enlighten us, but make it quick.€¦ · ignite nagdca 2018 9/27/2018 25 who are the victims?...

Ignite NAGDCA 2018 9/27/2018

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Enlighten us, but make it quick.• Ignite is a series of speedy presentations.• 20 slides each. 15 seconds per slide. • NAGDCA Ignite Presenters:

• Generational Education & Communication | Cindy Rehmeier, MOSERS• ESG – Environmental, Social & Governance Investment Criteria | Marla Skeffington, Natixis• The Emerging Cyber Threat| Tim Rouse, SPARK Institute • Success by Design: Innovation in Investment Lineups & Plan Design | Barbara Healy, NFP• Best Practices & Lessons Learned from Private Sector DC Plans | Judith Boyette, Hanson Bridgett • Holistic Retirement: Money, Purpose, Health | Andrea Cockrell, City of Plano, TX• Identifying & Solving for Retirement Income | Lori Lucas, EBRI

• Please hold your applause until the end.


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Generational Education & Communication


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CHALLENGESWrite me


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Preferences

2017 Lincoln Retirement Power® Participant Study

MO Deferred Comp

Survey by Age Cohort


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Survey Results Drive Efforts

SIMPLIFY


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Targeted Video

Modeferredcomp.org

University of California

Millennials

Are the toughest sell


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University of California

Messaging & Resources


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Audience Polling


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Audience Polling


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Environmental, Social and Governance (ESG) Investment Criteria

Bonnie SaynayGlobal Head of Responsible InvestmentInvesco

Francois OtienoDirector of Fixed IncomeSegal Marco Advisors

Marla SkeffingtonVice President-Retirement StrategiesNatixis Investment Managers

Nathalie WallaceESG Investment StrategistState Street Global Advisors

72%of Largest global companies by revenue issue CSR reports in 20174

15%of Board Seats are held by women globally6

400+Sustainability Reporting Instruments globally1

30%of the World’s

Private Wealth is controlled by women5

81%of Emerging Market countries with Government

Imposed Corporate ESG Disclosure3

70%of companies surveyed plan to use AI

(Artificial Intelligence) by the end of 20188

85%of S&P 500 companies published CSR reports in 2017,

representing growth of 325% since 20119

18of World’s Largest Economies have Corporate

Disclosure Requirements3

150+Providers of ESG research7

49%of Millennials in the U.S. with a net worth greater than

$1 million chose social responsibility as a factor when choosing an investment10

90Delisted

PRI signatories13

26%of Total Managed Assets globally are classified as sustainable9

46%of World’s Largest Economies have Pension

fund regulations3

38Stock Exchanges have issued guidance to listed companies on ESG reporting11

65%of Sustainability Reporting Instruments are mandatory2

1000+ESG Indicators to consider

in sustainabilityacross multiple vendors7

$89 Trillion+in AUM by PRI signatories13

22Stewardship Codes or initiatives globally12

State of the Responsible Investment Industry


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Macro Thematic View of Responsible Investing

Business Ethics

Climate ChangeInclusive Growth

Human Capital Development

Corporate Disclosure

EmergingMarketTrends

Fixed In

come

Sustainab

ility

Investing Data Privacy

GenderDiversity

Corporate Governance Diversity

Water Scarcity

Technology & AI Board

Accessibility

& Accountability

Demographic shifts

Single useplastics

Transparency & Regulatory Requirements

Shift to the social

C2 ‐ Internal Natixis

How many people are 60 years of age or older?

a) 350 millionb) 290 millionc) 435 milliond) 700 million

Demographic shifts…


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What is the estimated world population in 2050?

a) 6.5 billionb) 5.7 billionc) 7.5 billiond) 9.6 billion

...require sustainable cities and communities

What percentage of world citizens will live in cities in 2050?

a) 45%b) 70%c) 60%d) 35%


How many acres of land are destroyed each year?

a) 22 millionb) 32 millionc) 15 milliond) 7 million

Source: Mirova estimates based on public data

Need to preserve life on land


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What percentage of water in US pipes is lost due to leakage?

a) 14%b) 5% c) 3% d) 10%

Clean water scarcity is real

Source: United Nations

The UN Sustainable Development Goals (SDGs)


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What is ESG?

How a company uses and impacts the natural environment in its supply chain

How a company manages relationships with its employees, suppliers, customers and the communities where it operates

Policies and practices related to a company’s leadership, executive pay, and shareholder rights

Social

Environmental

Governance

1 Natixis Investment Managers, Survey of Defined Contribution Plan Participants compiled by CoreData Research, August 2016. Survey included 951 respondents.

Trends among plan participants…


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1 Natixis Investment Managers, Survey of Defined Contribution Plan Participants compiled by CoreDataResearch, August 2016. Survey included 951 respondents.


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ESG has evolved over the years

and managers may differ in their approach to integrating ESG into their investment process

• Socially Responsible Investing (“SRI”)

• Religion-based screening

• ESG best-in-class

• ESG integration

• Thematic

• Engagement

• Impact

• Mission-based investing


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Different ESG Investment Styles and Terminology

• Exclusionary screening

• Positive screening

• ESG integration

• Impact investing

• Active ownership/stewardship

The Road to ESGAsset managers face multiple challenges


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Have we forgotten someone? Asset Owners • Asset Managers • Industry

Fiduciary Duty and ESG Whatever is worth doing is worth doing well.

- Lewis Carroll (famous writer and mathematician)

The discussion around ESG today is not about fundamentally changing what we do, but rather creating a framework around these risks that can be clearly articulated, measured, monitored and tracked.

Active fund managers have always considered ESG risks as part of a robust investment process.


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Role of the Consultant

To ask the question: what are the assets/fund for?The answer is not always to make more money or hit a number.

To assure all material factors are considered and evaluated.

Factors considered within the “E” or the “S” may be material in assessing opportunities.

Constructive engagement of corporate management is a responsible and necessary

act of fiduciaries.

Impact and return are not mutually exclusive concepts.

How Consultants Can Help Clients Implement ESG

Investment Policy Manager Selection Proxy

Voting Corporate

Governance

Objectives

Risk Management

Selection Criteria

Required Reporting

Philosophy

Process

Security Selection

Risk Management

Proxy Policy

Annual Meetings

Proposals

Reporting

Board of Directors

Engagement

Advocacy

Alliances


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The Emerging Cyber Threat: How Plan Sponsors Can Prepare for Tomorrow’s ThreatsModerator/Panelist: Keith Overly, Ohio Deferred CompensationPanelists: Peggy Haering, State of Connecticut

Melanie Kolp, Nationwide Tim Rouse, SPARK InstituteAssunta Vivolo, SEC


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Who’s behind the breaches?

• 73% perpetrated by outsiders• 28% involved internal actors• 2% involved partners• 2% featured multiple parties

• 50% of breaches were carried out by organized criminal groups

• 12% of breaches involved actors identified as nation‐state or state‐affiliated

Verizon ‐ 2018 Data Breach Investigations Report 11th edition

Cyber Security Landscape

What are other commonalities?

• 49% of non‐POS malware was installed via malicious email

• 76% of breaches were financially motivated

• 13% of breaches were motivated by the gain of strategic advantage (espionage)

• 68% of breaches took months or longer to discover




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Who are the victims?

•58% of victims are categorized as small businesses



What tactics are utilized?

• 48% of breaches featured hacking• 30% included malware

• 17% of breaches had errors as causal events• 17% were social attacks• 12% involved privilege misuse

• 11% of breaches involved physical actions




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What’s happening with retirement plans?

• FBI confirms that retirement plans are being targeted

• SPARK members are seeing an increase in attacks

“Cause that’s where the money is”

• $7.7 trillion dollars is held in defined contribution plan accounts.

• Retirement plan administration involves receipt and transmission of sensitive data known as personally identifiable information or “PII”.

• Most attacks involve use of legitimate credentials. Your participants could be the weakest link.

Willie Sutton


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Not Just an IT problem

Everyone plays a role in protecting data.

Cyber threat is real; participants are the weakest link

Audience Polling

Is Cyber Security a Priority?


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Audience PollingDoes your record keeper have a process for preventing unauthorized distributions.

Do you have the necessary expertise in‐house?

Do you have Cyber Security Insurance?

What IS the record keeper’s role in protecting the data of participants?

What can we do to prevent unauthorized distributions from participants’ accounts when thieves have PII?

Protecting Plan Data


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SPARK’s 16 Control Objectives

Third Party Attestations


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Record Keeper Hires Third Party Independent Auditor

Auditor Uses SPARK’s 16 Control Objectives

Auditor Creates a SOC2 or AUP Report for Consultants and Plan Sponsors

Plan Consultant or Plan Sponsor Uses Report to Grade Record Keepers

Defining TermsWhat is a breach?

What is an incident?

When is it a breach and when is it fraud?


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Privacy • All states have laws protecting PII (but

provisions vary)

• ERISA has no provision dealing with PII

• FBI confirms that retirement plans are being targeted for unauthorized distributions

• SPARK members are seeing an increase in attacks

Protecting Participants• Check account frequently

• Don’t respond to phishing attempts

• Request 2 factor identification or additional security for account

• Read mailed notices

• Update account with current address

• Notify record keeper if your electronic devices are lost or compromised


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Takeaways

• Ask for help

• Don’t just rely on Cyber Insurance

Takeaways

• This is not just an IT issue

• Do Your Due Diligence


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Takeaways

• Evaluate Your Vendors

• Review Your Contract with Vendors


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Success by Design: Innovation in Investment Lineups and Plan Design


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What is…

Role

Philosophy

Design/Investments


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Choice Morningstar Style Box

White Label

White Label

Do It For Me


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Do It Myself

Self Directed Brokerage


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There a lot of risk in life…..


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New Cash Flow to Equity Funds Confirm….Buy High

Sell Low


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The Wheel of Risk….

Equity can vary by 56%

8%


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More Than a Clean Slate…..

Best Practices


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Establish Investment Menu

Investment Policy

Consultant Selection

Select Recordkeeper

Implementation

Best Practice Steps


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Best Practices and Lessons Learned


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•Best Practices and Lessons Learned•Everybody Loves a Winner!

•Best Practices•ERISA Standards‐What are they?


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•Best Practices•ERISA Standards‐Why do you care?

•Best Practices•ERISA Standards‐What’s the problem?


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•Best Practices•Increased Popularity of “White Label” Investment Structures

•Best Practices•Increased Popularity of “White Label” Investment Structures—Why?


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•Best Practices•White Label Structure‐right for your plan?

•Best Practices•White Label Structure or Something Else…You gotta keep ‘em happy!


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•Lessons Learned •Increased ERISA DC Plan Lawsuits•If you don’t keep ‘em happy…

•Lessons Learned‐ERISA Litigation •Lawsuits Focus on Investment/Recordkeeping Vendor Selection and Monitoring


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•Lessons Learned‐ERISA Litigation•Litigation‐‐Costs $$ & Risks Plan Reputation

•Lessons Learned•Review and Update Vendor Selection and Monitoring Procedures


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•Lessons Learned•Review recordkeeping and investment related costs against market; Consider design changes like “white label” investment structure

•Lessons Learned•Choose Commitments to Standards Carefully


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•Best Practices and Lessons Learned •Enjoy the rewards of your hard work!


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Holistic Retirement: Money, Purpose, Health

Moderator: Wendy Dominguez, Innovest

Panelists: Andrea Cockrell, City of Plano, TexasBrayton Connard, Monroe County, New YorkCarl SteinhilberJonathan Viscounte, Prudential

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0

10000

20000

30000

40000

50000

60000

70000

Employee A ‐ Police Employee B ‐ Public Works

Total Cost of Risk per Employee

Health Claims Workers' Comp Disability Paid Leave

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4% Rule


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“Happiness cannot be pursued, it must ensue. One must have a reason to be happy.” “Man’s Search for Meaning” ‐ Viktor Frankl


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Current public sector workers account for 1 in 5 employed person in

the U.S.

For financial professional or institutional plan sponsor use only. Not for further distribution.

fear being ready for retirement

47%



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44% fear not having enough money for daily living expenses

38% fear not being able to cover unexpected expenses

29% fear lack of life and career opportunities

29% fear not being able to treat family and friends



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higher employer costs if employees delay retirement by one year*

1 to 1.5%


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Identifying & Solving for Retirement Income –What to do with that retirement nest egg…

Lori Lucas, President and CEO of EBRICarol Bogosian, President of CAB Consulting

Kelli Hueler, Founder and CEO of Hueler Income Solutions®, LLCMichael Finke, Chief Academic Officer, The American College


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Retirement?

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Retirement?

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Or Retirement?

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Typical Calculator’s Approach to Spending in Retirement

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Typical Calculator’s Approach to Spending in Retirement

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What Spending Patterns Actually Look Like: Quantitative Evidence from HRS

Actual drawdown of assets in retirement ranged from 12% to 27%‐‐depending on assets in retirement.

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Source: EBRI 2018 Issue Brief: Asset Decumulation or Asset Preservation? What Drives Retirement Spending. Based on Health and Retirement Survey data. *Based on non‐housing assets observed right before retirement.

Low Asset Group: $200,000 or less

Middle Asset Group: $200,000 ‐ $500,000 High Asset Group:

>$500,000


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>$500,000



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>$500,000


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What Retirees Say About Spending Money in Retirement

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Everything is so uncertain. You don't know. There is no way you can know if you can afford it. I don't care how much money you have. If you have it in the stock market, you may lose it

tomorrow. You may lose it today. There are just so many uncertainties that you better save

everything you can, because you don't know, and you better not have it all in one place

Source: The Decision to Retire and Post‐Retirement Financial Strategies: A Report on Eight Focus Groups. SOA’s Committee on Post Retirement Needs & Risks and Pension Section.September 2013

Female, Chattanooga


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Everything is so uncertain. You don't know. There is no way you can know if you can afford it. I don't care how much money you have. If you have it in the stock market, you may lose it

tomorrow. You may lose it today. There are just so many uncertainties that you better save

everything you can, because you don't know, and you better not have it all in one place


Female, Chattanooga


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“I know that there’s enough there and I know what’s coming up in the future that I won’t

need to be taking out, so it’ll have time to grow some more. I didn’t take a lot out; it was just a few thousand dollars more. But I know that certain things will happen, like my house will be paid off and I won’t need that

money so it will have time to grow.”


Female, Chicago

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“Now today, I am basically on a fixed income, from investments to Social Security to my pension. Well, when you are the average

housewife, I’m speaking for myself and a lot of my neighbors, you can have a couple pair of jeans and tshirts and you get along just fine.

You don’t have to go out and spend a lot of money.”

Female, Health Decline Group in Chicago, IL




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“When we retired, we spent/wanted. Now I am spending a greater percentage on

needing and not as high a percentage on

wanting.”

Source: Society of Actuaries: Post‐Retirement Experiences of Individuals Retired for 15 Years or More: A Report on Twelve Focus Groups and Fifteen In‐depth Interviews in the United States and Canada. January 2016.

Female, Marital Change in Chicago

“I would say lower, especially for traveling. If you

retire you can go the cheap way.”

Male, Health Decline Group in Kitchener, ON


• Most adapt to their financial circumstances and are resilient: Most are comfortable with frugality and have lower expenses.

• But. . . There are certain mitigating factors:

Lessons Learned from RetireesIDI

Increased Longevity Possible Catastrophic Events

Reduced Access to Pension Income


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• Most adapt to their financial circumstances and are resilient: Most are comfortable with frugality and have lower expenses.

• But. . . There are certain mitigating factors:

Lessons Learned from RetireesIDI

Increased Longevity Possible Catastrophic Events

Reduced Access to Pension Income

Practical Steps for a Plan Sponsor

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• Review detailed “money out” report from your service provider to see what your participants are doing when they leave the plan

• Allow flexibility so action can be taken by participants based on personal financial circumstances

• Allow partial and ad-hoc withdrawals

• Promote keeping assets in the plan

• Offer systematic, periodic partial payments

• Educate participants about the value of converting a portion of their savings into a Personal Pension

©Hueler Companies 2018. All Rights Reserved. INCOME SOLUTIONS® is a registered trademark of Hueler Investment Services, Inc. U.S. Patent 7,653,560


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• Review detailed “money out” report from your service provider to see what your participants are doing when they leave the plan

• Allow flexibility so action can be taken by participants based on personal financial circumstances

• Allow partial and ad-hoc withdrawals

• Promote keeping assets in the plan

• Offer systematic, periodic partial payments

• Educate participants about the value of converting a portion of their savings into a Personal Pension

©Hueler Companies 2018. All Rights Reserved. INCOME SOLUTIONS® is a registered trademark of Hueler Investment Services, Inc. U.S. Patent 7,653,560

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Areas for educating employees improve retirement planning:

• Paying down debt before retirement to reduce fixed expenses

• Considering the impact of death on the surviving spouse/partner

• Considering family members’ need to help elderly parents and relatives

• Planning for the older ages when choosing pension and Social Security benefits and taking withdrawals from retirement savings

• Work during retirement to supplement income

• Postpone retirement to accumulate greater assets

• Postpone Social Security claiming to increase income in later ages

• Budgeting for unexpected, yet predictable, shocks

• Using insurance products to mitigate risks in retirement©Hueler Companies 2018. All Rights Reserved. INCOME SOLUTIONS® is a registered trademark of Hueler Investment Services, Inc. U.S. Patent 7,653,560



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Areas for educating employees improve retirement planning:

• Paying down debt before retirement to reduce fixed expenses

• Considering the impact of death on the surviving spouse/partner

• Considering family members’ need to help elderly parents and relatives

• Planning for the older ages when choosing pension and Social Security benefits and taking withdrawals from retirement savings

• Work during retirement to supplement income

• Postpone retirement to accumulate greater assets

• Postpone Social Security claiming to increase income in later ages

• Budgeting for unexpected, yet predictable, shocks

• Using insurance products to mitigate risks in retirement©Hueler Companies 2018. All Rights Reserved. INCOME SOLUTIONS® is a registered trademark of Hueler Investment Services, Inc. U.S. Patent 7,653,560


Thank you!

enlighten us, but make it quick.€¦ · ignite nagdca 2018 9/27/2018 25 who are the victims?...

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