Court Grants Genworth Class Certification Appeal

Plaintiffs can appeal class action status granted earlier this month to participants who were invested in BlackRock Inc. target date funds.

The U.S. Court of Appeals for the Fourth Circuit has granted plan sponsor Genworth Financial Inc. the chance to appeal a decision to give class action status to a group of participants who were invested in BlackRock Inc. target date funds through a workplace retirement plan.

The appeals court had been considering Genworth’s appeal to class action certification granted in the U.S. District Court for the Eastern District of Virginia. In that ruling, Judge Robert Payne gave class action status to all participants enrolled in the BlackRock LifePath Index Funds at any time on or after August 1, 2016, without giving a ruling on the plaintiff’s allegations that Genworth’s retirement plan committee had failed their fiduciary duty by not shopping for alternatives.

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The granting of class action status in the case, Trauernicht et al. v. Genworth Financial Inc. et al., stood out after numerous lawsuits filed by the same law firm, Miller Shah, had been dismissed by other courts.

In the appeal filed August 30, Genworth argued that plaintiffs did not sufficiently argue for class action status in the lawsuit. The firm, represented by Gibson, Dunn & Crutcher LLP, made the case that many of the “thousands of participants and beneficiaries” that would make up the class may in fact have “fared worse under Plaintiffs’ preferred alternative investments, depending on different individuals’ choices of when and how to invest.”

The defendant also argued that giving class action status in the case would have far-reaching consequences for ERISA fiduciary-breach cases, making such class certification a “fait accompli,” according to the appeal.

“That includes cases like this that are manifestly unfit for mandatory classes because they purport to resolve the rights of unharmed class members who will never even receive notice and the chance to opt out of the wasteful, attorney-driven litigation prosecuted in their names,” attorneys wrote in the request for appeal.

Genworth also accused the district court of erring when it did not decide if “any, let alone all” of the class members had standing for the allegations of fiduciary breach.

In his class certification ruling, Payne had not made a judgement on the merits of the complaint, but found only that there was enough to provide class status.

“Demonstrating financial injury in the context of standing is different than in the context of the merits,” he wrote. “Plaintiffs do not have to prove that they have suffered financial injury to establish standing. … Rather, standing is a threshold inquiry to determine whether the court may proceed to the merits.”

The fourth circuit court of appeals, in its order Friday, ruled that Genworth made enough of a case for it to review the class certification status before allowing the case to move ahead.

The plan held assets of $847.34 million as of December 31, 2023, according to a Form 5500 filing.

More Than Half of Plan Advisers Expect to Use AI

Adviser practices using artificial intelligence may become a reality in the next 12 months, according to BlackRock surveying.

Artificial intelligence use may move from idea to reality in the next 12 months in plan advisement, with more than half (53%) of advisers planning to implement AI in some fashion, according to BlackRock Inc.’s “2024 Read on Retirement: Advisor Outlook,” released Tuesday.

If those predictions come true, it will be a significant jump from the 9% of advisers that report currently using AI tools in their practices.

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“We see this taking place in the near future for advisers in a few specific areas,” says Carrie Schroen, head of BlackRock’s U.S. defined contribution intermediary business.

One area is using AI tools to “minimize everyday inefficiencies,” Schroen says. That could be using AI to help complete client requests for proposal, to analyze fee disclosure documents or to run in the background of customer relationship management systems and generate meeting agendas or create prompts for follow-up.

Schroen, who leads BlackRock’s DC adviser practice management program, says AI tools may also be used in advisers’ work with plan sponsor clients and participants. AI tools can help personalize communication across a client base or to identify specific needs and risks that could prompt participant outreach.

Finally, she sees it being used with service providers such as recordkeepers and third-party administrators. AI, for instance, may support identifying cybersecurity threats across platforms or finding improvements in plan design.

BlackRock’s survey, which drew on responses from 300 retirement plan advisers, also found a surge in interest from advisers in retirement income options and a focus on having active investment management be part of the investment strategy for plan sponsor clients.

Retirement Income

According to the survey, 81% of retirement plan advisers have discussed retirement income options with DC clients; another 82% either have recommended a retirement income solution or are likely to recommend one in the next 12 months.

“Part of what is driving this interest and acceleration of demand is that people are living longer, and we’ve lost that security that a pension once provided,” Schroen says. “The first generation of Baby Boomers retiring this year is doing so without that safety net that our parents’ generation had.”

She notes BlackRock’s recently launched DC guaranteed income product, LifePath Paycheck, as proof that such solutions are getting traction, noting that plans with $27 billion in target date assets are making the option available to 500,000 participants. Meanwhile, she says 60% of plan advisers say plan sponsor clients lean on them for communicating with and educating participants on retirement income issues.

“No one wants to solve this problem [of retirement income] more than advisers,” she says. “They are the ones who are hearing about it from plan sponsors and participants about just how concerned they are about their retirement futures.”

Active Focus

The survey also asked advisers about their use of active and passive investments in DC plans. More than half (55%) of plan advisers see active managers as consistently outperforming the market due to: their access to more investment options (59%), protect against losses (47%) and investment sector choices (44%).

While BlackRock is often associated with index-based passive investing, Schroen points to its blended LifePath Dynamic Funds as using both active and passive strategies, something advisers are seeking particularly as markets have grown more volatile in 2024.

“They see the benefits of diversification, manager experience and, lastly, that fee-efficient alpha,” she says.

Finally, the survey also showed that about 55% of plan advisers differentiate their practices by the education they provide on areas such as retirement readiness.

Schroen, who has been meeting with advisers around the country since taking her new position earlier this year, says the findings reflect what she has been hearing about practice management areas of interest.

“Our survey results here affirm … the top priorities for advisers: practice growth and prospecting new clients,” she says. “Our program aims to make their business management more efficient … specifically around client service and their business.”

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