Does Pru's hiring of DOL big signal reg changes for stable value?

ERISA lawyers say recruitment of Davis suggests insurer could be prepping for new rules

Nov 13, 2012 @ 12:05 pm

By Darla Mercado

retirement, stable value
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Michael L. Davis, second-in-command of a major division at the Labor Department, has become the head of Prudential Financial Inc.'s stable value business — sparking chatter that the insurer is gearing up for potential regulatory developments.

Mr. Davis started his new job Monday, according to a news release. Based in Woodbridge, N.J., the insurer's hub for stable value operations, he reports to Jamie Kalamarides, senior vice president and head of Prudential Retirement's institutional investment solutions.

In the release, Mr. Kalamarides cited Mr. Davis' “strong experience in the financial services industry and regulatory environment” as keys to helping the firm expand the stable value business.

But retirement industry insiders speculated that Mr. Davis' hiring means Prudential is preparing for stable value to become a focal point for the Labor Department's retirement policy.

Marcia Wagner, managing director at The Wagner Law Group, wondered whether Mr. Davis believed that the department could be convinced that stable value funds could be a qualified default investment alternative for retirement plans.

“There are two ways for this to go: It could be better for stable value and end up back on the QDIA shortlist,” Ms. Wagner said. “Or it could get worse. Stable value will be more regulated and more scrutinized. It could be either one; it's unclear.”

Jason C. Roberts, chief executive of the Pension Resource Institute, said that there has been buzz among service providers that the Labor Department could turn its attention toward advisers and plan sponsors' due diligence in selecting stable value.

Mr. Davis' expertise may contribute to what Prudential can do to educate distributors and plan sponsors as a manufacturer.

“How do you get the plan sponsor comfortable in terms of documentation, prudent review and selection of the product?” Mr. Roberts said. “[Mr. Davis] can bring insight to both sides and facilitate adoption from the distribution's perspective, and he can also help through communication with the plan sponsor.”

Dawn Kelly, spokeswoman at Prudential, declined to comment on the speculation; DOL spokesman Jason Surbey also declined to comment.

As of Sept. 30, Prudential Retirement had $102 billion in stable value retirement account values, including $56 billion in investment only stable value.

Experts agreed that bringing Mr. Davis on board was a major win for Prudential.

An alumnus of JPMorgan Asset Management, Mr. Davis was seen as understanding the needs of service providers as the DOL produced a volley of disclosure regulations and proposed a rule redefining “fiduciary.”

Mr. Davis “was always a very pragmatic regulator in terms of being accessible to the service provider community and being receptive to comments,” Mr. Roberts said. “He wasn't going to tell you what you wanted to hear, but he would listen.”

“He was a regulator; he knows how EBSA thinks,” Ms. Wagner said.

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