KCS on Asset TV

I recently had the great pleasure to stop by the Asset TV studios to provide some perspective on DB versus DC and the DOL Fiduciary Rule, which may or may not survive under President-elect Trump.  Here is a link to that interview.


As always, please don’t hesitate to reach out to us if we can be of any assistance to you. Happy Thanksgiving to you, your family and friends.

Donald Trump means more upheaval for the asset management industry

The following is an article that I wrote for eFinancialcareers on the potential impact of a Trump Presidency on the asset management industry.

For the U.S. institutional asset management industry that is already dealing with significant change, including the decline of traditional defined benefit (DB) pension plans to name just one, the election of Donald Trump is likely to create further disarray. First and foremost, there is great uncertainty as to his support – or lack thereof – for the Department of Labor’s fiduciary rule, over which the wealth management industry is divided.

Add this unknown to the impact on the financial services industry from changing demographics, new technology, consumer demands and a Trump presidency and we have a situation that is likely to shake traditional buy-side and less-nimble sell-side firms to their core.

You can find the remainder of the article at the following link to eFinancialcareers.com




Liabilities Are Like Snowflakes

P&I recently published a chart using data from that National Association of State Retirement Administrators (NASRA), which highlighted the fact that the once the holy grail 8% return on asset (ROA) target had moved from that level in 2001 to somewhere between 7.25% and 7.5%.  Although a full 50% of those using 8% in 2001 were still anchored there today.

We believe the data, but continue to shake our head at the foolishness of the ROA objective.  How is it that all these state plans, with a few exceptions, have a return objective that falls within 50-75 basis points of one another, especially when one considers the differences in current funding, contribution policies, workforces, economic environments, benefit structures, COLAs, etc.

As we’ve mentioned, if two plans have the same 7.5% objective they are likely going to have an asset allocation that is similar. But, does that make sense if one plan is 90% funded and the other one is 50% funded? Hell no! Given this example, one of these plans has an asset allocation that is either way to conservative or aggressive. The funded status and contribution policies should dictate asset allocation and investment structure – NOT the ROA.

A DB Plan should use cash flow (contributions) to meet benefit payments, where possible.  Why subject this important asset to the whims of the market? DB plans should also de-risk where possible.  The liability is known (promise made).  What isn’t known is how the markets will behave.  There are no guarantees, even with the benefit of time.  I suspect that most plan sponsors and their consultants would have assumed that the 8% was achievable over a 20 year horizon, but even the S&P 500 (7.7%) and the Russell 2000 (7.9%) failed to meet that objective for the 20 years ending October 31, 2016, and DB asset allocations aren’t only in equities.

It may be too much to ask of plan sponsors to completely flip the ROA switch off, but a portion of the assets should be se-risked in order to meet near-term obligations should the markets fall significantly from these levels.  Call us, we can help guide you on how to become more liability aware.

KCS November 2016 Fireside Chat – A DC Update

Regular readers of the KCS Fireside Chat series will know that 3-4 times per year we dedicate this monthly series to issues related to the defined contribution space, and November just happens to be one of those months.  Here is the link:


In this article, Dave Murray, KCS’s DC Practice Leader, addresses such diverse topics as the IRS contribution levels for 2017, the DOL Fiduciary Rule, and a recent spate of lawsuits targeting small (not smaller) defined contribution sponsors.  DC lawsuits had once been relegated to the big corporate sponsors, but successful litigation at these firms has lead enterprising lawyers to pursue similar cases against much smaller sponsors.

Plan sponsors who felt that freezing and / or terminating their DB plan significantly reduced their fiduciary responsibility / liability are finding that they were kidding themselves.  Given that most private sector employees are in defined contribution plans, if they are in a retirement plan at all.  The DOL and IRS are getting much more aggressive in conducting audits of these plans.  We would be happy to provide you with a fiduciary review of your activities in order to make sure that you and your plan are prepared should you be contacted about an audit.