Compliance January 8, 2021

Biden Administration to Nominate Marty Walsh as Secretary of Labor

The second-term mayor of Boston is known for fighting for a higher minimum wage and for being a long-term union member who is outspoken about the role of collective labor in the U.S. economy.

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After more than a day of speculation, the incoming Biden-Harris administration has confirmed that it will nominate Marty Walsh as the next secretary of labor.

While in terms of regulatory leaders, the retirement plan industry is most focused on whomever Walsh will select as the head of the Employee Benefits Security Administration (EBSA), the nomination is nonetheless an important moment for the Department of Labor (DOL). As labor secretary, Walsh will ultimately be in charge of any effort to reverse course on the newly finalized prohibited transaction exemption being implemented in the final and chaotic days of the Trump administration.

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In a statement to the press, the Biden-Harris administration says Walsh is “a champion for workers,” arguing he has the relationships and deep experience necessary to usher in “a new era of worker power.” Such ambitions have already caused some conservative business groups to speak out against the nomination, out of fear that Walsh and the Biden-Harris administration can now expect to leverage the support of a fully Democratic federal government.

Sources tell PLANADVISER the shift of Senate power, from Republicans to Democrats, makes it much more possible for the incoming administration to enact potentially sweeping and significant reforms in many different areas—labor regulations included.

Besides winning election as the mayor of Boston for two terms, Walsh’s palmarès also includes having joined the Laborers’ Union Local 223 at age 21, later becoming president of the union. He also led the Boston Metropolitan District Building Trades Council.

The Biden-Harris administration’s statement continues: “For the past 7 years, [Walsh] has worked tirelessly to rebuild the middle class, build a more inclusive, resilient economy, and fight for workers in his hometown—including fighting for a $15 minimum wage and paid family leave. Mayor Walsh is credited with setting records for new affordable housing in the city, putting a roof over the heads of hundreds of homeless people and ending chronic veterans’ homelessness, providing universal pre-K education, and bringing free community college to low-income students in the city. During his tenure as mayor, 100,000 new jobs were created.”

Apart from potentially reversing course on fiduciary rule-related regulations under the Employee Retirement Income Security Act (ERISA), there are many other areas where sources suggest the next DOL Secretary could drive significant changes. These include, but are not limited to, issuing or modifying regulations that impact the classification and treatment of part-time workers and contractors; the use of environmental, social and governance (ESG) themed investment portfolios in tax-qualified retirement plans; and the actions and responsibilities of proxy advisers.

In Practice January 7, 2021

2020 M&A Dust Settles, Showing Another Record

The average deal size grew significantly, as new players have flocked to the retirement advisory and wealth management industry over the past year.

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There’s no doubt about it: 2021 has gotten off to a rapid start for retirement plan industry mergers and acquisitions (M&As).

Already, several major deals have been announced, including Aquiline Capital Partners’ private equity backing of SageView Advisory Group and Truist’s sale of its recordkeeping and advisory businesses to the likes of Empower, Ascensus and OneDigital.

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Amid the flurry of news, Echelon Partners has published its final 2020 M&A report, showing the year broke the record for annual deal volume. According to the analysis, the fourth quarter of last year delivered 69 deals (through December 22), which is a new quarterly record as well. In fact, Q4 2020 brought a 25% increase over Q3 2020, which previously set the quarterly high-water mark with 55 total deals.

Echelon’s analysts say this surge in Q4 activity helped to power another record-breaking year for retirement adviser and wealth manager M&A activity, with at least 205 deals registered for the year, compared with the 203 deals that Echelon reported in 2019.

“This is an impressive rebound, given the 162 total deals forecasted for 2020 at the end of Q2, which was the slowest period for M&A in roughly four years,” the analysis states. “2020 now represents the eighth consecutive year that the total number of deals in the RIA [registered investment adviser] industry has increased.”

As previously reported, the COVID-19 crisis and associated market downturn led to a temporary pause in many M&A processes during Q2. However, Echelon reports, once market conditions stabilized and dealmakers adapted to the new normal of Zoom and virtual management meetings, activity picked up—especially larger deals.

“Average assets under management acquired per transaction increased to over $1.8 billion in 2020, up 24% over 2019’s average of $1.5 billion,” the analysis explains. “This is the highest annual average to date.”

Echelon’s report notes that numerous new players have “flocked” to the wealth management and retirement plan advisory industry over the past year.

“Professional buyers continued their aggressive push to acquire high-quality RIAs, and the industry’s high profitability and steady cash flows are increasingly attracting new entrants and resulting in increased competition and higher valuations,” the analysis concludes.

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