Compliance October 10, 2023

SEC’s AI Proposal Would Negatively Affect Retirement Education Features, Commenters Say

The feedback period for the SEC proposal on artificial intelligence and conflicts of interest closed today, and the feedback has been overwhelmingly negative.

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The comment period for the Securities and Exchange Commission’s proposal on artificial intelligence and conflicts of interest closed Tuesday. The proposal, which would require advisers to eliminate or neutralize all conflicts related to the use of predictive or optimization technology, received near-unanimous disapproval and many calls for a total withdrawal.

The proposal, first unveiled in July, would apply to any “analytical, technological, or computational functions, algorithms, models, correlation matrices, or similar methods or processes that optimize for, predict, guide, forecast, or direct investment-related behaviors or outcomes of an investor.”

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The breadth of this definition was the most common criticism in the comment file and has also been targeted in other public settings since the rule was first proposed.

Retirement sector professionals noted that this definition of predictive or optimization technology would apply to too wide a range of retirement educational and readiness tools. The ERISA Industry Commission noted in its letter to the SEC that the proposal would apply to ordinary retirement readiness calculators and chat bots. ERIC called on the SEC to fully withdraw the proposal.

According to the letter, educational tools “are highly dependent on technology to efficiently and effectively deliver services and information, including data that can be personalized to employees. This technology is ever-evolving and presents exciting opportunities to generate positive outcomes for workers. Regulations that create uncertainty, increase costs, and stifle innovation do not benefit workers and should be resisted.”

The American Benefits Council elaborated on this concern in its letter and likewise asked the SEC to withdraw the proposal. The ABC noted that the proposal would cover technologies that calculate for retirement savers “how much in total they need to have saved by retirement age or … how much money they can afford to spend annually during retirement,” since these technologies are predictive in character. The ABC added that the proposal would be “very counterproductive to our goal of achieving retirement security.”

Empower, unlike other commenters, suggested that the SEC either withdraw the rule or make specific changes. Instead of a full withdrawal, but in line with other commenters, Empower recommended making a categorical exemption for educational materials such as readiness calculators and allocation brochures.

Empower’s letter stated that many advisers offer educational tools for retirement plans, but if the required technology is swept up by a final rule and advisers are required to eliminate all related conflicts instead of mitigating and disclosing them, advisers may stop providing the tools at all. The letter explained that many advisers would be unlikely to take the risk that educational materials intended to encourage greater contributions to retirement accounts could be construed as a conflict.

Both the American Securities Association and the Investment Adviser Association requested that the SEC withdraw the proposal and instead stick to the principles of adviser fiduciary duties, which outlines the duties of care and loyalty advisers have to their clients. Already existing fiduciary duties would apply to the covered technologies anyway, but it only requires mitigation and disclosure of conflicts, rather than total elimination, their letters argued.

The IAA explained that “even where the covered technology would provide financial education, coaching, guidance, or advice that are in the best interest of clients, notwithstanding the presence of a conflict, the adviser would be per se prohibited from proceeding to use the technology without first eliminating or neutralizing the conflict altogether.”

The ASA letter was more critical and described the proposal as a “concept release in which a regulator surveys the industry to learn more about a topic and to better inform itself as to any unintended consequences.”

The SEC has not set a timetable for finalizing the rule.

Deals & People October 10, 2023

Retirement Industry People Moves – 10/6/23

PGIM Investments appoints Carlino as global head of alternative investments; Equitable Holdings names Bass head of investor relations; Pine joins Carson Group as Chief Legal Officer; and more.

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Retirement Industry People Moves – 10/6/23

PGIM Investments Appoints Carlino as Global Head of Alternative Investments

Dominick Carlino

PGIM Investments has appointed Dominick Carlino as global head of alternative investments. He will report to Stuart Parker, president and CEO of PGIM Investments.

“Dominick’s deep understanding and experience in the alternatives space will add tremendous value to our business as we continue to extend PGIM’s full array of high-quality private capabilities to our financial intermediary partners and their high-net-worth clients,” said Parker in a statement.

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In this newly created role, Carlino will be responsible for driving the continued development and distribution of alternative investments tailored to wealth management needs around the globe.

Carlino most recently served as managing director and head of alternative investments distribution at Merrill Lynch. Prior to his 10 years at Merrill Lynch, Carlino held various business development and distribution roles at AlphaOne Capital Partners, Morgan Stanley and Susquehanna International Group.

Equitable Holdings Names Bass Head of Investor Relations

Erik Bass

Equitable Holdings Inc. announced the appointment of Erik Bass as head of investor relations, effective immediately.

Bass will be responsible for communicating the company’s strategy and financial performance, as well as maintaining and expanding relationships with the investor and analyst communities. He will report to Robin Raju, Equitable’s chief financial officer.

“Erik’s knowledge and ability to produce valuable, industry-specific insights will enhance our relationships with investors and the market,” said Raju in a statement. “As a top analyst in our sector, Erik understands Equitable Holdings’ unique, integrated business model, and his experience will help advance our growth strategy.”

Bass joins the company after his seven-year tenure with AllianceBernstein’s sell-side research subsidiary, Autonomous Research, where he served as the lead U.S. life insurance analyst and was named in 2022 director of U.S. research, overseeing coverage across all sectors.

Pine Joins Carson Group as Chief Legal Officer

Julie Pine

Carson Group has hired Julie Pine as its chief legal officer. Pine will report directly to Teri Shepherd, president of the Carson Group, and will oversee all legal and regulatory matters for the firm.

“Julie’s impressive legal background and her dedication to community align perfectly with the values and goals of Carson Group,” Shepherd said in a statement. “Her expertise will be instrumental as we navigate the complex legal and regulatory landscape in our industry.”

Pine previously served as executive vice president, general counsel and chief risk officer at Lead Bank, in Kansas City, Missouri. During her tenure, Pine oversaw legal, risk, compliance, human resources and information security functions.

Early in her career, Pine was a commercial litigator and equity shareholder at McDowell, Rice, Smith & Buchanan PC before taking on the role of general counsel at Mariner Wealth Advisors.

Vestwell Hires Farmakis as SVP for Enterprise Sales

John Farmakis

John Farmakis has joined Vestwell as a senior vice president for enterprise sales. He will focus on growing strategic partnerships in retirement, asset management and insurance.

“I am delighted to join the impressive Vestwell team,” Farmakis said in a statement. “At this stage in my career, it was essential to align myself with the ‘go-to firm’ across the industry with the de facto platform for all workplace savings and investing. Vestwell’s leadership and culture, combined with the company’s great momentum, were key factors in my decision to join the team.”

In his career of more than 40 years, Farmakis has worked at firms such as Ubiquity Retirement + Savings, BlackRock and ADP Retirement Services. He has a track record in strategic business development, sales and relationship management.

Haase Named Chief Revenue Officer at 401Go

Ted Haase

Small business retirement plan provider 401Go Inc. has appointed Ted Haase to the role of chief revenue officer, the company’s CEO, Dan Beck, confirmed this week by email.

Haase is responsible for managing 401Go marketing and sales efforts.

“We’ve hired Ted to help accelerate growth and expand our partner-based approach to [retirement plan] distribution,” Beck says. “We have seen a massive increase in financial advisors wanting to work with us and have been needing to scale our advisor support team, which Ted is now leading.”

Haase previously worked at retirement plan provider Human Interest for four years, ending his tenure with the title of national senior director of business development. Prior to working there, Haase worked at retirement plan recordkeeper Paychex in several roles for 21 years. 

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