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Retirement plan advisers expect Labor Department rules to boost ESG options

Keith Lewis, CQ-Roll Call on

Published in Business News

While more than half of Americans are in the market, less than 15 percent hold stocks directly, according to the Pew Research Center. Most stock market holdings are indirect, through retirement accounts.

Labor regulations may have so far kept many ESG options away from retirement savers despite a rapidly growing interest in those investment strategies.

The total assets under management at funds focused on ESG last year surged to more than $40 trillion, almost twice the size of the U.S. economy, from $22.9 trillion in 2016, according to Opimas LLC, a management consultancy focused on global capital markets.

Demand for more choices

Investors worldwide are seeking more ESG options, according to another panelist, Charles Nelson, vice chairman and chief growth officer of Voya Financial.

“We meet with analysts and investors, and every time there’s a question around ESG,” Nelson said at the event. “I think this is one of the greatest opportunities for advisers in your practices as you go forward, because businesses, whether they’re publicly traded or they’re privately held by private equity or ultimately a hedge fund, they’re getting asked these questions.”

 

Another panelist noted it gives plan advisers more credibility with clients when they can discuss and offer ESG options.

“You’re now not just the guy or gal that comes in to do the 401(k) review — you become a strategic business partner with them, so it puts you at a much different level,” said Jania Stout, senior vice president at OneDigital Retirement. “I think that’s a huge opportunity for us as advisers.”

Joe DeNoyior, president of retirement and private wealth with HUB International, said he hopes plan advisers don’t merely offer retirement savers a single ESG option.

“[W]e’re starting to hear from our advisers, saying we can’t just put one in,” he said. “If ESG portfolios are the No. 1 portfolio that is attracting assets for the wealth side, then maybe we should market it a little bit differently, like having a one-stop solution for these participants in the ESG side.”

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