Data & Research January 22, 2013

Gen X, Y Prefer Interactive Retirement Tools

Companies should address retirement plan communication preferences of the “digital” generations.
Reported by

Because generations are so different from one another, it is important for plan sponsors to create strategies for different segments of the employee population, Chris Augelli, vice president of product marketing and business development at ADP, told PLANADVISER. 

According to a paper by ADP titled “Retirement Planning Mutual Gains,” Generations X and Y are “digital natives” who need greater online access to interactive education tools that provide them with helpful information. Enterprise Council on Small Business (ECSB) research found that younger business people tend to rely more on mobile applications and smartphones (60%) and participate in more advanced activities, from searching the Internet (47%) to downloading and reading files (20%) and watching online videos (9%). “They want to do independent research,” Augelli said.

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ECSB also found that younger Americans respond best to information that is available to them 24/7 and delivered via a variety of communication channels such as blogs, social media, apps and websites. They also want interactive tools such as retirement calculators. Older employees, on the other hand, still prefer to receive information more directly via mail or e-mail.

ADP recently created an app, “ADP Retirement Services Mobile Enrollment Application,” that can be used on all mobile devices as well as the company website. The app is now in a pilot launch and will go live nationally in the near future, Augelli said. “The entire thought process here was to simplify the [enrollment] process,” he added.

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The app also takes into account employees’ personal data such as payroll information, and if preferred, an adviser on the plan can walk the employee through the app.

When it comes to the younger generations, digital is here to stay. “People have expectations of how the world works,” Augelli said—they want fast, easy and interactive. “Give them the experience in which they can go in and see relevant data but also have input.”

The time is now to provide tools for these generations, as Augelli said retirement planning awareness is “higher than it’s ever been, particularly among younger generations.”

The ADP paper is available here.

Data & Research January 22, 2013

Asset Management Fees Drop for Alternatives

The only asset class that has experienced a material drop in asset management fees is alternatives, Mercer said in a report.
Reported by

Mercer’s 2012 Global Asset Manager Fee Survey, its fifth biennial survey, analyzes data on more than 25,000 asset management products from more than 5,000 investment management firms.

The survey covers asset managers in a range of geographies and across numerous products, by way of pooled and separately managed accounts. The study is intended for use as a reference when assessing asset management fees.

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Asset management fees in alternatives have fallen due to supply and demand dynamics, the report found. Asset managers in particular are under pressure to negotiate fees for hedge funds, direct private equity and infrastructure funds.

Given the plentiful supply of good quality active management, the level and structure of active fees has been remarkably resilient to a slowdown in demand, according to Divyesh Hindocha, global director of consulting for Mercer’s investments business.

“As we move from a defined benefit based pensions system to a defined contribution based pension system, which is much more cost conscious, our hope and expectation is that we see some innovation in this area, as otherwise the demand for active management may well fall off a cliff,” Hindocha said.

The majority of managers left fees relatively unchanged, the report said. Where fee reductions have occurred, the greatest falls have been in equity mandates. Retail equity funds have tended to lower their fees more than their institutional and segregated counterparts.

 

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Around a third of managers have increased their fees. Most small-cap equity strategies have increased fees except in the U.S., where such fees have tended to drop.

In alternatives, what was once a “2 and 20” industry standard continues to move toward “1.5 and 20” as supply and demand dynamics have led managers to be more flexible in negotiating fees, Mercer said.

Taking all asset classes into consideration in U.S. dollar terms, Mercer found that Canada remains the most inexpensive country/region in which to invest, with average median fees of around 0.3%. The U.K. and Europe are also relatively low priced, with average median fees of around 0.4% and 0.5% respectively.

Emerging markets remain the most expensive country/region at .89% on average, with Asia averaging .75%, a fall of .08% since 2010.

 

 

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