Data & Research December 18, 2023

Envestnet Expects Financial Advisers to Expand Further Into 401(k) Plan Business

The firm also predicts rising demand for end-to-end technology solutions and personalized services.

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Financial advisers, not just retirement specialists, are expected to pursue the 401(k) plan business at greater rates in 2024 and beyond, while demand for end-to-end technology solutions and personalized services will continue to grow, according to research from Envestnet Inc.

“The opportunity [in the 401(k) business] is significant, as only about half of U.S. workers have access to an employer-sponsored retirement plan today,” Chris Shutler, head of strategic development and market intelligence for Envestnet, says in an emailed response. “The retirement market is expanding, driven by a number of states mandating that small businesses provide employees with a plan, as well as SECURE Act 2.0 increasing available tax credits for such employers.”

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Envestnet’s latest report on “Trends to Watch in 2024” revealed a shift among employers to integrate financial wellness tools into their benefits packages as a competitive advantage. This integration is expected to promote higher employee satisfaction, productivity and retention rates. Envestnet’s report anticipated the workplace will become a crucial avenue for financial advisers to attract new assets.

“There are several reasons advisers should consider adding 401(k) capabilities, but chief among them is organic growth—the ability to offer high-quality advice to plan participants expands the potential to capture traditional wealth accounts,” Shutler says.

Shutler notes Envestnet’s recent announcement of a partnership with recordkeeper Empower on a full-service 401(k) plan available to advisers. He says the offering, called Retire Complete, gives advisers an “Easy Button” when they want to offer a plan.

All Together Now

The report also highlighted significant demand among advisers for end-to-end technology platforms and improved integrations for managing client portfolios. Among advisers, 61% want an all-in-one bundled financial technology software, platform and solution. In the report, Envestnet noted that there are more than 400 wealthtech solutions in the market, creating a need for connectivity between systems and software providers.

Firms are also focused on greater adoption and use by advisers of existing tech solutions to maximize investments made in these systems. Key areas highlighted in the report as critical to the adviser experience included the integration of client engagement tools and improvements in custody workflows.

“Increasingly, we’ve seen more of our clients looking to consolidate and streamline the technology and solutions their advisers utilize, to provide a more unified experience for customers and make it easier for them to do business,” Shutler said in a statement accompanying the report.

AI Can Personalize

The research also indicated growing client demand for personalized services by which advisers can provide specific advice and action steps. While 60% of advisers recognize the potential of personalized data insights to improve their business or advice to clients, many have yet to implement them.

Firms leveraging artificial intelligence for client insights, for instance, reported enhanced efficiency and improved client interactions and service delivery. Those positive results are boosted when advisories use AI as part of customer relationship management systems that provide alerts for advice across areas such as wealth, lending or banking.

“AI-powered next best actions will disrupt the standard adviser workflow,” Craig Iskowitz, CEO and founder of the Ezra Group, shared his thoughts on the report. “These systems will drive efficiency, productivity and sales results to unheard of levels.”

The report draws from research published by Envestnet’s Market Intelligence Team, including an analysis of market data, third-party research, as well as an Envestnet survey fielded earlier this year.

Compliance December 18, 2023

House Judiciary Committee Issues Subpoenas to BlackRock, State Street for ESG Documents

The Republican-controlled committee alleges collusive behavior against the fossil fuel industry by asset managers participating in climate-related initiatives.

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The U.S. House Committee on the Judiciary, under the leadership of Chairman Jim Jordan, R-Ohio, issued subpoenas to BlackRock and State Street Global Advisors on Friday. The subpoenas require both asset managers to turn over all documents and communications related to decarbonization goals, related investment decisions and agreements with other organizations related to decarbonization and environmental, social and governance investing.

The committee sent requests for documents to both managers on July 6, and the firms had until July 20 to comply with the request.

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The requests say the committee is investigating the managers for collusive behavior designed to reduce investment in fossil fuels in a manner that could violate antitrust law and restrict consumer choice and American economic growth. The requests do not spell out the provisions of the Sherman Antitrust Act of 1890 that were potentially violated.

The July letters explained that the managers’ involvement with the Net Zero Asset Managers Initiative and Climate Action 100+, two initiatives with the goal of reaching net zero of greenhouse gas emissions by 2050, were collusive in nature and possibly unlawful.

The committee also noted the size and shareholder voting power of both managers. According to the July letters, BlackRock votes 9.8% of the shares in the S&P 500 by volume, and State Street votes 5.7%.

On Friday, Jordan wrote that the responses to the request had been inadequate, though he did not explain what precisely was missing. The subpoena issued to BlackRock stated that BlackRock produced 7,745 total responsive documents and said it would need until February to produce all responsive documents. The subpoena released by the committee does not include a deadline for producing the requested documents.

State Street provided the following statement: “We have cooperated fully with the Committee and will continue to do so going forward. We remain confident that we have not violated any antitrust laws.”

The Judiciary Committee has issued similar subpoenas to a range of organizations at various points this year, all of which requested documents related to ESG and carbon emissions. In November, As You Sow, a nonprofit shareholder representative and climate action advocacy organization, was subpoenaed for documents with a deadline of December 1. As You Sow did not respond to a request for comment.

The committee also subpoenaed Vanguard and Arjuna Technologies Ltd. on December 11. Those subpoenas were issued on the same grounds as those issued to State Street and BlackRock: that climate initiatives are collusive and could violate antitrust laws.

House Republicans have also attempted to overrule the Department of Labor’s final rule on ESG investing in retirement plans through the budget process and other bills designed to ensure fiduciaries only consider “pecuniary factors.”

As House Republicans continue to pursue an anti-ESG agenda, public officials elsewhere have staked out different positions. This week, Brooke Lierman, a Democrat and the comptroller of Maryland, wrote a commentary published in the Baltimore Sun that criticized congressional anti-ESG efforts.

“Unfortunately, some federal lawmakers and officials in other states are pushing proposals that would limit my ability to access essential information and assess all types of risks and returns,” Lierman wrote. “At least four bills pending in Congress now seek to prevent fiduciaries from using all available information to make investment decisions. Each bill works slightly differently, but they all start and end from the same premise: that the only responsibility of fiduciaries is to prioritize short-term financial returns over all other factors.”

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