Wells Fargo Asset Management Launches Retirement Income Solution for Defined Contribution Plans
April 23 2020 - 9:00AM
Business Wire
The new retirement income option addresses longevity risk in
retirement
Wells Fargo Asset Management (WFAM) today announced the launch
of the Wells Fargo Retirement Income Solution, a step forward in
planning for income in retirement.
With increasing life expectancy, funding retirement has become
much more challenging, given that many workers and retirees don’t
know how long their retirement savings will need to last. The Wells
Fargo Retirement Income Solution, based on patent-pending research,
is designed to provide participants with an option to seamlessly
transition from investing for retirement to drawing income in
retirement. The solution provides an option to pair a target date
series with a deferred annuity,1 with the goal of providing income
for life. The solution is available to plan sponsors and
recordkeeping platforms.
“We believe our suite of retirement-oriented solutions has the
potential to help millions of Americans live more fulfilling
lives,” said Nate Miles, head of Retirement at WFAM. “By providing
an option for more consistent retirement income, we help retirees
address their ‘fear of running out’ of retirement savings.”
The solution will feature four key differentiators:
- An innovative design based on patent-pending research.
- An insurance carrier selection service, through which Wells
Capital Management leverages the SECURE Act safe harbor to provide
3(38) fiduciary services.2
- Collaboration with record-keeping experts to proactively
improve simplicity and portability.
- A low-cost structure designed for the institutional defined
contribution market.
According to a recent Wells Fargo Retirement Study, the quality
of retirement for younger generations will depend almost entirely
on how much they save through vehicles such as a 401(k) or IRA,
highlighting the importance of ensuring their savings lasts
throughout their retirement years.
“Defined contribution plans are becoming the primary source of
retirement income for many individuals,” said Sean Fullerton,
retirement investment strategist at WFAM. “As an industry, we need
to focus not only on helping people save while working but also on
helping them spend sustainably once they retire.”
The launch of the solution reflects the commitment from WFAM to
help solve issues facing America’s workforce and better address the
rapidly changing reality of retirement.
1. The Wells Fargo (WF) Retirement Income solution includes a
“retirement income” component which is a qualified longevity
annuity contract (“QLAC”), offered by a non-affiliated third-party
insurance carrier, for which participants need to positively
“opt-in” to purchase and which provides guaranteed income. QLAC
payments can start at age 85 and the guarantee is subject to the
claims-paying ability of the insurance carrier. The other
components of the solution are not guaranteed and are subject to
market risk; they may fluctuate and may lose value. These are Wells
Fargo Bank collective investments trusts (“CITs”)—a Wells Fargo
Target Retirement CIT series and Wells Fargo Retirement Income CIT.
The CITs are categorized as “asset allocation” CITs versus “income”
CITs; however, systematic withdrawals can be selected by
participants for the Retirement Income CIT for which any monthly
payments would be subject to the value in the CIT. CITs are Wells
Fargo Bank N.A. CITs that are subadvised by Wells Capital
Management, which is a WFAM entity.
2. Wells Capital Management Incorporated (WellsCap) offers an
Insurance Carrier Selection Service (“ICSS”) - which is a service
where WellsCap contracts with qualified retirement plans (“plans”)
to annually select for plans on a discretionary basis third-party
insurance carriers (“carriers”) and their qualified longevity
annuity contracts (“QLACs”). In providing the ICSS, WellsCap acts
as a Section 3(38) fiduciary, as defined in the Employee Retirement
Income Security Act of 1974 as amended, and not as an investment
adviser as defined under the Investment Advisers Act of 1940.
WellsCap is actively working to engage an insurance carrier to
provide QLACs, but an insurance carrier has not yet been
selected.
In general, the target date of a target date CIT represents the
year in which investors likely may begin withdrawing assets. Such
CITs typically gradually seek to reduce market risk as the target
date approaches and after it arrives by decreasing equity exposure
and increasing fixed-income exposure. The principal value is not
guaranteed at any time, including at the target date. Participants
may outlive the Retirement Income CIT portion of their assets.
About Wells Fargo Asset Management
At Wells Fargo Asset Management, we put the client at the center
of everything we do. Our commitment: Help clients achieve what
matters most to them on their path to financial well-being. We do
this by channeling the collective wisdom of our specialized
investment teams (backed by over 510 investment professionals) into
solutions designed to help meet clients' goals.
We place a relentless focus on pursuing consistent and positive
risk-adjusted returns, with the support of our independent risk
management teams. Together, we strive to help our clients build
portfolios aimed at generating successful outcomes and defending
them against uncertainty.
With more than $518 billion in assets under management* and
offices around the world, Wells Fargo Asset Management has the
resources and reach to help clients across the globe—be it
institutions or intermediaries whose focus on the client is akin to
our own.
*AUM is as of March 31, 2020 and includes $96 billion from
Galliard Capital Management, an investment advisor that is not part
of the WFAM trade name/GIPS firm.
Wells Fargo Asset Management (WFAM) is the trade name for
certain investment advisory/management firms owned by Wells Fargo
& Company. These firms include but are not limited to Wells
Capital Management Incorporated and Wells Fargo Funds Management,
LLC. Certain products managed by WFAM entities are distributed by
Wells Fargo Funds Distributor, LLC (a broker-dealer and Member
FINRA). This material is for general informational and educational
purposes only and is NOT intended to provide investment advice or a
recommendation of any kind—including a recommendation for any
specific investment, strategy, or plan.
PAR-0420-07215
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version on businesswire.com: https://www.businesswire.com/news/home/20200423005271/en/
Robert Julavits, 917-260-2448 robert.w.julavits@wellsfargo.com
Jeanette Foster, 415-264-1323 jeanette.d.foster@wellsfargo.com
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