An agreement signed with Pensionmark seals a partnership between the national firm and a St. Paul, Minnesota-based independent advisory practice, SevenHills Benefit Partners.
SevenHills will be the first Minnesota financial services
organization to partner with Pensionmark, according to the firms.
“This new partnership offers us the leverage, strength, and
resources of a national consulting firm while allowing us to maintain our
independent business model,” says Chris Schneeman, SevenHills president. “As a
result, our advisers will continue to be able to act in an investment fiduciary
capacity for clients and deliver an expansive and comprehensive suite of
services.”
SevenHills will have access to Pensionmark’s proprietary
financial wellness programming, enabling participants to create a financial
picture complete with retirement savings and household budgeting. The firm
joins Pensionmark’s national network of retirement plan advisers, which
includes defined contribution, defined benefit and terminal funding,
not-for-profit, and executive and deferred compensation specialists.
“SevenHills
is among the most highly regarded financial services firms in the country and
gives Pensionmark a strong presence in Minnesota,” says Troy Hammond,
Pensionmark president and CEO. “Seven Hills’ reputation and their experienced
staff will be a great addition to the Pensionmark adviser network.”
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A new study from the
Employee Benefit Research Institute (EBRI) and the Investment Company Institute
finds 401(k) plan design changes have led to substantial popularity for balanced
funds, especially target-date funds (TDFs).
The study, “401(k) Plan Asset Allocation, Account Balances,
and Loan Activity in 2013,” finds that nearly two-thirds of recently hired
401(k) participants were invested in balanced funds at year-end 2013, compared
with less than one-third of recently hired participants at year-end 1998. In
addition, among recent hires investing in balanced funds, EBRI and ICI say more
than three-quarters had invested more than 90% of their 401(k) account in such funds at year-end 2013.
Sarah Holden, ICI
senior director of retirement and investor research, says the popularity of
TDFs and balanced funds more generally has its roots in regulatory changes—namely passage of the
Pension Protection Act (PPA) of 2006. With the PPA,
sponsors gained the ability to designate qualified default investment
alternatives (QDIAs) for those novice investors who decline to make an
investment decision when entering a 401(k) plan or related defined contribution
(DC) arrangement, which provide more fiduciary protection than default fund options previously had.
“These data suggest that regulatory changes have helped make
it easier for employers to design their plans to cater to the wide array of
401(k) plan investors, ranging from folks who want to do it
themselves—constructing a portfolio from the investments offered—to those who
are invested in target-date funds for professional asset allocation,
diversification, and rebalancing over time,” Holden explains. “This evolution
in plan design has resulted in increased diversification across asset
categories, on average, for 401(k) plan participants.”
The analysis notes that
balanced funds can include mutual funds, bank collective trusts, life insurance
separate accounts, and any pooled investment product holding an automatic mix of equities and
fixed-income securities.
Target-date funds have played an especially large part in
the increased role of balanced funds, the analysis finds. At year-end 2013,
recently hired 401(k) plan participants had 41% of their 401(k) plan assets
invested in balanced funds, with 32% invested in TDFs. The research finds that
overall, across the entire 26.4 million 401(k) plan participants in the EBRI/ICI
401(k) database, target-date funds represent 15% of plan assets, and 41% of
401(k) plan participants overall hold shares in TDFs.
As
noted by Jack VanDerhei, EBRI research director, “Target-date funds provide a
convenient investment choice for 401(k) participants to automatically diversify
at least a portion of their retirement portfolios and maintain age-appropriate
asset allocations even during volatile financial markets.”
“The growing use of these funds in recent years, especially
among new 401(k) participants, has been accompanied by a marked decrease of
young participants with zero equity exposure,” VanDerhei continues. “The increased use
of target-date funds has also been associated with a decrease in older
participants with high concentrations in equities as well as a continued
reduction in the allocation to company stock among 401(k) participants.”
The research also
finds 401(k) investors are favoring investments in equities heading into 2015,
a year anticipated by many to be somewhat volatile but positive overall for
stocks.
The EBRI/ICI analysis shows that at year-end 2013, 66% of
401(k) plan participants’ accounts were invested in equities—through equity
funds, the equity portion of target-date funds, the equity portion of non-target-date
balanced funds, and company stock. Further, 90% of 401(k) plan participants held
at least some equities in their retirement accounts.
Although equity funds represented the largest share of
401(k) plan assets, target-date funds, which often are invested to a
significant degree in equities, also are playing an important role. The report
shows younger 401(k) plan participants had higher allocations to equities—accounting
for more than three-quarters of 401(k) assets among participants in their 20s
or 30s. For reference, participants in their 60s had a little more than half of
their 401(k) assets invested in equities.
Other key findings from the study show 401(k) loan activity held steady in 2013.
The study notes that at year-end 2013, 21% of all 401(k) participants who were
eligible for loans had loans outstanding against their 401(k) accounts, unchanged
from the prior four years, although still slightly elevated compared with the
levels seen prior to the financial crisis.
As expected, the average
401(k) account balance tends to increase with participant age and tenure.
Age, tenure, salary, contribution behavior, rollovers from other plans, asset
allocation, withdrawals, loan activity, and employer contribution rates all affect
an individual’s account balance at any point in time, EBRI and ICI note. For
example, at year-end 2013, the average account balance among 401(k) plan
participants in their 60s with more than 30 years of tenure was nearly
$250,000. The average 401(k) participant account balance for the entire sample was
$72,383.
The study is based on the EBRI/ICI database of
employer-sponsored 401(k) plans, a collaborative
research project undertaken by the two organizations since 1996. The 2013
EBRI/ICI database includes statistical information on 26.4 million 401(k) plan
participants in 72,676 plans, which hold $1.912 trillion in assets and cover
about half of the universe of 401(k) participants.
A
full copy of the EBRI/ICI report is available here.