Products July 21, 2016

Mercer Reveals Enhancements to MercerInsight

The new “Trends” module within MercerInsight provides real time information about manager searches and fees. 
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Mercer has announced a significant enhancement to its MercerInsight platform, centered around the development and launch of a new Trends module providing key information about investment manager searches and product fees.

“By providing quarterly manager search activity reported by Mercer consultants and real time data for fees, the Trends module enables institutional investors and asset managers to gain insight into the investment mandate activities of Mercer’s institutional clients and search trends around the world,” the firm explains. Clients can also “compare fees to those of other investment managers in aggregate by asset class, vehicle type, account size, among other data.”

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As the firm explains, MercerInsight is a cloud-based platform for institutional investors and asset managers that houses quantitative and qualitative data from Mercer’s global investment research team.

“Investment managers are often interested in understanding how the fees they charge for their products compare to those of similar products offered by their competitors,” notes Cara Williams, global head of wealth management and technology solutions. “Asset owners also want to know how the fees they are paying fare against those of other providers. This new Trends module was developed with these needs in mind.”

Mercer suggests the Trends module will be updated on a quarterly basis with investment manager searches performed by Mercer, enabling users to manipulate aggregate data and create custom reporting and filtering. Data goes back to 2006, allowing users to perform longer-term analyses. However the fee information in the Trends module is “updated in real time; as soon as an investment manager updates their fees on the database, new information is generated.”

For more information, visit www.mercer.com. 

Compliance July 21, 2016

New York Life Accused of Self-Dealing in 'Progress-Sharing' Plan

Corporate class action litigation often comes in waves—certainly this is the case in the retirement planning industry, which has seen a rash of “self-dealing” lawsuits filed against service providers under ERISA. 
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The retirement planning industry is facing a glut of self-dealing fiduciary breach lawsuits filed under the Employee Retirement Income Security Act (ERISA), including the latest complaint targeting two profit sharing plans offered internally to employees of the New York Life Insurance Company.

Other recent targets of similarly structured suits include familiar names ranging from M&T Bank Corporation, Aegon and Transamerica, American Century, and City National Corp, just to name a few of the examples covered recently by PLANADVISER and the wider financial media. In fact, New York Life’s 401(k) plan previously faced the same kind of litigation, which stretched on for nine years before resulting in a $14 million settlement with employees.  

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In the newly filed complaint, employees suggest they have not been fairly treated by officials running the New York Life Agents Progress-Sharing Plan, known as the Agents Plan, and the New York Life Insurance Company Employee Progress-Sharing Plan, dubbed the Employee Plan. Rather than running the plans for the exclusive financial benefit of participants, plaintiffs accuse the firm of improperly favoring and thereby profiting from the plans’ use of the MainStay S&P 500 Index Fund.

The text of the compliant explains the MainStay line of mutual funds is owned and operated by defendant New York Life Insurance Company and its subsidiaries, and “each fund charges fees and expenses for the operation of MainStay Funds.” From 2010 to 2016, according to the compliant, plan fiduciaries utilized the MainStay index product, “thereby promoting New York Life’s financial interests by using the plans to promote MainStay mutual funds … even though far less expensive S&P 500 index alternatives were available.”

From 2010 to the present, plaintiffs claim, the MainStay S&P 500 Index Fund has had annual costs of 35 bps, or 0.35% per year, “more than 17 times higher than the Vanguard Institutional Index Fund, the S&P 500 index fund offered by Vanguard with annual expenses of only 2 bps, or 0.02% per year.”

While 35 bps is ostensibly pretty cheap for an investment fee compared with, say, an active retail mutual fund product, plaintiffs still suggest the plans could have easily invested in other brands of mutual funds ranging anywhere from 10 bps to 4 bps and below. “By retaining the MainStay S&P 500 Index Fund in furtherance of the financial interests of New York Life, the plans’ fiduciaries cost the plans’ participants millions of dollars in excess fees,” the complaint argues.

The complaint goes on to suggest a “prudent fiduciary managing the plans in a process that was not tainted by self-interest” would have removed the MainStay S&P 500 Index Fund from the plans. Plaintiffs further cite the fact that no other retirement plan with publicly available data apparently uses the MainStay S&P 500 Index Fund. “By retaining the MainStay S&P 500 Index Fund  and failing to investigate the availability of lower-cost alternatives in the marketplace, the plans’ fiduciaries have breached their twin duties of loyalty and prudence,” the complaint concludes.

The full text of the complaint is here. 

* Please note, the original title and hyper-link for this article incorrectly stated the Mainstay index fund was used as a QDIA. 

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