Greetings and welcome to this week’s edition of 401k Real Talk. This is Fred Barstein contributing editor at WealthManagement.com’s RPA Edge and CEO at TRAU, TPSU & 401kTV. I review all of last week’s stories and select the 5 most important and interesting ones providing open honest and candid discussion you will not get anyway else. So let’s get real!
The question is not if a record keeper will be a victim of a cybersecurity attack, the questions are when, what are the repercussions and who will be liable. McCamish Systems, a subsidiary of Indian based Infosys which provides record keeping outsourcing for Vanguard, announced a breach in their insurance services that support the non-qualified businesses of Ascensus (through Newport which supports Vanguard), T Rowe Price and Prudential as well as Principal’s universal life customers.
Non-qualified account values have not been updated and are currently not available with no timeline announced though no data breach has been reported yet. One expert wondered when the hackers are going to demand a ransom.
And though some might blame outsourcing as the issue especially if sensitive data is vulnerable, even firms that do their own record keeping use 3rd parties like Moveit which led to data issues with multiple providers.
Proving perhaps that providers are as vulnerable as their weakest link.
While many industry associations like SIFMA and IRI petitioned the DOL to extend the 60 day comment period for their Retirement Security Rule set to end January 2nd, 2024, the DOL pushed back citing lots of input from the financial services industry over the many years that their fiduciary rule has been in play. Public hearings were announced for December 12-13 and possibly 14th if needed.
Meanwhile, a bill in the House was proposed that would bar use of congressional funds to enforce the Rule which the Biden administration said they wd veto.
Look for a concerted effort to thwart the bill through lawsuits which could push its application beyond the 1/1/25 date. It is the rule that neither dies yet never seems to get implemented.
Envestnet, which boasts over 110,000 advisors on their wealth various platforms, is making a big play to serve the expected boom in the small/start-up 401k market in partnership with Empower and 4 TDF providers in what is called “Envestnet Retirement Complete”.
338 services and investment due diligence will be delivered by Envestnet while Empower will provide record keeping, custom communications and financial advice.
Meanwhile, Empower noted that sales for plans under $50m have reached $10 bn including 800 start-ups. They now manage $1.4 tr with 18.3 m participants and $21 bn in their dynamic QDIA which moves participants from TDFs to managed accounts as they near retirement age.
At a recent SoCal thought leader dinner hosted by UCLA Professor Shlomo Benartzi and Voya wholesaler Mitch Haber, the topic of AI and ChatGPT was discussed leaving more questions than answers including:
- Can AI replace advisors?
- Does AI have superpowers?
- At what stage is AI now?
- Can it deliver holistic advice at scale?
- How hard is it to build an application?
- What is the difference between AI and ChatGPT?
- What role does data play?
- Why are regulators so scared?
Like Fidelity’s Dave Gray said about crypto, love it, hate it, learn it.
Last week’s RPA Edge column on the need to activate wealth advisors to serve the coming explosion of small plans due to government mandates and SECURE 2.0 tax credits went viral with almost 20,000 views on LinkedIn. But even more important is the need for retirement plan advisors to serve the estimated 97% of the 80 million defined contribution participants without a traditional financial advisor.
While wealth advisors are better equipped to serve the financial needs of participants, they are likely to cherry pick the top 5%.
Read my column about what it will take for RPAs to cultivate wealth management services and deliver advice at scale to the ignored DC participants.
So those were the most important stories from the past week. I listed a few other stories I thought were worth reading covering:
- Seven reasons why RIAs should offer 401(k) plan services
- DC participation and contributions slips
- Hearing on DOL Retirement Security Rule scheduled for Dec. 12-14
- DOL’s lost and found database gets a boost
- Empower’s small plan sales tops $10 billion
Please let me know if I missed anything or if you have any comments. Otherwise, I look forward to speaking with you next week on 401kReal Talk.