Data & Research December 5, 2023

Americans Remain More Wary of Inflation Than Retirement Shortfall

Fears about both inflation risk and retirement income remain elevated, per annuities and insurance provider F&G.

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Among American investors, 85% are worried about inflation impacting their financial future, while 68% say they are somewhat or very worried about their retirement income, according to a survey released Tuesday by F&G Annuities & Life Inc., a life insurance provider.

Fears about inflation are up from 79% in 2022, F&G found, even though the Consumer Price Index, the federal government’s inflation measure, fell to 3.3% in October from 7.7% one year earlier.

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Meanwhile, concern about retirement income stayed steady year-over-year, up slightly from 67% last year and still much higher than 2021 (47%) and 2020 (51%), F&G noted.

“American investors are increasingly more distressed about their financial futures than they were at the height of the pandemic, and many are still not taking action to address their concerns,” Chris Blunt, president and CEO of F&G, said in a statement. “Even with these worries, financial advisers continue to be underutilized. Regardless of what is happening in the world, financial advisers are a much-needed resource and key relationship to achieve ongoing financial wellness, sound retirement planning and a tailored mix of products to suit unique needs and goals.”

A separate survey from Forex.com released a week ago found a more negative view of retirement saving: More than half (56%) of Americans have not started saving for their retirement, despite more than one-third (33%) believing they will need between $100,000 and $500,000 to retire comfortably. Additionally, 69% of Americans are not at all satisfied with their current retirement savings pot, and only 5% feel satisfied, according to the Forex.com survey.

The F&G survey indicated that, given increased inflation, 42% of investors said they would be more likely to explore a new financial product. Despite the interest in new products, only 14% said they owned an annuity. Forex.com revealed that real estate and stock market investments are emerging as the most common sources Americans rely on for their retirement savings, with over one-third (35%) relying on these two.

Besides inflation, respondents to F&G’s survey also reported worries about the risk of the U.S. entering a recession (79%), followed by the 2024 presidential election (75%), F&G stated. Other fears included historically high global debt (67%) and the impact of generative artificial intelligence (50%).

F&G’s fourth annual Risk Tolerance Tracker was fielded from October 10 through 20, among a nationally representative sample of 1,644 U.S. adults at least 30 years old who have sole or shared financial decisionmaking responsibility for their household and own financial products valued at $10,000 or more.

Forex.com’s report surveyed 3,000 American citizens from October 17 through 27. The survey consisted of multiple-choice questions, allowing respondents to select from provided options.

Deals & People December 5, 2023

Mercer to Acquire Vanguard’s US OCIO Division

Mercer will add to its not-for-profit outsourced investments and retirement consulting capabilities.

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Mercer, the financial services and consulting arm of Marsh McLennan, has agreed to acquire the Vanguard Group’s U.S.-based outsourced chief investment officer business.

Mercer, which provides OCIO services to retirement plan sponsors, plans to complete an acquisition of Vanguard Institutional Advisory Services in the first quarter of 2024, according to a Tuesday announcement. Neither firm provided terms of the deal.

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Vanguard’s OCIO business is focused on not-for-profit organizations and other institutional investors and will add more than 1,000 clients and about 120 employees to Mercer’s existing OCIO business, according to an update on Vanguard’s website. The total full discretionary assets in the business was $52.3 billion as of June, according to Chief Investment Officer’s OCIO survey. CIO is a sister publication of PLANADVISER.

The move comes shortly after Marsh McLennan announced that Mercer will be getting a new CEO and president at the end of March 2024. In an October announcement, Pat Tomlinson was named president, with plans to take the role of CEO from Martine Ferland when she retires in March.

Mercer’s acquisition of Vanguard’s OCIO business was driven in part by its strength in the not-for-profit sector and “client-centric” approach, Marc Cordover, Mercer’s U.S. investments and retirement leader, said in a statement.

“We know institutional investors, and not-for-profit organizations specifically, continue to face a range of challenges,” Cordover said. “They require robust solutions and global expertise to stay ahead of the curve.”

Shekhar Mukherjee, a director at Clearwater Analytics, notes that one reason for the deal may have been that the OCIO market has become a scale game, with the biggest players having the infrastructure and scale to make the business work. Among those firms are Mercer, BlackRock Inc., Russell Investments and the Goldman Sachs Group Inc., some of which Clearwater works with as clients.

A second reason for the deal, Mukherjee notes, is that OCIO clients have been “getting more sophisticated over the years” when it comes to the investment mix on offer. While asset managers still offer their own funds for the investment strategies—often as the majority of investments—there is more demand for third-party options and varied investment strategies such as alternatives.

“Clients want exposure beyond just funds and ETFs, as they’ve gotten less comfortable with that model over the years,” he says.

Finally, the “buyers are changing” for OCIO services overall, Mukherjee says.

In the past, the focus was often on retirement pension plans in the defined benefit space. That has shifted over the years toward asset owners across sectors, ranging from corporate retirement plans to insurers to entities such as not-for-profits, the area featured in Mercer’s deal for Vanguard.

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