn from the SEC’s headquarters, regional offices and enforcement specialized units.”

“Consistent with increasing investor focus and reliance on climate and ESG [environmental, social and governance]-related disclosure and investment, the Climate and ESG Task Force will develop initiatives to proactively identify ESG-related misconduct,” the announcement explains. “The task force will also coordinate the effective use of division resources, including through the use of sophisticated data analysis to mine and assess information across registrants, to identify potential violations.”

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