Morningstar’s initial retirement report shows ‘alarming’ DC plan shrinkage

Morningstar’s initial retirement report shows ‘alarming’ DC plan shrinkage
Jack VanDerhei, formerly director of research at EBRI, joins the firm’s new unit.
MAR 01, 2022

In its first report, the new Morningstar Center for Retirement and Policy Studies has found that an “alarming” amount of money, $4.61 trillion, flowed out of defined-contribution plans from 2011 to 2020.

“These constant outflows, likely due mostly to rollovers and cash-outs, reduce plan assets,” Morningstar said in a release. “More assets in the defined-contribution system would help more sponsors gain the leverage to demand lower fees from asset managers and drive down costs for end investors.”

In addition, the report found that some people who participate in small plans pay around double the cost to invest as participants at larger plans.

“This is an issue industry leaders and policymakers must address because these differences in fees can add up, leaving participants with fewer assets at retirement and less ability to achieve their retirement goals,” Morningstar said.

The company said it created the center to dive more deeply into areas like plan investment holdings, plan quality and participants costs.

The Center's primary research team includes Aron Szapiro, head of retirement studies and public policy at Morningstar Inc./Morningstar Investment Management, as well as Jack VanDerhei, director of retirement studies for Morningstar Investment Management, and Lia Mitchell, senior analyst of policy research for Morningstar Inc.

VanDerhei joined the firm Tuesday and will be responsible for modeling the impact policy changes and proposals might have on U.S. retirement preparedness, as well as the effects of plan sponsors' decisions on participants. He was previously research director at the Employee Benefit Research Institute.

Independence still popular as recruiting recovers

Latest News

Dimon and Trump talk economy and Fed rates as meetings resume
Dimon and Trump talk economy and Fed rates as meetings resume

President meets with ‘highly overrated globalist’ at the White House.

NASAA moves to let state RIAs use client testimonials, aligning with SEC rule
NASAA moves to let state RIAs use client testimonials, aligning with SEC rule

A new proposal could end the ban on promoting client reviews in states like California and Connecticut, giving state-registered advisors a level playing field with their SEC-registered peers.

Could 401(k) plan participants gain from guided personalization?
Could 401(k) plan participants gain from guided personalization?

Morningstar research data show improved retirement trajectories for self-directors and allocators placed in managed accounts.

UBS sees a net loss of 111 financial advisors in the Americas during the second quarter
UBS sees a net loss of 111 financial advisors in the Americas during the second quarter

Some in the industry say that more UBS financial advisors this year will be heading for the exits.

JPMorgan reopens fight with fintechs, crypto over fees for customer data
JPMorgan reopens fight with fintechs, crypto over fees for customer data

The Wall Street giant has blasted data middlemen as digital freeloaders, but tech firms and consumer advocates are pushing back.

SPONSORED How advisors can build for high-net-worth complexity

Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.