The Markets October 14, 2021

Millennial Women Lead the Way in Non-Retirement Investing

Fidelity reports it has seen unprecedented growth in women opening new retail investing accounts, plus a record-high average of 9.2% contributions to DC retirement plans.

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Two-thirds (67%) of women are now investing outside of their defined contribution (DC) retirement accounts, up from 44% in 2018, according to a recent study from Fidelity Investments. Plus, the firm says, women are contributing a record-high average 9.2% to DC plans.

The number of women investing non-retirement funds has increased by 50% in just three years, according to Fidelity’s 2021 “Women and Investing Study.” It also said that since the beginning of the COVID-19 pandemic, Millennial women have led the way, with 71% investing outside retirement.

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Fidelity said it has seen unprecedented growth in women opening new retail investing accounts over the past year, with a record 43% year-over-year increase since last summer.

However, Fidelity also found that many women still keep a significant amount of savings in cash or bank accounts, where they earn minimal interest and miss out on much larger potential earnings. Approximately 47% of women report having $20,000 or more in savings, 31% have $50,000 or more, and 18% have $100,000 or more.

And the research indicates they are missing out on potentially meaningful investment gains: According to an analysis of more than 5 million Fidelity customers over the past decade, on average, women realized positive returns on their investments and also outperformed men by 40 basis points (bps), or 0.4%. That missed opportunity could be especially harmful, as previous research from Edward Jones and Age Wave found that, on average, a woman can earn $1.1 million less than her male counterpart over the course of her career.

While 50% of the women in the study said they have become more interested in investing since the start of the pandemic, only 41% say they’re comfortable with their investing knowledge. Meanwhile, 47% said they wouldn’t know what to do if given $25,000 to invest.

“We’re seeing a notable shift in women wanting to learn more not just about how to start investing, but how to dig deeper—how to evaluate and select different types of investments to align with specific goals,” says Lorna Kapusta, Fidelity’s head of women investors and customer engagement.

The research comes from a nationwide survey of 1,200 women and 1,200 men who were 21 years of age or older, have a personal income of at least $50,000 a year, and are actively contributing to a DC retirement savings plan. The survey was conducted by independent research firm CMI Research.

“The last 18 months have been extremely challenging, and, for many women, driven historic levels of stress surrounding their finances, job security and long-term savings,” Kathleen Murphy, Fidelity’s president of personal investing, says. “However, in working with millions of women across the country, they have clearly demonstrated their ability to persevere and focus on positive financial steps for the future.”

This article first appeared on CIO, PLANADVISER’s sister publication.

Compliance October 14, 2021

Aon Triumphs in ERISA Suit Over Lowe’s Investments

A judge determined the firm didn’t breach its ERISA fiduciary duties when it encouraged Lowe’s to move more than a billion dollars in plan assets to one of Aon’s own investment funds.

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Aon Hewitt Investment Consulting has won a lawsuit that accused it and Lowe’s Cos. of breaching their Employee Retirement Income Security Act (ERISA) fiduciary duties by limiting the menu of investment choices available to Lowe’s 401(k) plan participants and moving more than a billion dollars in plan assets to one of Aon’s own investment funds.

In a 120-page decision, Judge Kenneth D. Bell of the U.S. District Court for the Western District of North Carolina said he found that Aon did not breach its fiduciary duty as an investment adviser to the plan when it encouraged Lowe’s to change the plan’s menu of investment options. He also found Aon did not violate ERISA in its efforts to “cross-sell” its delegated fiduciary services, “which Lowe’s—a large, sophisticated corporation—independently decided to engage.”

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Regarding claims about offering the Aon Growth Fund in the plan, Bell concluded that although the Aon Growth Fund did not generate investment gains that were as large as those of other investment options that, in hindsight, would have fared better, “it did not breach its fiduciary duty to the plan in selecting and maintaining the Aon Growth Fund as the primary actively managed ‘equity’ investment option in the plan.”

According to the text of the complaint, the defendants placed $1 billion of the Lowe’s 401(k) plan’s assets into the new fund. The plaintiffs alleged that at least some of the money was inappropriately reallocated from eight existing funds in the plan, “which were generally performing well,” when the growth fund replaced these options on the investment menu.

“Prior to this $1 billion investment by the plan, the Hewitt Growth Fund had struggled to attract capital from other investors and had only $350 million in total assets, such that the plan’s investment resulted in a four-fold increase in the size of this fund,” the complaint alleged. “Hewitt had a conflict of interest in recommending this proprietary fund for the plan, and improperly did so to further its own financial interests instead of the interests of the plan’s participants.”

The Lowe’s defendants settled the claims against them in June, after failing to get the claims dismissed in 2019.

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