Deals & People July 12, 2019

Retirement Industry People Moves

Insight Investment names portfolio strategist; Ascensus adds RVP to cover northern Texas region; QMA announces chief business officer; and more.

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Art by Subin Yang

Art by Subin Yang

Insight Investment Names Portfolio Strategist

Insight Investment announced that Louis D’Anella has joined the firm as senior portfolio strategist. D’Anella will focus on supporting the sales efforts of Insight’s distribution partners in the intermediary market.

Svein Floden, head of Intermediary Distribution at Insight says, “Providing product specialist support to our distribution partners is key to developing our intermediary franchise in the U.S., including our actively managed multi-sector Core Plus bond strategy. Louis’ breadth and depth of experience will be invaluable as we continue to grow our engagement with intermediary platforms and financial advisers.”

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D’Anella joins Insight Investment from Alliance Bernstein where he most recently served as a senior fixed income investment strategist supporting the firm’s global multi-sector and core fixed income strategies. He began his career as a member of Merrill Lynch’s home office due diligence team covering fixed income investments.

D’Anella will be based in New York and report to Floden.

Ascensus Adds RVP to Cover Northern Texas Region

Ascensus has appointed Bryan Bracchi as regional vice president of the firm’s retirement plan sales team for the Northern Texas region, covering North Texas and Oklahoma.

In this role, Bracchi will work with financial advisers, third-party administrators (TPAs), and financial institutions—including institutional partners and DCIO (defined contribution investment only) sales representatives—to build and maintain Ascensus’ retirement plan distribution networks. He will report directly to Chad Brown, divisional vice president of the western region, retirement sales at Ascensus.

Bracchi brings nearly 20 years of retirement industry experience to his role. Prior to joining Ascensus, he served as vice president, senior retirement plan strategist at Franklin Templeton Investments and vice president, retirement plan consultant at Oppenheimer Funds. Bracchi earned his bachelor’s degree in business—human resource management from Auburn University and holds his FINRA Series 7, 63, and 66 licenses along with his Accredited Investment Fiduciary and Certified Health Savings Adviser designations.

“Bryan’s deep industry knowledge and excellent communication skills allow him to establish a rapport with clients that helps him to accurately assess—and ultimately meet—their needs,” states Jason Crane, head of retirement sales at Ascensus. “We’re looking forward to watching him apply his professional and interpersonal skills to building and maintaining adviser relationships in the Northern Texas region.”

QMA Announces Chief Business Officer

QMA has named Linda Gibson to the newly created role of chief business officer, the latest step in the firm’s continued global expansion. QMA is the quantitative equity and global multi-asset specialist of PGIM, the $1.2 trillion global investment management business of Prudential Financial, Inc.

Gibson will work closely with QMA’s chairman and CEO, Andrew Dyson, to advance QMA’s strategy including the provision of customized global solutions across the risk-return spectrum to clients, while leveraging the full scale of PGIM. Gibson will be based out of QMA’s headquarters in Newark, New Jersey, and oversee finance, business planning and management, competitive intelligence, project management, human resources (HR), operational risk and cross-functional initiatives.

“Linda brings a wealth of knowledge to QMA with her nearly 30 years of experience across all aspects of operating a large global company in the asset management industry,” says Dyson. “Her hire is proof that QMA’s innovative, client-focused culture continues to attract top-notch talent to complement our existing management team.”

“I’m thrilled to join QMA at such a pivotal time for the firm,” says Gibson. “I’m looking forward to working with the team to drive the strategy to the next level as we solidify QMA as a leading global player across the full range of quantitative strategies.”

Gibson joins QMA with nearly 30 years of investment management and financial services business experience, including 18 years at BrightSphere Investment Group, a public multi-boutique asset manager. Her roles there spanned a wide range of front and back office executive functions, including management of legal, compliance, operations, global business development and human resources. As part of Old Mutual’s executive team, Gibson led several high-profile initiatives such as transforming affiliates through product development, product line extension and lift-outs; creating a global, centralized distribution team; and developing strategy to take the company public.

Gibson has a variety of board experience, including serving at the chairman and board level for investment firms, trust vehicles and UCITS Funds within Old Mutual. She has also held several officer-level positions on multiple mutual funds. Gibson holds a law degree from Boston University School of Law and a bachelor’s degree in mathematics from Bates College.

Nationwide Appoints Leaders to Financial Services Business

John Carter has been named as the president and chief operating officer-elect of Nationwide’s financial services business lines, effective immediately. Carter succeeds Kirt Walker, who will become Nationwide’s next chief executive officer in October. Reporting to Walker, Carter will oversee the company’s retirement plans, life insurance (individual, business and corporate-owned), annuities and mutual funds business operations.

“John brings more than 30 years of financial services industry experience to this role,” says Walker. “Throughout his career, he has demonstrated outstanding leadership, both in terms of results and people. John is a strong advocate for the retirement security of America’s workers—helping them prepare for and live in retirement. We look forward to achieving continued success under his guidance.”

Carter joined Nationwide Financial in 2005 as president of the Nationwide Financial Sales and Distribution organization, responsible for leading sales of private-sector retirement plans, life insurance, annuities and mutual funds. In 2013, he was named president of Nationwide’s retirement plans business.

Prior to joining Nationwide, he held executive positions in financial services at Prudential Financial, UBS and the former Kidder Peabody.

“Nationwide benefits from a strong bench of executive leaders,” says retiring CEO Steve Rasmussen. “Kirt and John will work together to facilitate a smooth transition and maintain the strong growth momentum we’ve built over the past several years. We look forward to achieving continued success under John’s leadership, building on Nationwide’s mutual heritage, financial strength and culture of caring.”

Carter is a graduate of the University of Missouri where he earned a bachelor’s degree in business administration and finance.

Former Financial Services CEO Joins Custodia’s Advisory Council

Custodia Financial has appointed Roger Ochs, previous CEO of HD Vest, to its Strategic Advisory Council (SAC). In his role on the SAC, Ochs will provide guidance and subject matter expertise on corporate matters, capital markets, and corporate governance.

In addition to serving on the SAC, Roger is a member of the board of eSecLending, a provider of securities financing, collateral and liquidity services; chairman of the Board for Door, Inc., a residential real estate brokerage firm; a member of Parthenon Capital’s Industry Advisor Council; and a member of Securities Industry Financial Markets Association’s (SIFMA) Advisors Council. He is also a member of the Texas and Dallas bar associations.

“Roger brings a unique perspective to our Strategic Advisory Council,” says Tod Ruble, CEO of Custodia Financial. “First, he’s a true entrepreneur. His experiences growing HD Vest from a smaller firm into a nationally-recognized, technology-driven organization couldn’t be more relevant to Custodia. In addition, he knows the accounting and audit world, and an important benefit of [Retirement Loan Eraser] RLE is mitigating audit risk.”

“Loan defaults represent not just a retirement security and plan fiduciary problem, but also a significant audit risk, particularly given recent IRS changes to plan sponsor reporting. I see Retirement Loan Eraser as a win-win for employees and the companies they work for,” says Ochs.

Data & Research July 12, 2019

EBRI Projects Effect of Retirement Proposals on Retirement Income Adequacy

Introducing auto portability and allowing open multiple employer plans (MEPs) were simulated to have the biggest impact on decreasing the retirement income deficit.

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Since 2003, the Employee Benefit Research Institute (EBRI) has used its Retirement Security Projection Model (RSPM) to evaluate retirement income adequacy on a national basis. EBRI’s use of RSPM typically is confined to analysis of the current retirement system. The EBRI Retirement Savings Shortfalls (RSS) give the size of the deficits that households are simulated to generate in retirement.

Recently, EBRI used its model to simulate the effect on retirement income adequacy from certain legislative proposals, including:

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  • Requiring retirement plans for all but the smallest employers,
  • Covering part-time employees,
  • Introducing auto portability,
  • Providing the option of guaranteed income for life from 401(k) and 403(b) plans,
  • Allowing open multiple employer plans (MEPs), and
  • Modifying required minimum distributions.

Requiring retirement plans for all but the smallest employers

In one scenario, EBRI assumes all employers are required to offer defined contribution (DC) plans, except those with fewer than 10 employees. Its analysis assumes all new plans would be auto-IRAs with a 6% default contribution rate that escalates by 1% per year until it reaches 10% of pay. Based on experience observed from OregonSaves, a 30% opt-out is assumed for all new eligibles.  As expected, the youngest age cohort (35 to 39) would have the largest benefit—a 15.2% decrease in retirement deficit—since they would be exposed to the enhanced coverage for a longer period of time. Those in the 40 to 44 age cohort are simulated to have a 12.4% reduction in deficit, and those ages 45 to 49 are simulated to have a 10.3% reduction in deficit. Cohorts older than 50 are also simulated to have reductions in retirement deficits; however, the reductions are less than 10%.

Changing the scenario to have a cap on auto-escalation of 15%, the youngest cohort is simulated to have a 17% reduction in retirement deficit. Those in the 40 to 44 age cohort are simulated to have a 14.2% reduction in deficit, while those ages 45 to 49 are simulated to have an 11.7% reduction in deficit. Again cohorts older than 50 are simulated to have a reduction in retirement deficit less than 10%.

Covering part-time employees

Using its assumptions but including coverage of part-time employees, EBRI found the youngest cohort is simulated to have a 17.3% reduction in retirement deficit. Those in the 40 to 44 age cohort are simulated to have a 14.5% reduction in deficit, while those ages 45 to 49 are simulated to have an 11.9% reduction in deficit. Cohorts older than 50 are simulated to have reductions in retirement deficits that are less than 10%.

Introducing auto portability

EBRI explains that auto portability is designed to retain DC assets within the retirement system and reduce “leakage” from cashouts upon employment termination. When auto portability is in place, the youngest cohort is simulated to have a 27.1% reduction in retirement deficit, while those in the 40 to 44 age cohort are simulated to have a 23.5% reduction in deficit. Those 45 to 49 are simulated to have a 19.8% reduction in deficit, and those in the 50 to 54 age cohort are simulated to have a 14.7% reduction in deficit. Those ages 55 to 59 are simulated to have a 10.3% reduction in deficit. Cohorts older than 60 are also simulated to have reductions in retirement deficits; however, the reductions are less than 10%.

Providing the option of guaranteed income for life from 401(k) and 403(b) plans

EBRI found that having half of all 401(k) or 403(b) plan distributions taken in the form of guaranteed income for life at age 65 actual increases the retirement deficit for those who die prior to age 85. Those who die five years into retirement (by age 70) are projected to have a $74 average increase. The average increase in deficits for those who die between 70 and 75 is $876. The increase gradually scales down to $617 for those who die between ages 75 and 80 and to $532 for those who die between ages 80 and 85.

For those who die after age 85, however, the purchase of a single premium immediate annuity with 50% of the 401(k) or 403(b) account balance provides reductions in average retirement deficits. For those who die between ages 85 and 90, the average retirement deficit decreases by $1,014. The reductions in average retirement deficits increase substantially for those who die at later ages: $1,831 for those who die between 90 and 95, $3,140 for those who die between 95 and 100, and $4,027 for those who die after age 100. Overall, the impact of using 50% of the 401(k) or 403(b) balance to buy a single premium immediate annuity at age 65 is to decrease retirement deficits by $985.

Allowing open multiple employer plans (MEPs)

The potential impact of open MEPs on retirement income adequacy is heavily dependent upon plan sponsor adoption of such retirement vehicles, EBRI concedes. Rather than make assumptions about adoption, EBRI models a scenario in which all workers currently ages 35 to 39 benefit from the availability of an open MEP for all years during which they might not be eligible for another type of employer-sponsored retirement plan. Workers are divided into four quartiles according to their lack of eligibility. For example, those in the lowest “lack of eligibility” quartile are workers who are eligible for an employer-sponsored retirement plan for all future years in their working career as well as those who lack only a few years of eligibility. 

The percentage reduction in retirement deficits from the introduction of open MEPs for these individuals is de minimis (3.5%), EBRI says. However, the second quartile is simulated to have an 11.7% reduction in retirement deficit from open MEPs, while the third quartile is simulated to have a 23.2% reduction. Individuals in the highest quartile (where the most lack eligibility) are simulated to have a 26.7% reduction in average retirement deficit.

Modifying required minimum distributions

It has been proposed to raise the age for taking required minimum distributions (RMDs) from 70 ½ to 72. EBRI found an ad hoc increase in life expectancy of 5% with no increase in the age provides relatively small decreases in IRA distributions—0.2% for total balances and 0.3% for non-Roth balances.

However, when the 5% increase in life expectancy is combined with a one-year increase in the RMD starting age, to 71 ½, the decreases in IRA distributions are 2.7% (total) and 3.2% (non-Roth). In a scenario in which the RMD age is increased to 72 ½, EBRI found the decreases in IRA distributions are 5.3% (total) and 6.5% (non-Roth). EBRI also provides an analysis in which the ad hoc increase in life expectancy is 10%.

“By quantifying the impact of potential changes, EBRI allows plan sponsors, providers and policymakers to better understand their ramifications. This, in turn, can lead to better decision-making that affects the lives of millions of American workers,” EBRI concludes in its Issue Brief about the research.

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