Brandon T. Oliver is a Managing Partner of Arcwood Financial LLC. a Registered Investment Advisor Firm, and an Arcwood Consulting firm. Brandon is an Investment Adviser Representative and currently holds his life and health licenses as well as the Certified Financial Planner (CFP®) designation. Brandon started working in the securities industry in 2005. Soon after developing his skills in the financial services arena Brandon lead the Orphaned Client Division at a regional broker dealer where he assisted clients across the country who no longer had representatives. From there he also began assisting in the recruitment and branch development of new advisors for the same broker dealer.
At Arcwood Financial LLC, Brandon is a specialist on plan investment menu design, managed portfolios and the monitoring of the designated investment options, plan providers, participant education and committee governance.
When not working, Brandon enjoys spending time with his wife Summer and son’s Hayden and Remy. They live in North Central Phoenix, Az.
This week on our weekly Money Radio (105.3 fm) segment Peter & Brandon Discussed QACA, the Qualified Automatic Contribution Arrangement a less commonly used type of Safe Harbor 401k plan. Which in some cases could be a better match formula and/or discretionary contribution than the older and more well know safe harbor match/contribution options.
A Third Safe Harbor Option, the QACA
The QACA is a newer type of safe harbor 401(k) plan. Unlike the others, It includes a requirement for the plan to have an automatic enrollment feature. These work by automatically enrolling any eligible employee into the 401k on a certain date, without the need for them to actively enroll in the plan themselves.
QACA Match plans include the following special rules:
The QACA safe harbor matching contribution formula is a 100% match on the first 1% of compensation deferred and a 50% match on deferrals between 1% and 6% (3.5% total).
The plan’s default auto-deferral rate must start at no less than 3% and increase at least 1% annually to no less than 6% (with a maximum of 10%).
QACA safe harbor contributions can be subject to up to a 2 year cliff vesting schedule
There is also a nonelective QACA. It states:
The nonelective QACA has a contribution of 3% to all participants, including those who choose not to contribute any amount to the plan.
QACA nonelective 3% contributions can also be subject to up to a 2 year cliff vesting schedule
Nonelective contributions can also be used to help satisfy Profit Sharing cross-testing. Fulfilling the minimum gateway for 9% profit sharing contributions to owners or other key groups as well as getting a pass for the plan’s nondiscrimination tests.
For more information on if a QACA safe-harbor plan may be appropriate for your company please contact Arcwood or your plan administrator.
This week on our weekly Money Radio (105.3 fm) segment Peter Rowe discussed the changes that are being implemented 1/1/2020 to allow business to use ICHRA, Individual Converge health Reimbursement Arrangements again. These can be a valuable tool for small businesses to offer their employees. Allowing them to make tax deductible contributions that their employees can use to buy their own policy’s on the individual market VS needing to offer full group plan. Peter also discussed their uses for larger employees looking to supplement the existing plans.
When congressional leaders and President Donald J. Trump reached a budget agreement Monday, they closed it off to additional measures, including a landmark retirement-savings bill that is stalled in the Senate.
“It was not for lack of trying on our behalf,” said Chris Spence, senior director of federal government relations at TIAA.
The SECURE Act, which would bring about the biggest changes in
retirement policy in a decade, would provide legal protections for
employers to include annuities in retirement plans, make it easier for
small businesses to band together to offer plans, and increase the age
for required minimum distributions from 70½ to 72, among other
provisions. It was approved 417-3 by the House.
Several senators, including Ted Cruz, R-Texas, and Patrick Toomey,
R-Pa., are objecting to the bill for policy reasons unrelated to its
retirement provisions. That’s preventing the bill from being passed quickly by unanimous consent. Spokespeople for Mr. Cruz and Mr. Toomey weren’t immediately available for comment.
Getting time for a full debate on the Senate floor looks unlikely before the chamber departs next week for its summer recess.
“We’re not going to see floor time before August,” Mr. Spence said.
“We need to come together and regroup to figure out what can be done in
September to move this forward.”
Paul Richman, chief government and political affairs officer at the
Insured Retirement Institute, hopes that the SECURE Act will be included
in appropriations legislation that must be approved this fall to avoid a
One of the points of the budget agreement
says no policy changes can be included in government-agency spending
bills unless they’re approved by House Speaker Nancy Pelosi, D-Calif.,
Senate Majority Leader Mitch McConnell, R-Ky., the minority-party
leaders in each chamber and Mr. Trump.
“All have said they have no issues with the SECURE Act,” Mr. Richman
said. “We continue to remain optimistic that the leadership of Congress
and the president see the value of enacting this into law sooner rather
When the insurance lobby kicked off its campaign
to get SECURE approved, they said doing so before August was critical.
As the presidential election year gets closer, legislative activity on
Capitol Hill is likely to slow.
But SECURE proponents are taking setbacks in stride.
“The bill is a very positive force,” Mr. Spence said. “It’s not a
policy issue. We’re getting caught up in the politics of it. It’s got to
be a matter of time before it breaks loose and gets over the finish
In the meantime, the lobbying continues. On Tuesday, the American Retirement Association released research showing the retirement-savings gap
on a state-by-state basis and asserted the SECURE Act would address the
28.3 million Americans who do not have access to a workplace retirement
Pretty heavy reading but these multiple white papers from various record-keepers like Fidelity, Schwab and Vanguard on the value of Retirement Plan Consultant services are still really interesting. I appreciate the fact that these firms, which were traditionally known to try and work direct without advisors, have come around to the conclusion that the plan level input and participant engagement we add is a win-win for everyone. This specific Vanguard white paper tries to quantify the hypothetical future wealth creation plan participants in plans with advisors would receive vs. those without a retirement plan consultant like Arcwood. The Alpha is staggering at over 3.5% annualized. Which is hard to believe until you drill down into the article and look into the areas this increased retirement success come from. Which includes an advisors work on crucial areas like asset allocation policy, risk management frameworks, manager oversight, and most importantly plan design advocacy and implementation.
Click here to read the white paper in its entirety.
There is a lot of talk about Financial Wellness right now. Every provider seems to be offering something tied into their system. However, the most important thing you as an investment committee member or plan sponsor should know, is like those before them, they are all almost entirely all Self-Service-Programs.
In our opinion the retirement plan service industry’s greatest shortcoming is found in participant engagement. If you don’t already have a plan and advisor in place with boots on the ground to engage and help your participants with the existing retirement plan, simply adding a self-service/do-it-yourself financial wellness program isn’t going to move the needle for very many participants.
Arcwood works with many providers including Fidelity, MassMutual, Dave Ramsey, etc. to help our plan sponsors drive Financial Wellness Programs and offer more than just access to an online tool. Here are some of the main options and resources available to most sponsors when considering a Financial Wellness program:
THIRD-PARTY ONLINE WELLNESS PROGRAMS
There are several programs on this list which is growing daily. They include: Questis, Retiremap, Financial Finesse and of course Dave Ramsey’s Smart Dollar. They are all traditionally used online by employees at a self-service pace. Arcwood combines these online courses with other financial wellness meetings and engagement for those sponsors who have additional funds and are looking to provide more resources. For those sponsors who like the Dave Ramsey baby step approach the program includes a free budgeting tool. Signing up for the program through Arcwood provides sponsors a 30%+ discount to per head pricing.
401K PROVIDER (Record-Keeper) WELLNESS PROGRAMS
Through their Record-Keeping platforms many providers are now offering version of online wellness tools that go beyond simple gap analysis. MassMutual’s program, Map My Benefits, for example can help guide participants through other aspects of their financial life like short term savings needs, college education funding and any possible life insurance gaps. Prioritizing them based upon the employees stage in life, current resources and liabilities. While companies like Vanguard and Fidelity both have budgeting tools that can pull in outside liabilities, like student loan debt, and advise on savings plans for both those and the 401k. Our advisors focus much of the wellness education we provide on the tools already available like these combining them with other other financial wellness courses.
ADVISOR LEAD & SPECIALIST SEMINARS
There are also many resources available to sponsor and advisor through their existing fund provider relationships. For example both Franklin Templeton Investments and BlackRock Funds have speakers available to provide educational seminar meetings on Social Security Benefits. Arcwood combines these specialist meetings with other financial wellness meetings we provide ourselves as well as local 501(c)3 not-for-profit speakers available on other topics like debt management and budgeting.
Financial Wellness is important to us. If you are looking into programs and would like some advice please reach out to one of our business development advisors and we would be happy to discuss your options.
A new breed of robo-retirement startups have positioned themselves to take on incumbents and the $27.3T of assets held in retirement accounts.
The wealth management
industry is under siege by a new crop of “robo-retirement” fintech
startups disrupting retirement savings. At stake is roughly $27.25T held
in US retirement assets as of September 2017 (including IRAs, 401(k)s, pensions, etc).
Though 401(k)s only account for $5.28T of assets (nearly 20% of total
retirement savings in 2017), they have grown dramatically, up from 2%
of total retirement savings in 2007.
said, these retirement vehicles are still vastly underutilized by
employees due to high fees, poor user experience, and lack of education.
Now, startups have zeroed in on the opportunity to create retirement
offerings that cut down on fees and deliver a better user experience,
following the playbook fintechs used with robo-advisors.
While 4 out of 5 workers are employed by companies that offer a
401(k) plan, only 41% of workers actually contribute. A number of
factors can contribute to this — lack of education on the benefits of
contributing, difficulty accessing and navigating 401(k) plans, or an
income that just covers expenses, thus making it difficult to save.
In addition to the challenge of getting more employees to invest in
401(k)s when they’re available, smaller companies also struggle to
provide these plans to their workers. This can be the result of high
costs and administrative challenges.
These “robo-retirement” platforms streamline access for employers,
lower the costs to administer plans, and provide transparent pricing.
Meanwhile, incumbent wealth managers’ suite of products and services
remain static – and vulnerable to disruptors.
The same trends that are helping robo-retirement companies gain
traction are the same ones that enabled the rise of the first
robo-advisors nearly a decade ago. If incumbents want stay relevant as
these startups gain traction, they will need to be proactive to address
products gaps, or suffer a similar fate.
Using the CB Insights platform and SEC filings, we analyzed how these
startups stack up, and highlighted a few operating metrics like assets
under management (AUM), client accounts, and financing.
We define this group of fintech startups as “robo-retirement.” Our
robo-retirement category includes automated wealth management platforms
that specifically target retirement savings accounts including 401(k),
403(b), and pensions. Our robo-retirement category is tracked as part of
the broader wealth tech collection on the CB Insights platform.
Investors see new opportunities in retirement savings startups
Following a $21M Series B investment in ForUsAll, Nick
Shalek, General Partner at Ribbit Capital noted there are 2 brokers for
every 1 fund they manage, creating an opportunity for software to
increase broker efficiency. This is in part why Ribbit Capital, among
other investors, are jumping in early.
industry is in desperate need of improvement. Around 300,000 brokers
manage 650,000 small and mid-sized business 401(k)s. Since the average
broker only handles two 401(k)s, they simply do not have the ability to
invest deeply in delivering modern, personalized investment solutions to
companies and their employees.
Just as the travel
agent market was uprooted by technology, we believe ForUsAll is
disrupting the 401(k) broker market by using technology to deliver a
smarter, more effective, and less expensive solution.”
-Nick Shalek, General Partner at Ribbit Capital
Human Interest is
the latest to raise, completing a $11M investment from Wing Venture
Capital that also included angel investor Adam Nash. Adam Nash is
experienced in scaling and advising robo-advisor startups. He is a
current board member at Acorns, and the former CEO and president of Wealthfront.
A few of the other private startups focused on retirement include Blooom, Guideline, and FeeX.
Many of these startups are using a range of strategies that vary by
distribution channel and perceived addressable gap, which we analyze
below. The majority are leveraging a B2B strategy targeting small- and
medium-sized employers because they are largely underserved.
Robo-Retirement fintechs are already growing aum, client accounts
grown the fastest in terms of assets under management (AUM) and client
accounts. As of January 2018, Blooom has quietly collected approximately
$2B in AUM across 17,746 client accounts.
Blooom is a B2C and select B2B portfolio management software provider
for Employer-Sponsored Retirement Accounts (ESRA). B2B partners include
Fidelity, the startup’s custodian, which holds nearly half of the
startup’s reported AUM in separately managed accounts.
Forusall is the second largest with a reported $500M of AUM for an undisclosed amount of accounts as of a press release in January
2018. AUM is up nearly 5x in less than a year. In March 2017, Forusall
reported the company managed $104M of AUM across 5,685 client accounts.
Guideline came in third with a reported $158M in AUM across 2,000 client accounts as of October 2017.
Also pictured are Human Interest and Vault. Though these companies manage less money, Human Interest is
still keeping up with Guideline and Forusall in the race for client
accounts. Portland-based Vault, a 401(k) provider for SMBs, was acquired
by micro-investing startup Acorns in Q4’17. The firm has grown assets to $1.1M across 507 client accounts.
Similarly, this cohort of robo-retirement startups were able to grow
largely unchallenged by incumbents in the early days. To stay ahead of
challengers in 2018, these startups will need to focus on customer
acquisition and scaling.
these are the investors placing robo-retirement bets
We used the CB Insights Business Social Graph to highlight the investors that are diversifying their bets in fintech with retirement savings startups.
Please click to enlarge. Each green line indicates one investment.
Collectively, this group has raised $97M and are all in the early- to mid-stages. The most well-funded is Forusall, mentioned above.
Forward-thinking strategic investors are early backers of
robo-retirement startups. Insurance companies Allianz Life Ventures and
Nationwide Ventures both co-invested in Blooom.
While Blooom is currently focused on retirement savings, extending into
insurance could be on the product roadmap and a partnership with
insurers would not be surprising.
Investors are spreading out their bets. Horizons Ventures has made 2 investments in this space, investing in Feex, a B2C subscription service that reduces 401(k) management fees, as well as Forusall. SV Angel on the other hand invested in Human Interest and Guideline.
Looking at investors’ portfolios, we can see a few notable
overlapping portfolios with some of the largest robo-advisors. Great Oak
Ventures is an investor in Human Interest and in micro-investing platform Acorns. Ribbit Ventures is an investor in Forusall and in Wealthfront.
Retirement savings startups have already seen 1 acquisition. Vault, mentioned above, was acquired by Acorns
in Q4’17. Acorns will leverage Vault to launch a retirement product
called Acorns Later in 2018. We dug into Acorn’s acquisition strategy as
part of strategy teardown on Acorns.
Employer-sponsored retirement programs are still a largely untapped
and growing portion of the retirement savings market. Early movers have a
head start but can’t compete with incumbent’s resources. Timing in this
market is essential and startups are well positioned to grow if they
focus on acquiring customers while the economy remains strong (despite a
What will be interesting to watch, however, is when (and how)
incumbents will respond to this new wave of insurgents. Looking to get
ahead, incumbents with a “buy” strategy might look to get into the
retirement savings market. When the first robo-advisors entered the
market, many incumbent firms seemed unfazed (while others funded a few).
Today, every initial skeptic has a robo-advisor strategy.
If history repeats itself, by the time incumbents take notice, it could be too late to stop them.
Principal Financial Group is acquiring Wells Fargo &
Company’s Institutional Retirement & Trust business, a unit that
serves 7.5 million customers and oversees $827 billion in assets, for
$1.2 billion, the two companies announced Tuesday.
The deal is expected to close in the third quarter of this year,
pending regulatory approval. Principal is financing the $1.2
billion purchase with cash and senior debt financing. Wells Fargo can
also earn an additional $150 million contingent on better-than-expected
revenue retention and payable two years after the deal closes. No other
specific terms were disclosed.
The acquisition doubles the size of
Principal’s record-keeping assets, making a juggernaut in the
retirement space even larger, while diversifying its client base. More
than two-thirds of Wells Fargo’s institutional retirement assets are
in midsize employers’ plans ranging from $10 million to $1 billion,
according to Principal.
“Retirement is at the heart of our business and core to our future,”
Dan Houston, the chairman, president and CEO of Principal, said. “This
will be a powerful combination for customers, employees and shareholders
as we solidify our place as a top-three leader in the U.S. retirement
Shedding the Institutional Retirement & Trust
unit, which includes defined contribution, defined benefit, executive
deferred compensation, employee stock ownership plans, institutional
trust, and custody and institutional asset advisory businesses, is a
stark change relative to at least one other wealth manager. Morgan
Stanley just reorganized its wealth management business to fold in
the recent acquisition Solium Capital Inc., a stock-plan administration
company the bank acquired in February for $900 million. It also has been vocal about seeking to make other acquisitions and adding to its wealth management business to help serve the employees of the more than 1,000 companies
it provides retirement accounts and stock options to, as plan sponsors
seek ways to help improve their employees’ overall financial health.Advertising, Mouse Over For Audio
Rob Foregger, co-founder of NextCapital, a company that provides
enterprise digital advice solutions to Transamerica and other financial
services firms, said he expects there will be more consolidation amongst
recordkeepers. But a well-executed strategy like Morgan Stanley’s can
make a retirement business especially valuable. Much of Fidelity
Investments’ asset management growth has stemmed from its retirement
business, said Foregger, who spent nearly two years as the president and
led Fidelity’s retail banking services.
A Wells Fargo spokesperson said the sale of the retirement business
to Principal reflects Wells Fargo’s strategy to focus our resources on
areas where we can grow and maximize opportunities within wealth,
brokerage and asset management.”
Lazard and Debevoise & Plimpton advised Principal on the transaction.
key House committee on Tuesday unanimously passed a bill intended to
increase the flexibility of 401(k) plans and improve access to the
accounts, particularly for small businesses and their employees.
proposal, known as the Secure Act, was backed by the top Democrat and
Republican on the tax-writing Ways and Means committee.
The bill includes:
A host of provisions aimed at encouraging small businesses to provide private retirement benefits to their workers.
allows them to band together to offer 401(k)s and creates a new tax
credit of up to $500 for companies that set up plans with automatic
Businesses with long-term, part-time workers must also allow them to become eligible for retirement benefits.
Several measures that would affect other types of savings are included in the bill.
It repeals the maximum age for IRA contributions and raises the age for required mandatory distributions from 70½ to 72.
It also expands the use of 529 plans, from only college-related expenses to include home schools and student loans.
“Americans currently face a retirement income crisis, with too many people in danger of not having enough in retirement to maintain their standard of living and avoid sliding into poverty,” committee Chairman Richard Neal, D-Mass., said Tuesday.
The bill is one of the few
proposals with a significant chance of becoming law amid a bitterly
divided Congress. Elements of the bill have been debated among members
for years and enjoy wide support among both industry groups and advocacy
organizations. On Tuesday, Neal called the legislation “a major
“The Ways and Means committee is where we find solutions and get things done for the American people,” he said.
last time Congress passed major retirement legislation was in 2006. The
Pension Protection Act focused on underfunded accounts and reforms to
that system. Since then, lawmakers have debated proposals to address the
popularity of 401(k)s and individual savings accounts.
efforts have stalled on their own, said Paul Richman, chief government
officer at the Insured Retirement Institute, a trade group. He said the
Secure Act aims to “modernize” the system.
“It’s packaging them
all into a comprehensive piece of legislation that would address many of
these little issues that have cropped up over the years,” he said. “We
think that it’s a good chance for Congress to take some positive,
bipartisan action and advance this bill.”
The Senate Finance
committee introduced a companion bill late Monday. It is expected to
pass with backing from both sides of the aisle.
“There’s a lot of pent-up momentum for this, and that’s why it’s so bipartisan in nature,” said Shai Akabas, director of economic policy at the Bipartisan Policy Center, a think tank. “They’re now getting to the point where there’s momentum to get it across the finish line in both the House and the Senate.”
In the House, Neal said he is also working on a
second retirement bill with ranking Republican Rep. Kevin Brady of
Texas. He said he hopes the committee will consider that legislation
before Congress goes on recess in August.