Deals & People June 10, 2008

Ueland Pushed Out at Russell in Executive Shakeup

Russell Investments tapped board member John Schlifske as its new president and CEO after former head Craig Ueland stepped down from the post, the company said.

Reported by

Fred Schneyer

A Russell news release said the company’s board will conduct a search for a replacement to succeed Schlifske, who Russell said is expected to return to parent company Northwestern Mutual, where he is executive vice president. Michael Phillips remains as Russell’s board chairman, the company said.

“We are fortunate to have someone of John’s seniority taking on this role, which clearly demonstrates the support of Northwestern Mutual to lead our future success,” Phillips said in a statement. “I and the board have complete confidence in his ability and that of the Russell leadership team.”

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The company said Schlifske most recently was responsible for all aspects of Northwestern Mutual’s investment products and services business, including annuities, mutual funds, advisory products, and the Northwestern Mutual Wealth Management Company. As part of these responsibilities, Schlifske also served as CEO of Northwestern Mutual Investment Services, Northwestern Mutual’s broker/dealer. Northwestern acquired Russell in 1999.

In the Russell statement, Phillips acknowledged Ueland’s contributions since being named president in July 2003 and CEO in January 2004. “Craig has made an extensive contribution to Russell throughout his 25 years at the company, culminating in his leadership the past five years,’ Phillips said. “Craig successfully melded his expertise and his deep affection for Russell and its purpose in order to drive growth and position the firm to compete in the global financial services landscape of the future. We wish him well as he moves on.”

Departure Not Voluntary

Ueland’s departure, which was not voluntary, indicates two important phenomena at the company, officials there say.

First, Northwestern, which has been almost entirely hands-off since it made the Russell acquisition, is going to be more intimately involved, even beyond the actual tenure of Schlifske at Russell, which is expected to be brief as he is the heir apparent at Northwestern. Second, while Ueland had clearly made his share of foes in Tacoma (there has been substantial turnover at a senior level within the firm the past two years), he would have survived the turmoil if the basic Russell manager-of-managers business was in better shape.

Ueland had championed the firm’s move from Tacoma to Seattle that was known to have upset Phillips, among others.

The real challenge for Schlifske, sources say, is to capitalize on Russell’s extraordinary brand and footprint in the institutional investment space in a fast-changing investment environment, which is what Ueland failed to do.

With nearly $213 billion in assets under management as of March 31, Russell serves individual, institutional, and adviser clients in more than 40 countries.

Data & Research June 10, 2008

Group Proposes Automatic Enrollment to Lifetime Income

The Retirement Security Project proposes a trial period of automatic enrollment into lifetime income vehicles for 401(k) participants at retirement.

Reported by

Ellie Behling and Rebecca Moore

In its paper released in conjunction with the Brookings Institution, the group notes that the private market is responding to the changing retirement income landscape and fears of outliving retirement savings by developing new lifetime income products. However, the group says these products will have varying success at matching consumers’ preferences and need, and they may only reach a select group of consumers.

The Retirement Security Project proposes establishing a default trial income arrangement within 401(k)-type retirement plans in which workers would have a substantial portion of their retirement assets directed into the vehicle unless they choose to opt out. According to the paper, under the default, each retiree would receive 24 consecutive monthly payments, after which the retiree could opt for any distribution option under the plan.

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If the retiree made no selection of a different distribution option at the end of the trial period, the payments would automatically convert to a permanent income payment program. Under its proposal, the group said, plan sponsors would be encouraged to offer the trial income program and would have discretion over some of its structure and implementation.

The group argues that adding “automatic” (default) features to 401(k)s allows inertia to work in favor of lifetime income, as it has done in increasing 401(k) participation rates and contribution levels. The paper also says launching a trial income program through 401(k)-type plans, which have millions of participants, has the potential to mitigate the bad selection problem in lifetime income contracts, and to lower the prices of these vehicles.

The trial program initially would provide income for a limited time, and workers who preferred to direct their own retirement assets or take distributions in other forms could opt out if they so chose.

The group concedes that, for such a strategy to work and be sustainable, there were certain issues still to be resolved and certain structures to be established. It said the aim of the paper is to lay out the issues and begin a dialogue that hopefully would lead to a strategy for improved retirement income.

The full paper is here.