Data & Research December 5, 2017

Spouses Play Increasingly Influential Role Alongside Advisers

Advisers focused on client retention take heed—spouses are increasingly influencing retirement income planning decisions, says Hearts & Wallets research.

Reported by

A new report from Hearts & Wallets assesses the state of retirement income planning through the eyes of older affluent consumers.

The report, “Retirement Income to Goals-Based Wealth Management,” focuses on U.S. retirement savers ages 53 years and older with more than $100,000 in investable assets. According to Hearts & Wallets researchers, this demographic segment’s consumer engagement with traditional retirement income planning tools has declined over the past few years, as households juggle multiple financial goals and grapple with when to stop full-time work.

Want the latest retirement plan adviser news and insights? Sign up for PLANADVISER newsletters.

In 2008, 82% said they had a written plan or solid idea about this question of timing retirement, in comparison with 73% in 2016.

“As old rhythms of life, from pensions to firm retirement dates, fall by the wayside, goals-based wealth management emerges as a means to accommodate competing life goals, such as saving for a new home or a child’s college, and new lifestyles,” researchers suggest.

Of nine wealth planning components, consumers’ need for one traditionally key component—recommended selection of investments that will generate income in retirement—has declined over time, even as demand has increased for other advisory program components. The biggest unmet advisory consumer need, according to Hearts & Wallets, is “recommendations for minimizing taxes.” For context, only 21% of consumers cite a need for support with investment selection, compared with 44% who say tax advice is an unmet need.

Laura Varas, CEO and founder of Hearts & Wallets, notes that retirement savings efforts are directly affected by the “changing nature of work and the growing disconnect between retirement savings programs and the employer.” Although “Started thinking more about retiring” remains the most common inspiration for planning toward specific financial goals, the most surprising trend, according to Varas, is that spouses are becoming more important, while advisers are decreasing in importance.

“The spouse inspires one out of five conversations, and this is growing,” Varas continues. “The adviser is still higher, at one out of four, but is falling over time. The influence of the spouse jumped across all asset levels and across the industry.”

Put simply, spouses remain more influential than employers, Hearts & Wallets says, but the influence of the employer is much higher at firms with strong defined contribution (DC) businesses.

Compliance December 4, 2017

Plaintiffs Ask Court Not to Approve J.P. Morgan Stable Value Suit Settlement

Four of twelve class representatives say the $75 million J.P. Morgan agreed to pay is not enough.

Reported by

“Four of twelve Class Representatives opposing the settlement is a Red flag for this Court,” says a memorandum of opposition filed with the U.S. District Court for the Southern District of New York for a lawsuit challenging underlying investments in J.P. Morgan stable value funds.

The consolidated litigation alleges that the defendants managed the plaintiffs’ investments imprudently in violation of its fiduciary duties under the Employee Retirement Income Security Act (ERISA) by causing its stable value funds to invest heavily in the Intermediate Bond Fund (IBF) and the Intermediate Public Bond Fund (IPBF). The defendants managed the IBF and IPBF in the same way and invested them both in risky, highly leveraged assets, including, among other things, mortgage-related assets.

For more stories like this, sign up for the PLANADVISERdash daily newsletter.

Last month, J.P. Morgan agreed to pay $75 million to settle the litigation.

Arguing that the motion for preliminary approval of the settlement should be denied, the opposing representatives note that total class damages are either $532 million or $619 million, and that the class will not receive $75 million. “The $75 million settlement will be reduced by up to $25 million in attorney’s fees, and over $1.75 million in case expenses, unspecified notice and administrative costs, and $240,000 in incentive payments, netting the Class less than $48 million. A $48 million settlement on strong claims and damages up to $619 million is not within a range of potential final approval,” the memo says.

The objecting representatives note that damages are measured by comparing what the ERISA plan assets earned on the imprudent investments versus what the plan would have earned had the investments been prudently managed.  In addition, the court already accepted the damages methodology in granting class certification, and J.P. Morgan’s experts agree damages are readily calculable in this way at the participant level.

They also say that while it is possible the court could find J.P. Morgan managed the stable value fund prudently, it is more likely not. “The evidence in the summary judgment record and outlined herein presents a strong factual basis establishing imprudence,” the memo states. “Objecting Plaintiffs therefore believe there is no less than a 30%-50% chance the Class will prevail on the merits and recover 100% of their damages, either $532 and $619 million.”

They say the “range of reasonableness,” prior to a ruling on summary judgment, is between $159 million and $309 million. And, they argue that nominal comparisons are meaningless and approved settlements in other ERISA cases are not relevant.

The objecting representatives request that the court deny the motion for preliminary approval, order the parties to refile their respective summary judgment motions, and set this case for a trial in no less than six months. Alternatively, they say, the court should require the Notice and Distribution Plan changes requested in their memo.

«