May 5, 2024 • 46 mins
Research and consulting giant Morningstar was cited over 40 times in the final fiduciary rule release, officially called the Retirement Security Rule. The reason was largely due to the data and information for which the company is known.
Aron Szapiro, Head of Government Affairs with Morningstar, joins American Retirement Association CEO Brian Graff for a wide-ranging discussion about the rule and its future implications, as well as recent attacks on the country’s private retirement savings system. This is an episode not to miss.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Financial services firms are highly innovative.
You heard a lot of thosearguments back in 2015 and 2016.
And yeah, that rule was vacated, sure, but you saw a lot of
changes, a lot of reallyinnovative and positive changes
in response to that rule beforeit was vacated.
Speaker 2 (00:14):
DC Pension Geeks brings you exclusive
conversations with topretirement policymakers and
regulators in and aroundWashington DC, hosted by Brian
Graff, an attorney, accountant,former Capitol Hill staffer and
CEO of the American RetirementAssociation.
If you're looking for aninsider's view of all the twists
and turns that Washington takeson the road to ensuring a
(00:34):
secure retirement for millionsof Americans, you're in the
right place.
Welcome to DC Pension Geeks.
Speaker 3 (00:41):
Well, hello everybody .
It's been a little minute ortwo, probably due to the Napa
Forward Case Summit taking up somuch of our time here, but
we're back at it.
Another edition of the DCPension Geeks podcast.
And you know, we're veryfortunate today to have someone
(01:06):
that a lot of people probablydon't realize is involved in
policy.
His name is Aaron Shapiro, he'sthe head of government affairs
of Morningstar and you know,aaron, thanks for being with us
today.
Let's talk a little bit aboutyou, if you don't mind.
How did you end up in DC?
(01:28):
How'd you end up working onpolicy issues?
What's the Aaron story?
Speaker 1 (01:38):
Yeah, well, I've really sort of split my career
evenly now about 10 years ingovernment total and now just
came up on my 10-yearanniversary at Morningstar.
So I was just always interestedin politics and policy.
I had the real privilege,certainly from a learning
perspective, of a first jobworking for the New Jersey
General Assembly Majority Office, and that is how I got
(02:02):
interested in retirementsecurity issues, because we had
a I don't know billion dollardeficit to close.
And we're sitting around thecaucus room and the budget
person says well, you know, wecould go from projected unit
credit to EAN, and I'm sort oflike what do those words mean
and where did this money comefrom?
And so that really got veryinteresting.
(02:24):
And I worked at the USSGovernment Accountability Office
for a couple of years and thatwas fascinating.
A lot of different issues, butI really found that retirement
was good to work on becausegenerally it was often
bipartisan consensus.
Things were happening.
This was right after PPA waspassed, so there was consensus.
Things were happening.
(02:45):
This was right after PPA waspassed, so there was a lot of
implementation happening.
And that's, you know, that'swhere GAO can really, you know,
help inform Congress of what'sgoing on, make recommendations
to agencies.
There were mandates to theagency in that as well.
You know did some stuff that's.
You know I think most peoplewould find very boring, but I
found really interesting so Iknew I'd kind of found my spot.
Speaker 3 (03:09):
Well, I mean, I think everyone listening to this
podcast can probably attest tothe fact that most people find
what we do boring, but we findit very interesting.
Pretty common theme with peoplein the retirement plan business
.
You mentioned the governmentaccountability office.
You know we haven't had anyonefrom GAO on the podcast and I
(03:34):
think a lot of people don't evenknow what the heck GAO is and
what they do.
So would you mind sharing,because I know I mean we do.
They reach out.
I remember when you were at GAOyou reached out to us with some
questions and I recall I meanyou know we are constantly being
not constantly, but prettyregularly being asked by them
(03:55):
for input on projects they'redoing.
They've got a pretty sizableteam of people that do
retirement policy.
So maybe a little bit you knowwhat is the role of GAO in the
Washington sphere.
Speaker 1 (04:06):
And you know, and also a big report that came out
today with two you know notuncontroversial recommendations
to the Department of Labor ontarget date funds.
So they're, you know they're,they always have.
They often have activeengagements.
Yes, I mean GAO, for thepurposes of most of your
listeners, is the researchInvestigative Arm of Congress
(04:26):
and it takes requests fromtypically ranking members or
committee chairmen on the Hilland it's a client.
I think the thing to understandis it is a client-type
relationship with the Hill, nota customer-type relationship,
and so those requests go throughback and forth.
It's an iterative process tomake sure there are questions
(04:48):
that the agency can answer withthe approach that it uses to
what it calls audits.
There are some just straightperformance audits that the
agency does some accountingthings, but mostly it's public
policy research and one thingyou will see in these reports is
that they'll always set up acriteria, sort of the way things
ought to be, as definedtypically in statute, and then
(05:12):
whether there's a disconnectbetween the reality of how
things are working and what thatcriteria is, and then
recommendations to close thatgap so that hopefully in the
future reality matches betterwith criteria.
Some of the stuff in theretirement space is maybe even a
little bit more abstract.
I did work on what are thephilosophies of different ideas
(05:32):
for discounting pension funds,but some of that stuff becomes
very concrete what happens whenyou align the cost accounting
standards that DOD contractorsuse to discount their pension
funds with the specifications inPPA, and what does that mean
for forward pricing.
So I mean, you know there'sthere's there's sort of a range,
a range of things.
But yeah, I mean I think youknow and I guess I should.
I should also say it's a, youknow, it's a nonpartisan,
(05:55):
independent agency that I thinkis quite well respected on the
Hill, and so I think it'sprobably always good to be, to
be helpful.
Speaker 3 (06:08):
They take some pretty deep dives on stuff.
You mentioned the report todayabout target day funds and and
yeah, I mean there has been some, a lot of it coming out of some
articles in the media.
You know questioning, you knowsome of the fees and strategies
associated with tdfs and so someum, some folks on the um I
(06:34):
think it was bobby scottactually um submitted some
questions um regarding targetdefense at jail and they just
came out with that study, which,um you might yeah, he was.
Speaker 1 (06:44):
he was one of the requesters on that job and I'm
trying to.
I don't know if it was a jointrequest with the Senate side or
not, I can't remember.
Speaker 3 (06:52):
I don't recall that either.
So most of the listeners arevery familiar.
I mean Morningstar householdname, certainly a well-known
name in the context of in thefinancial services universe.
But what they don't realize ishow involved Morningstar is in
(07:12):
public policymaking and researchand, you know, to some degree
in advocacy.
So let's talk a little bitabout all the things that
Morningstar is doing in terms ofpositioning itself to be a
(07:34):
significant contributor into thepolicymaking process.
Speaker 1 (07:38):
Yeah, so well.
First of all, I reallyappreciate you framing it that
way and that's certainly how wethink about it.
I want to preface this bysaying I am just extraordinarily
fortunate to work at a companylike Morningstar that is willing
to pursue this kind of strategyand willing to pursue it over
the long term fell into this job, which is what happened.
(08:05):
I joined a startup, we wereacquired and at the same time,
there were a lot of questionsabout how Morningstar, which was
growing quite rapidly, movinginto being a much more regulated
business, how we're going to dogovernment affairs, and we
really didn't have a lot ofinternal disagreement around
what our approach would be.
We knew we were getting a lotof incoming questions Like, for
example, we're cited a bunch oftimes in that GAO report.
(08:25):
It's a lot of our data.
We're getting questions likethat from the Hill from
different regulators, and so weknew we wanted to formalize that
a lot more, make sure that wewere coming to perspectives that
represented the company's viewsand leveraged that data and
that desire to advocate forordinary investors to really put
them front and center in thekind of analysis that we were
(08:47):
doing.
I think we announced ourpresence way back in 2015-16,
when we did our first biganalysis of what was then a much
more controversial DOLfiduciary package.
Let's call that one 2.0, maybe1.0.
We did the 2020.
Speaker 3 (09:04):
BTO as 2.0.
Speaker 1 (09:05):
It really was 2.0, maybe 1.0.
We did the 2020 BTO as 2.0.
Speaker 3 (09:06):
It really was 2.0.
Because it was the 2010.
Speaker 1 (09:08):
FDL, so maybe we're on 4.0 in any case.
So they did a very largeregulatory impact analysis and
what we did in that case was tryto replicate it and also change
some of the assumptions aroundand sort of see what we got.
And we found stuff that I thinkwas reasonably annoying to
(09:31):
people on kind of both sides ofthe debate, which signaled to me
we were on the right trackbecause we found a pretty sharp
discontinuity over time where alot of the associations with
different kinds of conflictedbusiness arrangements were
becoming less and less important.
But we still found a prettysignificant effect of certain
(09:52):
kinds of conflicts that we wereable to measure.
So you know we reported on that, we published some stuff in the
Journal of Retirement, we usethat to inform future comment
letters to the department andalso commentary on Reg BI and
we've had, you know, we do trackwhether the agencies take our
(10:12):
recommendations and I meanobviously they don't always
listen to us, but I think youknow we're trying to provide
something valuable, empiricallydriven and truly driven by where
the the data goes, as long asas we believe it will help um
investors I mean that doesn'tmean that we don't play the kind
of um you know defense thatevery, every firm is is going to
(10:33):
play from time to time.
But but investors really are thethe north star, and I'm not
saying that's not true foranybody else.
I can only speak for for us andum you know, we're just, we're
just privileged to sit on thesort of data and capabilities
where we can do some prettyinteresting and valuable
analyses from the point of viewof policymakers.
Speaker 3 (10:54):
Well, I mean, you know, at your core you're a
technology data company, right,and so you know it kind of makes
sense, given that data, thatdata perspective, to be able to
provide, you know, that kind ofinput into the policymaking
process, which is oftentimesvery short on.
(11:16):
You know, empirical informationwhen people are making policy
decisions.
I think is what you know, howregulators and folks on the Hill
see the value in being able to.
Well, you know, this is what.
What's really, you know,happening here.
How do you I mean how do you goabout deciding?
Is there some sort of internalprocess where you guys are going
(11:38):
about deciding?
What are the issues that wewant to get in?
You know, get involved with andget active in.
You know how active in how dowe go about deciding.
If you're going to take aposition on something, how's
that process work?
Speaker 1 (11:50):
Yeah, it probably works pretty similarly to other
places, again with the differentvalence that I was describing.
I mean, we have an internalgovernance process.
We have a policy council whichI chair but which we really try
to make sure that we're makingdecisions through consensus, and
you know, one of our inaddition to you know, putting
(12:10):
investors first one of ourguiding principles is do we have
anything unique to add to thisconversation, right?
So I'm pretty reluctant.
Having worked in government, Iam painfully aware that there
are human beings who have toread these letters that come in,
right?
So we're not just trying tokind of do a 20-page letter
(12:31):
that's the same as somebodyelse's.
If we think that we are wellwithin the industry consensus,
we may send a short letterexplaining why.
But if we don't have data toadd to it, we're not going to
just kind of there's plenty ofother people making the argument
but where we think we havesomething unique to contribute
and it's important, you knowthat's where we try to focus.
Speaker 3 (12:54):
Well, speaking of data, and something where you
clearly made an impact andobviously the hot topic of the
day in our little world of 401kplans and financial services is
DOL's retirement securityregulation, aka affectionately
(13:15):
known as the fiduciary rule.
You know they issued theirfinal rule last week Morningstar
our count was 41 times.
Morningstar was mentioned inthat package of regulations and
(13:35):
private transaction exemptions.
That's way more than anybodyelse.
I'm not even close in terms ofimpact and a lot of it was data
driven, as you were suggesting.
A lot of it was, you know,citing facts around how this
would impact investors, how itwould affect plans.
(13:57):
Quite a bit about that.
So talk a little bit about howyou.
You know that rule is verycontroversial.
That rule is very controversial.
One can argue.
You guys sort of to some degree, represent everyone in the
industry, in a sense that therearen't that many facets of the
(14:20):
financial services industry thataren't your customers to one
degree or another.
So talk to us about thatprocess.
How did you decide to getinvolved?
And then what did you kind?
Speaker 1 (14:36):
of focus on in terms of the comments and information
that you provided to thedepartment.
Yeah, so we knew we would be.
That's when we knew, you know,a priori, that we were going to
be doing significant amounts ofwork on the analysis of the rule
because we believed that theprevious the PT-2020-02, the
previous package and, of course,reg BI you know separate but
related issue all have had asignificant impacts on investors
(14:59):
, and, I think, largely for thebetter.
You know, for example, if youjust look at where the money is
going pre and post 2016,.
Naive analysis we do moresophisticated econometric
analyses as well, but that seemsto have really accelerated a
push into just higher quality,lower fee investments, and so we
knew we were going to weigh inon this.
It's part of our mission.
(15:19):
The people running that teamare very supportive and we know
that not all of our clients aregoing to agree with our opinions
, just as we wouldn't agree withall of their opinions.
I mean, that's fine and I thinkthat we have to be kind of
guided by what we see and whatour analysis shows.
We have this Form 5500 databaseand I know this is a
(15:46):
sophisticated audience, butthat's the annual reports that
plans file at leastERISA-covered plans file, and it
involves some prettylabor-intensive and
computationally intensive workto pull investment information
off.
The Schedule H, which is againwhere the Schedule of Assets is,
(16:06):
is listed and it's not terriblystructured and that's a whole
other conversation.
So we're sort of sitting onthis data that can be very
useful in informing this viewand we had a pretty good idea of
what we were going to do beforewe even saw the rule and when
we saw the rule we refined ourapproach there.
But the question here is aroundhow much better could things
(16:32):
plausibly get for retirementinvestors?
And I think the answer forpeople covered by larger plans
is it can't get any better.
It is better to be an investorin the US in a retirement plan,
basically anywhere else in theworld, and it's better today
than it was five years ago.
And there is a point at whichwhen you're paying like eight
basis points for exposure to theentire domestic and
(16:53):
international market, I mean itcan't get that much better than
that, really right.
So we didn't think we'd seemuch there and we didn't see
much there.
We do see.
We knew we were seeingbeforehand because we do this
annual retirement plan landscapereport a lot of variation in
the small plan markets.
You get a lot of small plansthat are doing a great job and
then you have a lot that franklyaren't, and you could see that
(17:15):
they're invested in the samestuff basically.
So this sort of extremely widevariation in fees is troubling,
and so we were able to producean analysis that, I think, is.
We made sort of small Cconservative assumptions all the
way.
We didn't assume that the smallplans would all of a sudden
become like the best small plans.
We just assumed they would geta little bit better, get a
(17:37):
little bit closer to the median,and that has pretty significant
savings for the 10% or so ofworkers who are in them.
It's something that I felt gotlost a lot in the debate and
that we wanted to do.
We also did a fairly limitedanalysis looking at the interest
rate spreads on fixed indexannuities, which we assume will
(17:58):
come down, will narrow, giventhe scrutiny that would be put
on them and given again thevariation we see there in the
marketplace.
But I think the larger costsavings came from relatively
small improvements to a largenumber of plans covering a
fairly small portion of the 401kpopulation, but that's still
millions and millions of people,especially because people cycle
(18:19):
in and out of small plans.
So it's not like I thinkthere's a tendency to stylize
this, as people work where theywork and then they'll just work
there for 30 years, andobviously that's not true.
So when you have a segment ofthe K marketplace where I think
there's still some room forimprovement that could benefit
(18:39):
from this rule, we wanted tohighlight that and, yeah, we
think it's a big part of ourmission.
I'm sorry.
Speaker 3 (18:46):
I mean, obviously, when you do these kind of
economic analysis, there's, youknow, assumptions that are
fundamentally, you know,critical to you know, doing that
analysis, you know what we saw.
(19:16):
If you go back to the mid-90s,when you know there started to
be recognition that there was,you know, a fiduciary
requirement associated with 401kinvestments.
And you know this is, you know,going back to the you know,
early 90s.
It was really just thebeginning of the 401k, you know,
becoming the primary retirementplan in the workplace, 401k,
you know, becoming the primaryretirement plan in the workplace
.
And then, you know, you marchforward to the early 2000s when
(19:37):
you start seeing litigation inthis area and the fiduciary
process became, you know, prettymuch understood as necessary.
And so I think to your point,you've seen over time, for
better or worse, a reduction ininvestment management fees that
has been concomitant with thatprocess.
So what you're doing is saying,okay, we saw how that worked
(19:59):
with large plans.
If you interpose a fiduciaryrequirement in the small plan
market, which this regulationwould do, you're making some
assumption You're not going toget all the way to matching
large plans but you're going toget marginally better.
I think that's a fairassumption, that you're going to
(20:20):
get marginally betterinvestment management fees.
Speaker 1 (20:22):
Yep, that is a great summary of what we did, and then
we have pages and pages andpages explaining how we did it
and what the specific numbersare and where they were derived
from.
We actually also only assumethat around 30% of plans will
make any adjustment, because alot of the small plans do look
pretty good, which?
Speaker 3 (20:39):
I think is, and your point is well taken there has
been improvements in themarketplace, a lot of it being a
lot more folks getting intothat marketplace that are tech.
You know a lot of, arguably,fintech companies that are
offering, you know, online typesof 401k programs where their,
(21:01):
you know their pricing hasgotten more competitive and
notwithstanding the fact thatyou know there are policymakers
and there was an article in theNew York Times recently that all
small plans are just, you know,grossly overpriced, and I think
we both know- that, yeah, youdon't see that in the data at
all.
Speaker 1 (21:18):
And again, that's the troubling thing.
If they were all expensive, Iwould just say, well, that's
just the economies of scale,that's just the marketplace.
But when you see such a widevariation I'm using my hands,
like this is not a visual medium, but you know such a wide
variation that's where you knowwe think, okay, there is some
room for improvement there.
Sure that you know that thatstandard deviation?
Speaker 3 (21:38):
well, it should be correct, because if it's so wide
, then there's a.
You know your economicbackground would suggest there's
got to be a fault in themarketplace and the way it's
operating.
So and that's.
You know, that's where, ingeneral, that's where regulatory
activity is intended to addressit.
So we haven't talked aboutrollovers Big deal.
(21:59):
Right, you know I've made theargument that the plan advice
issue is, you know, iscontroversial, but really
marginally controversialcompared to the rollover side of
the universe, and so youprovided some input on that.
Can we talk about that a littlebit?
Speaker 1 (22:15):
Sure, yeah, I mean we believe that having the kind of
documentation of the reason fora rollover is extraordinarily
valuable for end investors.
That would be required by thisrule for more entities.
We advocated for that in Reg BI.
(22:36):
It is not an explicit part ofit, although the sort of
preamble talks about how youwould comply doing this.
But then you know some firms do, some firms don't, and there
are some FINRA rules around it.
Speaker 3 (22:44):
But your point is well taken.
It's not explicit.
It's not't and there are someFINRA rules around it.
But your point is well taken.
It's not explicit.
Speaker 1 (22:50):
It's not explicit and that's the biggest change, I
think, certainly for entitiesthat were already covered by and
following Reg BI the sort ofexplicit requirements around
documenting substantiating thereason that a rollover is in a
client's best interest.
I think, if nothing else, thathelps set expectations for the
(23:12):
person who is rolling over.
Rollovers aren't going to goaway.
There are a lot of DC plans andDC plan sponsors let's be
honest who don't really wantthose assets there
post-retirement.
I mean there are some who do.
There are some who havewonderful programs that are
designed to allow people toconvert that money into lifetime
income in plan, but you alsohave plans that don't even have
(23:34):
good ways of doing structuredwithdrawals right.
So the rollovers are anecessary part of this system.
In fact, this whole system is agiant public-private
partnership and we do look atthe regulation like that and
regulation that's going to beeffective is going to encourage
continued partnership that way.
But yeah, we've supported thisfor a long time and we think
(23:57):
again.
Things are definitely quitedifferent and better when you're
talking about, certainly, wherethe assets are flowing in
mutual funds, and that's just afact.
You can just look at what theweighted expense ratios are
today compared to 10 years ago.
It's a phenomenal time to be aninvestor and I'll say pooled
(24:21):
investment vehicles so you cancover all the CITs and
everything and nobody feels leftout.
There's some really goodinsurance products out there.
There's some less good ones.
We do not buy the argument thatthe NAIC model standard is the
same or covers things in thesame way, and we think that
(24:44):
imposing at least a requirementto justify the rollover will be
very helpful for investorsthinking about this
extraordinarily importantdecision when they attain
retirement age or when theyterminate from employment and
are thinking about what to dowith that money.
Speaker 3 (25:01):
So you mentioned lifetime income and obviously
the insurance industry is upset.
And obviously the insuranceindustry, you know, is upset
that's probably the most grosslyunderstated word associated
with their view of the DOL rulebut is, you know, very concerned
(25:21):
with the rule.
One of the key components is,they believe it will reduce
access to advisors to enableparticipants who want lifetime
income solutions to obtain them.
What was your guys' analysis ofthat?
Speaker 1 (25:34):
I mean, it's a very hard thing to falsify, which is
why you see those kind ofarguments pop up, sort of the
unintended consequence argumentis it's always easy to create
one.
But basically, I believe in thesort of not to be flippant, but
I believe in that financialservices firms are highly
(25:56):
innovative.
You heard a lot of thosearguments back in 2015 and 2016.
And, yeah, that rule wasvacated, sure, but you saw a lot
of changes, a lot of reallyinnovative and positive changes
in response to that rule beforeit was vacated and, by the way,
that's why Reg BI was sosuccessful.
You just introduced Reg BIwithout all that background
noise.
I don't think anything happened.
Because it had already happened,but the path of least
(26:19):
resistance was to just keepdoing what you were doing,
everything's iterative.
Everything's iterative, now Irecognize this is a significant
shift.
Everything's iterative, now Irecognize this is a significant
shift.
But the insurance industryclearly has an important role to
play in helping people,particularly those for whom
social security is not going tobe a substantial income
(26:41):
replacement and who don't haveso much money they can
effectively self-insure forlongevity risk.
That's a pretty big slice ofpeople actually, something we're
working on trying to quantifyhow many households fall into
that category.
I mean, there's people who justhave so much money they might
as well yeah, they're going tobe fine, right.
Their functional withdrawalrates are well under 2%, 3%, and
that's fine, right.
(27:02):
And then you've got people forwhom Social Security is a
significant portion of thereplacement and they probably
don't need additional lifetimeincome, although their results
may vary and mileage may varyand everybody's situation is
different.
But there's a slice of Americanhouseholds that can benefit
from these products and I thinkwhat you'll probably see
assuming the rule isn'tultimately thrown out by the
(27:22):
courts is significant amounts ofinnovation in that space.
And again, I mean I just keepcoming back to well, if you
can't justify why the rollovermakes sense, I don't know.
That seems like a veryreasonable barrier given the
fiduciary protections thatpeople enjoy inside their plan
(27:44):
and the massive consequences ofthese kinds of rollovers.
So that's Trevor Burrus Jr.
Speaker 3 (27:49):
Yeah, I mean ironically it's probably the
annuity rollover is probably themost justifiable rollover out
of a plan because so few plansprovide any type of guaranteed
income solution.
So I've always felt that in away it's easier to defend the
(28:13):
annuity rollover because of thefact that there are a lot of
employees and participants whoactually to your point, middle
income individuals who wouldreally benefit for a you know
all or a portion of theiraccount convert into lifetime
income.
(28:33):
I think the second so I'm notthat doesn't necessarily trouble
me and I've been surprised atthe pushback on that because I
think to some degree it favorsinsurance versus other types of
investment vehicles.
I think the challenge for theinsurance industry is on
differential compensation.
It's just incrediblyuncomfortable with the notion of
(28:57):
fee disclosure in any way.
It's sort of a cultural barrierthat exists in that universe.
Speaker 1 (29:04):
Let me sort of dig in on two things in that universe.
But let me sort of dig in ontwo things.
One is one of the things wesaid in our comment letter and
we didn't expect to see this inthe final regulation for obvious
reasons be clear in a second.
But we said you know, reallyyou should always be thinking
about social security and thatshould be part of the analysis
and the department did mentionthat in the preamble.
Speaker 3 (29:21):
They did, they did Made me feel happy.
Speaker 1 (29:22):
You know that's good, so that's good.
Speaker 3 (29:24):
It's better than nothing.
They said you should thinkabout this, but we're not going
to say that you have to.
Speaker 1 (29:29):
That's right.
But I mean, I think, and I dothink, that the sort of you want
to make sure that theincentives are set up for
advisors, producers, whoever isgiving that recommendation to
think about, because socialsecurity is a pretty good deal.
Even if you think that thebenefits are going to be cut
down to 76% or whatever in 10years is still a pretty good
(29:50):
deal and I don't think.
Speaker 3 (29:54):
For lower-moderate income workers it is a great
deal.
Speaker 1 (29:57):
And I just that's not what you asked and I won't get
sidetracked.
Speaker 3 (30:03):
Well, it's a good segue because it's going to go
to something else.
Speaker 1 (30:08):
I was just going to say, though, on that point right
, about insurance industry.
I mean, a counter-argument heremight be and if I were I'm not
speaking for them and I can'tknow what's in sort of the
leadership of these companieslike what they think, but if I
were in their shoes, I would notbe able to publicly say, ah,
(30:30):
this is great, right, because Ihad a lot of producers who were
upset, but if I had wanted toshift to a different business
model?
We definitely saw this in 2015,2016, 2017.
I now have a super usefulboogeyman that I can point to.
It's not me, man, right, it'sthe mean department of labor,
(30:50):
and I do think there is some.
I think the firms that look atthis as an opportunity assuming
that it is not vacated are goingto be able to do some really
interesting and exciting thingsin terms of serving retirement
investors.
I know it's easy for me to saythat, it's easy for me to have
that optimism.
I don't have to implement it,but I really do think we've seen
(31:12):
this movie before in otherindustries and and there's a
tremendous amount of opportunitythere um, because you don't
have the first mover problem,where someone jumps into the
pool and nobody else is.
Is there everybody's beingforced?
in and so that's a terriblemetaphor, but you see what I'm
(31:43):
saying.
Speaker 3 (31:43):
I mean.
I mean that regulation createsthat opportunity set of funds to
my IRA, set of funds that are,you know, not going to be as
priced as well.
There's no way it's going to be.
To your point, you know thefact that I'm giving, you know,
a little bit more of ahandholding with the participant
(32:07):
.
Is that going to be enough tojustify the rollover if they're
paying 50 basis points more,Whereas if I'm rolling over part
of the account into an annuityproduct, that is not, again to
your point, the retirement planisn't offering, they really
(32:27):
don't offer any way to doinstallment payments out of the
plan in a practical andreasonable way.
I can justify that all day long.
There's nothing in the rulethat says you can't pay a
commission.
I think the trick's going to belevelizing those
commission-based right and thatand and that, that.
Speaker 1 (32:45):
That looks an awful lot, like you know listeners
will remember.
You know triple zeros andt-shares and all.
I mean there are things thatcan be done but they can't be
done in the absence ofregulation and I mean there's
just no way to sort of push thatthrough.
So anyway, yes, I think I, andI think your point is very well
taken around.
Yeah, I mean what thedepartment would call
(33:07):
differential products.
Speaker 3 (33:09):
I think, arguably, this is actually pro-annuity
from a rollout perspectivebecause of that.
Anyway, so you mentioned SocialSecurity, let me let me talk
about something completelydifferent, and that's, you know,
there's been these attacks on401ks that are, you know, kind
of been pervasive for severalmonths now in the media in
(33:32):
various forms.
One of the things that hasfrustrated me is the fact that
when they, either the media andsome of these academics look at
now I'm talking with my handslook at the 401k system, they
look at it in isolation and theycompletely ignore the role that
(33:54):
social security plays.
They're not and were neverintended to be.
You know, uh, completely, uh,separate rather, part of the
401k is a supplemental savingsprogram on top of whether it was
a, you know, traditionaldefined benefit plan or
fundamental social security,which is a universal retirement
(34:16):
plan for all American workers.
Why do you think that is thecase and how?
How can?
Because if you look at thereplacement ratios income
replacement ratios for socialsecurity alone, they do a
fantastic.
It does a fantastic job forlower and moderate income
workers.
It's the middle income, and youmentioned the wealthy people.
(34:36):
They'll be fine, we're notworried about them.
It's the people in the middlethat desperately need that
supplemental savings if they'regoing to get to that magical 70
whatever percent of income inretirement.
Speaker 1 (34:50):
I think there are a few reasons that you've had this
.
Well, I mean.
So the question is, why dopeople just ignore social
security and its progressivity?
I don't have a pithy answer.
I mean, I think why do peopletend to focus on, you know, the
(35:12):
tax deferrals over the next 10years?
Well, that's because that's howJCT scores them and that's
because of budget rules, right?
So I think that's, you know,that's just unfortunate.
Why do you know, why do peoplesort of miss that these are
deferrals?
Speaker 3 (35:26):
But the attack on the 401k is about the 401k.
It talks about the fact thatthe arguments are the 401k
doesn't help lower income people, and the point is well, of
course it doesn't, because it'sasking people who don't have
enough money to take more moneyout of their paycheck and put it
(35:49):
into a supplemental savingsplan.
It's never going to work wellfor people that are at the
lowest income levels.
Speaker 1 (35:56):
But that's why we have Social Security.
Well, I think the other thingis that people who are not
living and breathing this everyday just miss the tradeoffs that
are intrinsic in a voluntarysystem voluntary for employers,
much less voluntary for theworkers.
And so, to the extent that wedon't have a mandate and we have
(36:18):
a voluntary system, you'regoing to need to have tax
benefits that incentivizecompanies to offer these right,
and I think that's easy to missif you're not an individual.
One of the things people alwaysask me is why can't the IRAs
just have the same limits as Ks?
And the answer is well, thenthere would be no more Ks.
Speaker 3 (36:39):
I mean not no more, but you would use.
Speaker 1 (36:42):
There would be many fewer right, there'd be no
reason for the principles.
And then I think things likeADP testing is pretty People's
eyes glaze over.
But things like, you know, adptesting is pretty people's eyes
glaze over, but we do have a lotof, you know, safeguards and
protections in the system.
One thing that has reallyfrustrated me now that I'm kind
of going off about this is wehave current law that was passed
(37:05):
recently in a bipartisan way inthe form of the Savers match.
That is going to be enormouslybeneficial for, at least for
people lucky enough to havecoverage at work and that you
know.
But but fairly low incomepeople just to approaching, you
know, the lower end of moderateincome and we've done some some
(37:26):
preliminary modeling on this.
It may be out by the time folksare listening to this.
It's going to come out the weekof hope, the week of May 8th or
9th, and you see enormousbenefits, even if you don't
assume that anyone changes theirbehavior at all, which is
probably not right.
And if people do change theirbehavior they say oh, I'm
(37:47):
getting a government match inaddition to my employer match.
I'm going to contribute up tomake sure I get that full $1,000
government match.
You would have reallysignificant differences, as
measured by the ratio of accountbalance to final projected
salary, which I think is sort ofjust the easiest way to make
comparisons across disparateincome groups.
(38:08):
And so that stuff's reallyimportant and is worth
highlighting and it's worthdefending, because this stuff's
going to be difficult toimplement and you know, I
certainly appreciate that it'sgoing to be challenging to
implement and you know I reallywant to see that happen.
But yeah, I mean, we don't havea 401k system, we have a
retirement system, we have anincredibly strong pillar one.
And yeah, I guess the otherthing is there's sort of when I
(38:35):
talk to people my age, so intheir middle age, people just
assume they won't get any socialsecurity and I think that may
contribute to some of this and Ijust think that's the wrong
assumption.
That's just a math problem.
It's a fairly easy math problemto solve.
Speaker 3 (38:49):
Yeah, I mean I have a lot of confidence we'll solve
it.
I mean, one of the things thatwe're thinking about from an
organizational standpoint andit's a little.
You know, we got to wait pastthis election because no one's
going to, no one's going to talkseriously about something as
controversial as social securityor fixing social security until
after that.
But the reality is it's not.
(39:10):
You know, people have thistendency they want to talk about
well, we're going to do thisfix or do that fix.
We're going to, you know, justthe retirement age.
We're going to increase taxesand we'll lift the wage, but
that's, I mean, this isn'tdifficult.
The difficult part is both sidesagreeing to put down their
swords and recognize they haveto fix it and are willing to not
(39:33):
snipe at each other during theprocess.
That's what we got to do, likewe did in 1983, which is the
last time we quote fix SocialSecurity.
So that's the challenge is anagreement on a process that will
not be contentious, so that wecan sit down and do the math,
because, as you point out, it'sa defined benefit plan and it's
(39:56):
not nuclear physics, right?
So you guys are also doingsomething, in addition to all
the work that you're doing froma policymaking standpoint?
You partnered with Aspen andDacia on the collaborative for
equitable retirement savings andyou came out with your first
(40:18):
study.
We don't have a lot of timeleft, but kind of quickly.
What were the takeaways fromthat work?
Speaker 1 (40:25):
Yeah, let me preface this by saying and I'll try to
do this quickly, but I'm just soexcited about this work.
Really, the only data we hadwas from the In Living Color
study, which Ariel did 10 yearsago, which is a great study on
the sort of race and gender gapswithin K-plans.
We really wanted to dosomething new and that study
(40:50):
largely goes back to around thetime PPA was being implemented,
so there's big differences interms of auto-enrollment.
It's really important to kindof get at this and I think
people say well, you can go andyou can see this stuff in the
Survey of Consumer Finances, butreally really small sample
sizes there when you get tocertain race and gender
combinations, so it's sort ofdifficult to take that too
(41:11):
seriously.
And then we don't know anythingabout the plans that people are
participating in.
So we really needadministrative plan data.
So I'll give you just the bulletpoints of the findings.
The first thing is we do have aproblem here.
Among people lucky enough to becovered, we do have pretty
significant race and genderdisparities, but they're not
just driven by income.
(41:32):
I think a lot of people wouldassume.
Well, once you control forincome, that'll narrow.
They're not just driven byincome.
At least some of the problemsseem to be exogenous to that or
separate from that.
Speaker 3 (41:47):
But it seemed like just to quickly interject, if
you don't mind.
It seemed like a lot of thatwas hardship.
Speaker 1 (41:54):
Yeah, I was about to build up to that.
I got a whole no, no, no, yougot to the punchline, which is
important.
I mean, that's the thing.
That's exciting ispre-retirement withdrawals.
So black and Hispanic workersjust have much higher
frequencies of pre-retirementwithdrawals and that appears to
have a really large effect onoverall accumulation.
And while that is discouragingin some ways, it's very exciting
(42:17):
because that is a problem thatyou can solve.
It's identifiable, it'sidentifiable and it's something
that it's pretty easy, and Ithink some of the sponsors we're
working with will try differentthings out.
I mean, maybe it's having somekind of point of paycheck
emergency savings, or maybe it'sjust raising the barriers a
little bit on the hardshipwithdrawal so that it's not
quite as easy to do.
There's a lot of ways that youcan get at that.
Speaker 3 (42:43):
I thought it was also interesting it wasn't just
communities of color, but it wasalso gender.
Speaker 1 (42:49):
Yeah, the gender gaps and I will commend people to go
to the seafirstorg website anddownload the summary piece or
even the full report but, yeah,the differences across gender
are quite stark.
Speaker 3 (43:08):
And you can probably imagine dealing with daily life
responsibilities for women inthose communities might, in
terms of child raising and otherfactors could lead to that
increased withdrawal rate.
Speaker 1 (43:24):
Yeah, and I certainly don't want it to come across
like we're blaming anybody orthat some of these withdrawals
could, that all of thesewithdrawals could be avoided.
But we do think some of themprobably could and we even have.
We need more data but we dothink that there's probably some
(43:46):
benefits that could come fromdifferent kinds of interventions
that some of the sponsors we'reworking with are kicking around
, and that would be veryexciting.
I mean, this is really justphase one, but you can't solve
from different kinds ofinterventions that some of the
sponsors we're working with arekicking around, and that would
be very exciting.
I mean, this is really justphase one, but you can't solve a
problem until you can identifywhat's driving it.
Speaker 3 (44:02):
And I think we've made an important contribution
in looking at what's drivingsome of these gaps and I think
it's a great start to anincredibly important
conversation.
That really I mean.
Admittedly, we've, as you knowmy organization have focused
appropriately so on coverage andthat needs to continue.
We've got to continue to try toclose the coverage gap.
(44:26):
The driver, in terms of ofhelping workers have enough
retirement is critical Inaddition to automatic enrollment
, is addressing the leakageissue in a in a in a substantive
and significant way.
Speaker 1 (44:44):
That's right, yeah, that's right yeah.
Speaker 3 (44:48):
If we can solve and get better control of leakage.
I think the numbers I've seenin various work that some people
have done dramatic increases inpeople's retirement
accumulations.
Speaker 1 (45:00):
Well, yeah, just in our paper I mean we see a real
closing of the gap Again betweenthat preferred metric that we
have for this paper of the ratioof the account balance to final
salary, have for this paper ofthe ratio of the account balance
to final salary.
I mean it is a dramatic jump upfor the groups that are
currently most likely to takehardship withdrawals.
If you somehow were able to cutthat off Now.
Again, I think you do need tohave some ability, even in an
(45:26):
auto-enrollment world, to takesome of this money out to
encourage savings, and there aregoing to be times where that is
the right decision.
But I think it's generally nota good decision and generally
could be hopefully avoided withsome other kinds of
interventions.
Speaker 3 (45:43):
Great, well, listen, aaron, really appreciate your
time.
Lots of really good, I wouldsay geeky stuff that we went
over, but that's what we love totalk about, right?
Speaker 1 (45:54):
Yeah, no one's ever accused me of not being geeky,
so same here, I'm afraid.
Speaker 3 (45:59):
So listen, thanks.
I hope we can do this again atsome point.
There's a lot going on in ourworld and it's not going to stop
anytime soon.
Speaker 1 (46:07):
Oh, this is really fun.
Thanks for having me on thepodcast.
Thank you.
Financial services firms are highly innovative.
You heard a lot of thosearguments back in 2015 and 2016.
And yeah, that rule was vacated, sure, but you saw a lot of
changes, a lot of reallyinnovative and positive changes
in response to that rule beforeit was vacated.
Speaker 2 (00:14):
DC Pension Geeks brings you exclusive
conversations with topretirement policymakers and
regulators in and aroundWashington DC, hosted by Brian
Graff, an attorney, accountant,former Capitol Hill staffer and
CEO of the American RetirementAssociation.
If you're looking for aninsider's view of all the twists
and turns that Washington takeson the road to ensuring a
(00:34):
secure retirement for millionsof Americans, you're in the
right place.
Welcome to DC Pension Geeks.
Speaker 3 (00:41):
Well, hello everybody .
It's been a little minute ortwo, probably due to the Napa
Forward Case Summit taking up somuch of our time here, but
we're back at it.
Another edition of the DCPension Geeks podcast.
And you know, we're veryfortunate today to have someone
(01:06):
that a lot of people probablydon't realize is involved in
policy.
His name is Aaron Shapiro, he'sthe head of government affairs
of Morningstar and you know,aaron, thanks for being with us
today.
Let's talk a little bit aboutyou, if you don't mind.
How did you end up in DC?
(01:28):
How'd you end up working onpolicy issues?
What's the Aaron story?
Speaker 1 (01:38):
Yeah, well, I've really sort of split my career
evenly now about 10 years ingovernment total and now just
came up on my 10-yearanniversary at Morningstar.
So I was just always interestedin politics and policy.
I had the real privilege,certainly from a learning
perspective, of a first jobworking for the New Jersey
General Assembly Majority Office, and that is how I got
(02:02):
interested in retirementsecurity issues, because we had
a I don't know billion dollardeficit to close.
And we're sitting around thecaucus room and the budget
person says well, you know, wecould go from projected unit
credit to EAN, and I'm sort oflike what do those words mean
and where did this money comefrom?
And so that really got veryinteresting.
(02:24):
And I worked at the USSGovernment Accountability Office
for a couple of years and thatwas fascinating.
A lot of different issues, butI really found that retirement
was good to work on becausegenerally it was often
bipartisan consensus.
Things were happening.
This was right after PPA waspassed, so there was consensus.
Things were happening.
(02:45):
This was right after PPA waspassed, so there was a lot of
implementation happening.
And that's, you know, that'swhere GAO can really, you know,
help inform Congress of what'sgoing on, make recommendations
to agencies.
There were mandates to theagency in that as well.
You know did some stuff that's.
You know I think most peoplewould find very boring, but I
found really interesting so Iknew I'd kind of found my spot.
Speaker 3 (03:09):
Well, I mean, I think everyone listening to this
podcast can probably attest tothe fact that most people find
what we do boring, but we findit very interesting.
Pretty common theme with peoplein the retirement plan business
.
You mentioned the governmentaccountability office.
You know we haven't had anyonefrom GAO on the podcast and I
(03:34):
think a lot of people don't evenknow what the heck GAO is and
what they do.
So would you mind sharing,because I know I mean we do.
They reach out.
I remember when you were at GAOyou reached out to us with some
questions and I recall I meanyou know we are constantly being
not constantly, but prettyregularly being asked by them
(03:55):
for input on projects they'redoing.
They've got a pretty sizableteam of people that do
retirement policy.
So maybe a little bit you knowwhat is the role of GAO in the
Washington sphere.
Speaker 1 (04:06):
And you know, and also a big report that came out
today with two you know notuncontroversial recommendations
to the Department of Labor ontarget date funds.
So they're, you know they're,they always have.
They often have activeengagements.
Yes, I mean GAO, for thepurposes of most of your
listeners, is the researchInvestigative Arm of Congress
(04:26):
and it takes requests fromtypically ranking members or
committee chairmen on the Hilland it's a client.
I think the thing to understandis it is a client-type
relationship with the Hill, nota customer-type relationship,
and so those requests go throughback and forth.
It's an iterative process tomake sure there are questions
(04:48):
that the agency can answer withthe approach that it uses to
what it calls audits.
There are some just straightperformance audits that the
agency does some accountingthings, but mostly it's public
policy research and one thingyou will see in these reports is
that they'll always set up acriteria, sort of the way things
ought to be, as definedtypically in statute, and then
(05:12):
whether there's a disconnectbetween the reality of how
things are working and what thatcriteria is, and then
recommendations to close thatgap so that hopefully in the
future reality matches betterwith criteria.
Some of the stuff in theretirement space is maybe even a
little bit more abstract.
I did work on what are thephilosophies of different ideas
(05:32):
for discounting pension funds,but some of that stuff becomes
very concrete what happens whenyou align the cost accounting
standards that DOD contractorsuse to discount their pension
funds with the specifications inPPA, and what does that mean
for forward pricing.
So I mean, you know there'sthere's there's sort of a range,
a range of things.
But yeah, I mean I think youknow and I guess I should.
I should also say it's a, youknow, it's a nonpartisan,
(05:55):
independent agency that I thinkis quite well respected on the
Hill, and so I think it'sprobably always good to be, to
be helpful.
Speaker 3 (06:08):
They take some pretty deep dives on stuff.
You mentioned the report todayabout target day funds and and
yeah, I mean there has been some, a lot of it coming out of some
articles in the media.
You know questioning, you knowsome of the fees and strategies
associated with tdfs and so someum, some folks on the um I
(06:34):
think it was bobby scottactually um submitted some
questions um regarding targetdefense at jail and they just
came out with that study, which,um you might yeah, he was.
Speaker 1 (06:44):
he was one of the requesters on that job and I'm
trying to.
I don't know if it was a jointrequest with the Senate side or
not, I can't remember.
Speaker 3 (06:52):
I don't recall that either.
So most of the listeners arevery familiar.
I mean Morningstar householdname, certainly a well-known
name in the context of in thefinancial services universe.
But what they don't realize ishow involved Morningstar is in
(07:12):
public policymaking and researchand, you know, to some degree
in advocacy.
So let's talk a little bitabout all the things that
Morningstar is doing in terms ofpositioning itself to be a
(07:34):
significant contributor into thepolicymaking process.
Speaker 1 (07:38):
Yeah, so well.
First of all, I reallyappreciate you framing it that
way and that's certainly how wethink about it.
I want to preface this bysaying I am just extraordinarily
fortunate to work at a companylike Morningstar that is willing
to pursue this kind of strategyand willing to pursue it over
the long term fell into this job, which is what happened.
(08:05):
I joined a startup, we wereacquired and at the same time,
there were a lot of questionsabout how Morningstar, which was
growing quite rapidly, movinginto being a much more regulated
business, how we're going to dogovernment affairs, and we
really didn't have a lot ofinternal disagreement around
what our approach would be.
We knew we were getting a lotof incoming questions Like, for
example, we're cited a bunch oftimes in that GAO report.
(08:25):
It's a lot of our data.
We're getting questions likethat from the Hill from
different regulators, and so weknew we wanted to formalize that
a lot more, make sure that wewere coming to perspectives that
represented the company's viewsand leveraged that data and
that desire to advocate forordinary investors to really put
them front and center in thekind of analysis that we were
(08:47):
doing.
I think we announced ourpresence way back in 2015-16,
when we did our first biganalysis of what was then a much
more controversial DOLfiduciary package.
Let's call that one 2.0, maybe1.0.
We did the 2020.
Speaker 3 (09:04):
BTO as 2.0.
Speaker 1 (09:05):
It really was 2.0, maybe 1.0.
We did the 2020 BTO as 2.0.
Speaker 3 (09:06):
It really was 2.0.
Because it was the 2010.
Speaker 1 (09:08):
FDL, so maybe we're on 4.0 in any case.
So they did a very largeregulatory impact analysis and
what we did in that case was tryto replicate it and also change
some of the assumptions aroundand sort of see what we got.
And we found stuff that I thinkwas reasonably annoying to
(09:31):
people on kind of both sides ofthe debate, which signaled to me
we were on the right trackbecause we found a pretty sharp
discontinuity over time where alot of the associations with
different kinds of conflictedbusiness arrangements were
becoming less and less important.
But we still found a prettysignificant effect of certain
(09:52):
kinds of conflicts that we wereable to measure.
So you know we reported on that, we published some stuff in the
Journal of Retirement, we usethat to inform future comment
letters to the department andalso commentary on Reg BI and
we've had, you know, we do trackwhether the agencies take our
(10:12):
recommendations and I meanobviously they don't always
listen to us, but I think youknow we're trying to provide
something valuable, empiricallydriven and truly driven by where
the the data goes, as long asas we believe it will help um
investors I mean that doesn'tmean that we don't play the kind
of um you know defense thatevery, every firm is is going to
(10:33):
play from time to time.
But but investors really are thethe north star, and I'm not
saying that's not true foranybody else.
I can only speak for for us andum you know, we're just, we're
just privileged to sit on thesort of data and capabilities
where we can do some prettyinteresting and valuable
analyses from the point of viewof policymakers.
Speaker 3 (10:54):
Well, I mean, you know, at your core you're a
technology data company, right,and so you know it kind of makes
sense, given that data, thatdata perspective, to be able to
provide, you know, that kind ofinput into the policymaking
process, which is oftentimesvery short on.
(11:16):
You know, empirical informationwhen people are making policy
decisions.
I think is what you know, howregulators and folks on the Hill
see the value in being able to.
Well, you know, this is what.
What's really, you know,happening here.
How do you I mean how do you goabout deciding?
Is there some sort of internalprocess where you guys are going
(11:38):
about deciding?
What are the issues that wewant to get in?
You know, get involved with andget active in.
You know how active in how dowe go about deciding.
If you're going to take aposition on something, how's
that process work?
Speaker 1 (11:50):
Yeah, it probably works pretty similarly to other
places, again with the differentvalence that I was describing.
I mean, we have an internalgovernance process.
We have a policy council whichI chair but which we really try
to make sure that we're makingdecisions through consensus, and
you know, one of our inaddition to you know, putting
(12:10):
investors first one of ourguiding principles is do we have
anything unique to add to thisconversation, right?
So I'm pretty reluctant.
Having worked in government, Iam painfully aware that there
are human beings who have toread these letters that come in,
right?
So we're not just trying tokind of do a 20-page letter
(12:31):
that's the same as somebodyelse's.
If we think that we are wellwithin the industry consensus,
we may send a short letterexplaining why.
But if we don't have data toadd to it, we're not going to
just kind of there's plenty ofother people making the argument
but where we think we havesomething unique to contribute
and it's important, you knowthat's where we try to focus.
Speaker 3 (12:54):
Well, speaking of data, and something where you
clearly made an impact andobviously the hot topic of the
day in our little world of 401kplans and financial services is
DOL's retirement securityregulation, aka affectionately
(13:15):
known as the fiduciary rule.
You know they issued theirfinal rule last week Morningstar
our count was 41 times.
Morningstar was mentioned inthat package of regulations and
(13:35):
private transaction exemptions.
That's way more than anybodyelse.
I'm not even close in terms ofimpact and a lot of it was data
driven, as you were suggesting.
A lot of it was, you know,citing facts around how this
would impact investors, how itwould affect plans.
(13:57):
Quite a bit about that.
So talk a little bit about howyou.
You know that rule is verycontroversial.
That rule is very controversial.
One can argue.
You guys sort of to some degree, represent everyone in the
industry, in a sense that therearen't that many facets of the
(14:20):
financial services industry thataren't your customers to one
degree or another.
So talk to us about thatprocess.
How did you decide to getinvolved?
And then what did you kind?
Speaker 1 (14:36):
of focus on in terms of the comments and information
that you provided to thedepartment.
Yeah, so we knew we would be.
That's when we knew, you know,a priori, that we were going to
be doing significant amounts ofwork on the analysis of the rule
because we believed that theprevious the PT-2020-02, the
previous package and, of course,reg BI you know separate but
related issue all have had asignificant impacts on investors
(14:59):
, and, I think, largely for thebetter.
You know, for example, if youjust look at where the money is
going pre and post 2016,.
Naive analysis we do moresophisticated econometric
analyses as well, but that seemsto have really accelerated a
push into just higher quality,lower fee investments, and so we
knew we were going to weigh inon this.
It's part of our mission.
(15:19):
The people running that teamare very supportive and we know
that not all of our clients aregoing to agree with our opinions
, just as we wouldn't agree withall of their opinions.
I mean, that's fine and I thinkthat we have to be kind of
guided by what we see and whatour analysis shows.
We have this Form 5500 databaseand I know this is a
(15:46):
sophisticated audience, butthat's the annual reports that
plans file at leastERISA-covered plans file, and it
involves some prettylabor-intensive and
computationally intensive workto pull investment information
off.
The Schedule H, which is againwhere the Schedule of Assets is,
(16:06):
is listed and it's not terriblystructured and that's a whole
other conversation.
So we're sort of sitting onthis data that can be very
useful in informing this viewand we had a pretty good idea of
what we were going to do beforewe even saw the rule and when
we saw the rule we refined ourapproach there.
But the question here is aroundhow much better could things
(16:32):
plausibly get for retirementinvestors?
And I think the answer forpeople covered by larger plans
is it can't get any better.
It is better to be an investorin the US in a retirement plan,
basically anywhere else in theworld, and it's better today
than it was five years ago.
And there is a point at whichwhen you're paying like eight
basis points for exposure to theentire domestic and
(16:53):
international market, I mean itcan't get that much better than
that, really right.
So we didn't think we'd seemuch there and we didn't see
much there.
We do see.
We knew we were seeingbeforehand because we do this
annual retirement plan landscapereport a lot of variation in
the small plan markets.
You get a lot of small plansthat are doing a great job and
then you have a lot that franklyaren't, and you could see that
(17:15):
they're invested in the samestuff basically.
So this sort of extremely widevariation in fees is troubling,
and so we were able to producean analysis that, I think, is.
We made sort of small Cconservative assumptions all the
way.
We didn't assume that the smallplans would all of a sudden
become like the best small plans.
We just assumed they would geta little bit better, get a
(17:37):
little bit closer to the median,and that has pretty significant
savings for the 10% or so ofworkers who are in them.
It's something that I felt gotlost a lot in the debate and
that we wanted to do.
We also did a fairly limitedanalysis looking at the interest
rate spreads on fixed indexannuities, which we assume will
(17:58):
come down, will narrow, giventhe scrutiny that would be put
on them and given again thevariation we see there in the
marketplace.
But I think the larger costsavings came from relatively
small improvements to a largenumber of plans covering a
fairly small portion of the 401kpopulation, but that's still
millions and millions of people,especially because people cycle
(18:19):
in and out of small plans.
So it's not like I thinkthere's a tendency to stylize
this, as people work where theywork and then they'll just work
there for 30 years, andobviously that's not true.
So when you have a segment ofthe K marketplace where I think
there's still some room forimprovement that could benefit
(18:39):
from this rule, we wanted tohighlight that and, yeah, we
think it's a big part of ourmission.
I'm sorry.
Speaker 3 (18:46):
I mean, obviously, when you do these kind of
economic analysis, there's, youknow, assumptions that are
fundamentally, you know,critical to you know, doing that
analysis, you know what we saw.
(19:16):
If you go back to the mid-90s,when you know there started to
be recognition that there was,you know, a fiduciary
requirement associated with 401kinvestments.
And you know this is, you know,going back to the you know,
early 90s.
It was really just thebeginning of the 401k, you know,
becoming the primary retirementplan in the workplace, 401k,
you know, becoming the primaryretirement plan in the workplace
.
And then, you know, you marchforward to the early 2000s when
(19:37):
you start seeing litigation inthis area and the fiduciary
process became, you know, prettymuch understood as necessary.
And so I think to your point,you've seen over time, for
better or worse, a reduction ininvestment management fees that
has been concomitant with thatprocess.
So what you're doing is saying,okay, we saw how that worked
(19:59):
with large plans.
If you interpose a fiduciaryrequirement in the small plan
market, which this regulationwould do, you're making some
assumption You're not going toget all the way to matching
large plans but you're going toget marginally better.
I think that's a fairassumption, that you're going to
(20:20):
get marginally betterinvestment management fees.
Speaker 1 (20:22):
Yep, that is a great summary of what we did, and then
we have pages and pages andpages explaining how we did it
and what the specific numbersare and where they were derived
from.
We actually also only assumethat around 30% of plans will
make any adjustment, because alot of the small plans do look
pretty good, which?
Speaker 3 (20:39):
I think is, and your point is well taken there has
been improvements in themarketplace, a lot of it being a
lot more folks getting intothat marketplace that are tech.
You know a lot of, arguably,fintech companies that are
offering, you know, online typesof 401k programs where their,
(21:01):
you know their pricing hasgotten more competitive and
notwithstanding the fact thatyou know there are policymakers
and there was an article in theNew York Times recently that all
small plans are just, you know,grossly overpriced, and I think
we both know- that, yeah, youdon't see that in the data at
all.
Speaker 1 (21:18):
And again, that's the troubling thing.
If they were all expensive, Iwould just say, well, that's
just the economies of scale,that's just the marketplace.
But when you see such a widevariation I'm using my hands,
like this is not a visual medium, but you know such a wide
variation that's where you knowwe think, okay, there is some
room for improvement there.
Sure that you know that thatstandard deviation?
Speaker 3 (21:38):
well, it should be correct, because if it's so wide
, then there's a.
You know your economicbackground would suggest there's
got to be a fault in themarketplace and the way it's
operating.
So and that's.
You know, that's where, ingeneral, that's where regulatory
activity is intended to addressit.
So we haven't talked aboutrollovers Big deal.
(21:59):
Right, you know I've made theargument that the plan advice
issue is, you know, iscontroversial, but really
marginally controversialcompared to the rollover side of
the universe, and so youprovided some input on that.
Can we talk about that a littlebit?
Speaker 1 (22:15):
Sure, yeah, I mean we believe that having the kind of
documentation of the reason fora rollover is extraordinarily
valuable for end investors.
That would be required by thisrule for more entities.
We advocated for that in Reg BI.
(22:36):
It is not an explicit part ofit, although the sort of
preamble talks about how youwould comply doing this.
But then you know some firms do, some firms don't, and there
are some FINRA rules around it.
Speaker 3 (22:44):
But your point is well taken.
It's not explicit.
It's not't and there are someFINRA rules around it.
But your point is well taken.
It's not explicit.
Speaker 1 (22:50):
It's not explicit and that's the biggest change, I
think, certainly for entitiesthat were already covered by and
following Reg BI the sort ofexplicit requirements around
documenting substantiating thereason that a rollover is in a
client's best interest.
I think, if nothing else, thathelps set expectations for the
(23:12):
person who is rolling over.
Rollovers aren't going to goaway.
There are a lot of DC plans andDC plan sponsors let's be
honest who don't really wantthose assets there
post-retirement.
I mean there are some who do.
There are some who havewonderful programs that are
designed to allow people toconvert that money into lifetime
income in plan, but you alsohave plans that don't even have
(23:34):
good ways of doing structuredwithdrawals right.
So the rollovers are anecessary part of this system.
In fact, this whole system is agiant public-private
partnership and we do look atthe regulation like that and
regulation that's going to beeffective is going to encourage
continued partnership that way.
But yeah, we've supported thisfor a long time and we think
(23:57):
again.
Things are definitely quitedifferent and better when you're
talking about, certainly, wherethe assets are flowing in
mutual funds, and that's just afact.
You can just look at what theweighted expense ratios are
today compared to 10 years ago.
It's a phenomenal time to be aninvestor and I'll say pooled
(24:21):
investment vehicles so you cancover all the CITs and
everything and nobody feels leftout.
There's some really goodinsurance products out there.
There's some less good ones.
We do not buy the argument thatthe NAIC model standard is the
same or covers things in thesame way, and we think that
(24:44):
imposing at least a requirementto justify the rollover will be
very helpful for investorsthinking about this
extraordinarily importantdecision when they attain
retirement age or when theyterminate from employment and
are thinking about what to dowith that money.
Speaker 3 (25:01):
So you mentioned lifetime income and obviously
the insurance industry is upset.
And obviously the insuranceindustry, you know, is upset
that's probably the most grosslyunderstated word associated
with their view of the DOL rulebut is, you know, very concerned
(25:21):
with the rule.
One of the key components is,they believe it will reduce
access to advisors to enableparticipants who want lifetime
income solutions to obtain them.
What was your guys' analysis ofthat?
Speaker 1 (25:34):
I mean, it's a very hard thing to falsify, which is
why you see those kind ofarguments pop up, sort of the
unintended consequence argumentis it's always easy to create
one.
But basically, I believe in thesort of not to be flippant, but
I believe in that financialservices firms are highly
(25:56):
innovative.
You heard a lot of thosearguments back in 2015 and 2016.
And, yeah, that rule wasvacated, sure, but you saw a lot
of changes, a lot of reallyinnovative and positive changes
in response to that rule beforeit was vacated and, by the way,
that's why Reg BI was sosuccessful.
You just introduced Reg BIwithout all that background
noise.
I don't think anything happened.
Because it had already happened,but the path of least
(26:19):
resistance was to just keepdoing what you were doing,
everything's iterative.
Everything's iterative, now Irecognize this is a significant
shift.
Everything's iterative, now Irecognize this is a significant
shift.
But the insurance industryclearly has an important role to
play in helping people,particularly those for whom
social security is not going tobe a substantial income
(26:41):
replacement and who don't haveso much money they can
effectively self-insure forlongevity risk.
That's a pretty big slice ofpeople actually, something we're
working on trying to quantifyhow many households fall into
that category.
I mean, there's people who justhave so much money they might
as well yeah, they're going tobe fine, right.
Their functional withdrawalrates are well under 2%, 3%, and
that's fine, right.
(27:02):
And then you've got people forwhom Social Security is a
significant portion of thereplacement and they probably
don't need additional lifetimeincome, although their results
may vary and mileage may varyand everybody's situation is
different.
But there's a slice of Americanhouseholds that can benefit
from these products and I thinkwhat you'll probably see
assuming the rule isn'tultimately thrown out by the
(27:22):
courts is significant amounts ofinnovation in that space.
And again, I mean I just keepcoming back to well, if you
can't justify why the rollovermakes sense, I don't know.
That seems like a veryreasonable barrier given the
fiduciary protections thatpeople enjoy inside their plan
(27:44):
and the massive consequences ofthese kinds of rollovers.
So that's Trevor Burrus Jr.
Speaker 3 (27:49):
Yeah, I mean ironically it's probably the
annuity rollover is probably themost justifiable rollover out
of a plan because so few plansprovide any type of guaranteed
income solution.
So I've always felt that in away it's easier to defend the
(28:13):
annuity rollover because of thefact that there are a lot of
employees and participants whoactually to your point, middle
income individuals who wouldreally benefit for a you know
all or a portion of theiraccount convert into lifetime
income.
(28:33):
I think the second so I'm notthat doesn't necessarily trouble
me and I've been surprised atthe pushback on that because I
think to some degree it favorsinsurance versus other types of
investment vehicles.
I think the challenge for theinsurance industry is on
differential compensation.
It's just incrediblyuncomfortable with the notion of
(28:57):
fee disclosure in any way.
It's sort of a cultural barrierthat exists in that universe.
Speaker 1 (29:04):
Let me sort of dig in on two things in that universe.
But let me sort of dig in ontwo things.
One is one of the things wesaid in our comment letter and
we didn't expect to see this inthe final regulation for obvious
reasons be clear in a second.
But we said you know, reallyyou should always be thinking
about social security and thatshould be part of the analysis
and the department did mentionthat in the preamble.
Speaker 3 (29:21):
They did, they did Made me feel happy.
Speaker 1 (29:22):
You know that's good, so that's good.
Speaker 3 (29:24):
It's better than nothing.
They said you should thinkabout this, but we're not going
to say that you have to.
Speaker 1 (29:29):
That's right.
But I mean, I think, and I dothink, that the sort of you want
to make sure that theincentives are set up for
advisors, producers, whoever isgiving that recommendation to
think about, because socialsecurity is a pretty good deal.
Even if you think that thebenefits are going to be cut
down to 76% or whatever in 10years is still a pretty good
(29:50):
deal and I don't think.
Speaker 3 (29:54):
For lower-moderate income workers it is a great
deal.
Speaker 1 (29:57):
And I just that's not what you asked and I won't get
sidetracked.
Speaker 3 (30:03):
Well, it's a good segue because it's going to go
to something else.
Speaker 1 (30:08):
I was just going to say, though, on that point right
, about insurance industry.
I mean, a counter-argument heremight be and if I were I'm not
speaking for them and I can'tknow what's in sort of the
leadership of these companieslike what they think, but if I
were in their shoes, I would notbe able to publicly say, ah,
(30:30):
this is great, right, because Ihad a lot of producers who were
upset, but if I had wanted toshift to a different business
model?
We definitely saw this in 2015,2016, 2017.
I now have a super usefulboogeyman that I can point to.
It's not me, man, right, it'sthe mean department of labor,
(30:50):
and I do think there is some.
I think the firms that look atthis as an opportunity assuming
that it is not vacated are goingto be able to do some really
interesting and exciting thingsin terms of serving retirement
investors.
I know it's easy for me to saythat, it's easy for me to have
that optimism.
I don't have to implement it,but I really do think we've seen
(31:12):
this movie before in otherindustries and and there's a
tremendous amount of opportunitythere um, because you don't
have the first mover problem,where someone jumps into the
pool and nobody else is.
Is there everybody's beingforced?
in and so that's a terriblemetaphor, but you see what I'm
(31:43):
saying.
Speaker 3 (31:43):
I mean.
I mean that regulation createsthat opportunity set of funds to
my IRA, set of funds that are,you know, not going to be as
priced as well.
There's no way it's going to be.
To your point, you know thefact that I'm giving, you know,
a little bit more of ahandholding with the participant
(32:07):
.
Is that going to be enough tojustify the rollover if they're
paying 50 basis points more,Whereas if I'm rolling over part
of the account into an annuityproduct, that is not, again to
your point, the retirement planisn't offering, they really
(32:27):
don't offer any way to doinstallment payments out of the
plan in a practical andreasonable way.
I can justify that all day long.
There's nothing in the rulethat says you can't pay a
commission.
I think the trick's going to belevelizing those
commission-based right and thatand and that, that.
Speaker 1 (32:45):
That looks an awful lot, like you know listeners
will remember.
You know triple zeros andt-shares and all.
I mean there are things thatcan be done but they can't be
done in the absence ofregulation and I mean there's
just no way to sort of push thatthrough.
So anyway, yes, I think I, andI think your point is very well
taken around.
Yeah, I mean what thedepartment would call
(33:07):
differential products.
Speaker 3 (33:09):
I think, arguably, this is actually pro-annuity
from a rollout perspectivebecause of that.
Anyway, so you mentioned SocialSecurity, let me let me talk
about something completelydifferent, and that's, you know,
there's been these attacks on401ks that are, you know, kind
of been pervasive for severalmonths now in the media in
(33:32):
various forms.
One of the things that hasfrustrated me is the fact that
when they, either the media andsome of these academics look at
now I'm talking with my handslook at the 401k system, they
look at it in isolation and theycompletely ignore the role that
(33:54):
social security plays.
They're not and were neverintended to be.
You know, uh, completely, uh,separate rather, part of the
401k is a supplemental savingsprogram on top of whether it was
a, you know, traditionaldefined benefit plan or
fundamental social security,which is a universal retirement
(34:16):
plan for all American workers.
Why do you think that is thecase and how?
How can?
Because if you look at thereplacement ratios income
replacement ratios for socialsecurity alone, they do a
fantastic.
It does a fantastic job forlower and moderate income
workers.
It's the middle income, and youmentioned the wealthy people.
(34:36):
They'll be fine, we're notworried about them.
It's the people in the middlethat desperately need that
supplemental savings if they'regoing to get to that magical 70
whatever percent of income inretirement.
Speaker 1 (34:50):
I think there are a few reasons that you've had this
.
Well, I mean.
So the question is, why dopeople just ignore social
security and its progressivity?
I don't have a pithy answer.
I mean, I think why do peopletend to focus on, you know, the
(35:12):
tax deferrals over the next 10years?
Well, that's because that's howJCT scores them and that's
because of budget rules, right?
So I think that's, you know,that's just unfortunate.
Why do you know, why do peoplesort of miss that these are
deferrals?
Speaker 3 (35:26):
But the attack on the 401k is about the 401k.
It talks about the fact thatthe arguments are the 401k
doesn't help lower income people, and the point is well, of
course it doesn't, because it'sasking people who don't have
enough money to take more moneyout of their paycheck and put it
(35:49):
into a supplemental savingsplan.
It's never going to work wellfor people that are at the
lowest income levels.
Speaker 1 (35:56):
But that's why we have Social Security.
Well, I think the other thingis that people who are not
living and breathing this everyday just miss the tradeoffs that
are intrinsic in a voluntarysystem voluntary for employers,
much less voluntary for theworkers.
And so, to the extent that wedon't have a mandate and we have
(36:18):
a voluntary system, you'regoing to need to have tax
benefits that incentivizecompanies to offer these right,
and I think that's easy to missif you're not an individual.
One of the things people alwaysask me is why can't the IRAs
just have the same limits as Ks?
And the answer is well, thenthere would be no more Ks.
Speaker 3 (36:39):
I mean not no more, but you would use.
Speaker 1 (36:42):
There would be many fewer right, there'd be no
reason for the principles.
And then I think things likeADP testing is pretty People's
eyes glaze over.
But things like, you know, adptesting is pretty people's eyes
glaze over, but we do have a lotof, you know, safeguards and
protections in the system.
One thing that has reallyfrustrated me now that I'm kind
of going off about this is wehave current law that was passed
(37:05):
recently in a bipartisan way inthe form of the Savers match.
That is going to be enormouslybeneficial for, at least for
people lucky enough to havecoverage at work and that you
know.
But but fairly low incomepeople just to approaching, you
know, the lower end of moderateincome and we've done some some
(37:26):
preliminary modeling on this.
It may be out by the time folksare listening to this.
It's going to come out the weekof hope, the week of May 8th or
9th, and you see enormousbenefits, even if you don't
assume that anyone changes theirbehavior at all, which is
probably not right.
And if people do change theirbehavior they say oh, I'm
(37:47):
getting a government match inaddition to my employer match.
I'm going to contribute up tomake sure I get that full $1,000
government match.
You would have reallysignificant differences, as
measured by the ratio of accountbalance to final projected
salary, which I think is sort ofjust the easiest way to make
comparisons across disparateincome groups.
(38:08):
And so that stuff's reallyimportant and is worth
highlighting and it's worthdefending, because this stuff's
going to be difficult toimplement and you know, I
certainly appreciate that it'sgoing to be challenging to
implement and you know I reallywant to see that happen.
But yeah, I mean, we don't havea 401k system, we have a
retirement system, we have anincredibly strong pillar one.
And yeah, I guess the otherthing is there's sort of when I
(38:35):
talk to people my age, so intheir middle age, people just
assume they won't get any socialsecurity and I think that may
contribute to some of this and Ijust think that's the wrong
assumption.
That's just a math problem.
It's a fairly easy math problemto solve.
Speaker 3 (38:49):
Yeah, I mean I have a lot of confidence we'll solve
it.
I mean, one of the things thatwe're thinking about from an
organizational standpoint andit's a little.
You know, we got to wait pastthis election because no one's
going to, no one's going to talkseriously about something as
controversial as social securityor fixing social security until
after that.
But the reality is it's not.
(39:10):
You know, people have thistendency they want to talk about
well, we're going to do thisfix or do that fix.
We're going to, you know, justthe retirement age.
We're going to increase taxesand we'll lift the wage, but
that's, I mean, this isn'tdifficult.
The difficult part is both sidesagreeing to put down their
swords and recognize they haveto fix it and are willing to not
(39:33):
snipe at each other during theprocess.
That's what we got to do, likewe did in 1983, which is the
last time we quote fix SocialSecurity.
So that's the challenge is anagreement on a process that will
not be contentious, so that wecan sit down and do the math,
because, as you point out, it'sa defined benefit plan and it's
(39:56):
not nuclear physics, right?
So you guys are also doingsomething, in addition to all
the work that you're doing froma policymaking standpoint?
You partnered with Aspen andDacia on the collaborative for
equitable retirement savings andyou came out with your first
(40:18):
study.
We don't have a lot of timeleft, but kind of quickly.
What were the takeaways fromthat work?
Speaker 1 (40:25):
Yeah, let me preface this by saying and I'll try to
do this quickly, but I'm just soexcited about this work.
Really, the only data we hadwas from the In Living Color
study, which Ariel did 10 yearsago, which is a great study on
the sort of race and gender gapswithin K-plans.
We really wanted to dosomething new and that study
(40:50):
largely goes back to around thetime PPA was being implemented,
so there's big differences interms of auto-enrollment.
It's really important to kindof get at this and I think
people say well, you can go andyou can see this stuff in the
Survey of Consumer Finances, butreally really small sample
sizes there when you get tocertain race and gender
combinations, so it's sort ofdifficult to take that too
(41:11):
seriously.
And then we don't know anythingabout the plans that people are
participating in.
So we really needadministrative plan data.
So I'll give you just the bulletpoints of the findings.
The first thing is we do have aproblem here.
Among people lucky enough to becovered, we do have pretty
significant race and genderdisparities, but they're not
just driven by income.
(41:32):
I think a lot of people wouldassume.
Well, once you control forincome, that'll narrow.
They're not just driven byincome.
At least some of the problemsseem to be exogenous to that or
separate from that.
Speaker 3 (41:47):
But it seemed like just to quickly interject, if
you don't mind.
It seemed like a lot of thatwas hardship.
Speaker 1 (41:54):
Yeah, I was about to build up to that.
I got a whole no, no, no, yougot to the punchline, which is
important.
I mean, that's the thing.
That's exciting ispre-retirement withdrawals.
So black and Hispanic workersjust have much higher
frequencies of pre-retirementwithdrawals and that appears to
have a really large effect onoverall accumulation.
And while that is discouragingin some ways, it's very exciting
(42:17):
because that is a problem thatyou can solve.
It's identifiable, it'sidentifiable and it's something
that it's pretty easy, and Ithink some of the sponsors we're
working with will try differentthings out.
I mean, maybe it's having somekind of point of paycheck
emergency savings, or maybe it'sjust raising the barriers a
little bit on the hardshipwithdrawal so that it's not
quite as easy to do.
There's a lot of ways that youcan get at that.
Speaker 3 (42:43):
I thought it was also interesting it wasn't just
communities of color, but it wasalso gender.
Speaker 1 (42:49):
Yeah, the gender gaps and I will commend people to go
to the seafirstorg website anddownload the summary piece or
even the full report but, yeah,the differences across gender
are quite stark.
Speaker 3 (43:08):
And you can probably imagine dealing with daily life
responsibilities for women inthose communities might, in
terms of child raising and otherfactors could lead to that
increased withdrawal rate.
Speaker 1 (43:24):
Yeah, and I certainly don't want it to come across
like we're blaming anybody orthat some of these withdrawals
could, that all of thesewithdrawals could be avoided.
But we do think some of themprobably could and we even have.
We need more data but we dothink that there's probably some
(43:46):
benefits that could come fromdifferent kinds of interventions
that some of the sponsors we'reworking with are kicking around
, and that would be veryexciting.
I mean, this is really justphase one, but you can't solve
from different kinds ofinterventions that some of the
sponsors we're working with arekicking around, and that would
be very exciting.
I mean, this is really justphase one, but you can't solve a
problem until you can identifywhat's driving it.
Speaker 3 (44:02):
And I think we've made an important contribution
in looking at what's drivingsome of these gaps and I think
it's a great start to anincredibly important
conversation.
That really I mean.
Admittedly, we've, as you knowmy organization have focused
appropriately so on coverage andthat needs to continue.
We've got to continue to try toclose the coverage gap.
(44:26):
The driver, in terms of ofhelping workers have enough
retirement is critical Inaddition to automatic enrollment
, is addressing the leakageissue in a in a in a substantive
and significant way.
Speaker 1 (44:44):
That's right, yeah, that's right yeah.
Speaker 3 (44:48):
If we can solve and get better control of leakage.
I think the numbers I've seenin various work that some people
have done dramatic increases inpeople's retirement
accumulations.
Speaker 1 (45:00):
Well, yeah, just in our paper I mean we see a real
closing of the gap Again betweenthat preferred metric that we
have for this paper of the ratioof the account balance to final
salary, have for this paper ofthe ratio of the account balance
to final salary.
I mean it is a dramatic jump upfor the groups that are
currently most likely to takehardship withdrawals.
If you somehow were able to cutthat off Now.
Again, I think you do need tohave some ability, even in an
(45:26):
auto-enrollment world, to takesome of this money out to
encourage savings, and there aregoing to be times where that is
the right decision.
But I think it's generally nota good decision and generally
could be hopefully avoided withsome other kinds of
interventions.
Speaker 3 (45:43):
Great, well, listen, aaron, really appreciate your
time.
Lots of really good, I wouldsay geeky stuff that we went
over, but that's what we love totalk about, right?
Speaker 1 (45:54):
Yeah, no one's ever accused me of not being geeky,
so same here, I'm afraid.
Speaker 3 (45:59):
So listen, thanks.
I hope we can do this again atsome point.
There's a lot going on in ourworld and it's not going to stop
anytime soon.
Speaker 1 (46:07):
Oh, this is really fun.
Thanks for having me on thepodcast.
Thank you.
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