Deals & People June 7, 2021

David Blanchett Named as QMA’s Head of Retirement Research

One of his top priorities will be to provide research to develop retirement income products for DC plans.

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David Blanchett

QMA LLC, the quantitative equity and multi-asset solutions specialist of PGIM, the $1.5 trillion global investment management business of Prudential Financial Inc., has hired David Blanchett as managing director, head of retirement research for defined contribution (DC) solutions. Blanchett was formerly head of retirement research at Morningstar Investment Management.

QMA says Blanchett will help meet a growing demand for DC solution capabilities.

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“Income solutions are going to be the next thing that will come to dominate the marketplace,” QMA Chief Executive Officer Andrew Dyson tells PLANADVISER. Blanchett’s hiring “reflects QMA’s vision for our role in the future of retirement income. Products will need to be founded on great research, and David will be at the forefront of that. Over the next 10 years, income solutions will come to dominate the DC marketplace. David is a recognized retirement thought leader, and his experience will be invaluable for the future. We are thrilled to have him join QMA.”

PGIM CEO David Hunt points out that PGIM manages $214 billion of DC assets across multiple asset classes. “We are committed to providing best-in-class support to our clients and in delivering new and innovative retirement solutions founded on market-leading research,” he adds.

Blanchett says, “I am incredibly excited to join QMA given PGIM’s position as a leader in the retirement space. I look forward to working alongside some of the brightest minds in the industry to develop new proprietary investment solutions to improve retirement outcomes for potentially millions of investors and DC participants.”

An adjunct professor of wealth management at The American College of Financial Services and a former member of the ERISA [Employee Retirement Income Security Act] Council, Blanchett has published more than 100 papers in a variety of industry and academic journals. His research has received a number of awards, and he is also a regular contributor to The Wall Street Journal.

Compliance June 7, 2021

Serco Settles Excessive Fee Case for $1.2 Million

The class action lawsuit had charged the Navy defense contractor with selecting higher-cost mutual funds when cheaper options were available, and with allowing excessive fees in its 401(k) plan.

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Navy defense contractor Serco Inc. has reached a $1.2 million settlement agreement in the excessive fee lawsuit that was filed against its 401(k) plan last year.

After nearly a year of discovery and motions following private mediation that began in November, the parties have agreed to what the class calls “fair and reasonable terms.” The settlement includes an injunction on the plaintiffs from filing additional lawsuits on the same grounds as the original case.

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The settlement funds will be dispersed through a qualified settlement fund, with restorative money being given to participants in the Serco 401(k) plan and paper checks valid for 180 days to those who have left the plan. It awaits court approval.

The settlement agreement notes that the class wants to settle. In it, the defense denies all allegations and all liability for the allegations and claims.

The original Employee Retirement Income Security Act (ERISA) lawsuit was filed in the U.S. District Court for the Eastern District of Virginia, Alexandria Division. The proposed class action complaint accused Serco of failing to provide its 401(k) plan participants with the most cost-effective mutual fund shares, among other issues. According to the complaint, the unnamed issuer of the mutual funds in the plan offered a lower-cost share class for at least 21 of the 30 funds in the lineup, and those funds consistently achieved higher returns.

“The plan, however, inexplicably failed to select these lower fee-charging and better-return producing share classes,” the complaint stated. “As well, the administrative fees charged to plan participants by the recordkeeper, also unnamed, were consistently greater than the fees of more than 90% of comparable 401(k) plans, when fees are calculated as cost per participant or when fees are calculated as a percent of total assets.”

The complaint went on to state these “investment options and unreasonable fees cannot be justified.

“Their presence confirms more than simply sloppy business practice; their presence is the result of a breach of the fiduciary duties owed by Serco Inc. to plan participants and beneficiaries,” the lawsuit continued. “Prudent fiduciaries of 401(k) plans continuously monitor administrative fees against applicable benchmarks and peer groups to identify unreasonable and unjustifiable fees.”

The lawsuit said that for plans with between $250 million and $500 million of assets, the mean expenses were 0.41% of assets under management (AUM), but the plan’s fees averaged 0.81%.

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