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Home > News > Investing > FTX Bankruptcy Has Chilling Effect on Crypto Use in
Retirement Plans
Investing November 11, 2022


FTX BANKRUPTCY HAS CHILLING EFFECT ON CRYPTO USE IN RETIREMENT PLANS

The collapse of the cryptocurrency exchange and related plummet in the crypto
market has increased concern about including the asset in DC plans.

By Alex Ortolani
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The rapid collapse of cryptocurrency exchange FTX has some in the retirement
industry second-guessing a recent push toward including cryptocurrency in
401(k)s and other defined contribution retirement plans.

The fast fall of FTX, which caused a related drop in mainstay cryptocurrencies
such as bitcoin, came to a head Friday with Bahamas-based FTX filing for Chapter
11 bankruptcy. No matter the outcome of the proceedings, industry experts say
financial and retirement advisers may be chilled on recommending the asset,
which is currently in use by some plan sponsors via offerings from
industry-leader Fidelity Investments and small business plan provider ForUsAll.

“About a year ago we had questions from clients about crypto within 401(k) plans
and we suggested a ‘wait and see’ approach,” says Michael Gheen, vice president
and senior client executive for retirement plan services at Oswald Financial.
“The FTX bankruptcy really reinforced our approach. There is not enough
regulation and too much risk today to add crypto as an investment option within
the plan.”

The events over the past week have added to concerns voiced by some in the
retirement industry, including regulators, that cryptocurrency inclusion needs
serious consideration to meet the fiduciary standards enforced by the U.S.
Department of Labor through the Employee Retirement Income Security Act.

“If you are sitting in the DOL’s shoes, this points to the fact that this isn’t
a regulated currency, there are some issues to be worked out and that
fiduciaries should be cautious,” says Wendy Von Wald, fiduciary product manager
at Travelers Insurance. “Overall, I think what this does is just reinforce the
need for fiduciaries to be real diligent in what they’re offering.”

A survey by fintech company Capitalize found that 60% of investors would like
cryptocurrency in retirement plans, and the offering is particularly interesting
to younger workers, according to a separate survey by Charles Schwab. Gheen of
Oswald says they were asked by plan sponsor clients about cryptocurrency before
the drop in values began earlier this year, but at the time they cautioned
against it.

“We reminded committees members of their fiduciary responsibility to their
participants,” Gheen says. “Our big concern is many plan participants are not
sophisticated investors, however, they hear news about ‘crypto billionaires’ and
may get caught up in the hype. With the concern of participants chasing returns,
in hindsight we are relieved none of our clients added a crypto option to their
plan.”

Debbie Matustik, a managing director with retirement advisory Pensionmark
Financial Group in Austin, said the FTX collapse reinforced her views on
cryptocurrency not being a good option for plan participants.

“To me, the potential risk inherent in cryptocurrencies makes them inappropriate
for most participant-directed retirement plans,” Matustik said in emailed
response. “Most plan participants do not have sufficient investment
sophistication to truly understand the potential risks of an investment in
crypto. The FTX crash and bankruptcy bears this out.”


PARTICIPANT ACCESS

The news comes as the country’s largest retirement plan recordkeeper, Fidelity,
and small business plan provider ForUsAll have plan sponsor clients providing
participants access to cryptocurrency assets within their 401(k) accounts.

A spokesperson for Fidelity said in an email that the Boston-based firm has had
plan sponsors signed up since the fall offering access to Fidelity’s Digital
Assets Account as a part of their core 401(k) line up. The firm did not
immediately respond to comment on the FTX collapse.

ForUsAll announced last week that 50 plan sponsors were live with its
cryptocurrency offering for 401(k) participants through the self-directed
brokerage window. It also noted a number of safety precautions ForUsAll has in
place before retirement investors can direct deferrals into cryptocurrency,
including a waiver, a quiz on blockchain technology, and the fact of needing to
go through the self-directed window itself. The San Francisco-based company did
not immediately respond to comment on the FTX collapse.

ForUsAll is also embroiled in a lawsuit against the DOL about a warning the
regulator gave to fiduciaries about including cryptocurrency in retirement
plans, whether through the menu or a self-directed brokerage window. CEO David
Ramirez recently told PLANADVISER that the firm offered to drop the lawsuit so
long as the agency confirmed its warning on cryptocurrency in retirement plans
does “not have the force of law.”


NOT PLAIN VANILLA

The story of FTX’s fall reinforces the need for fiduciaries to be prudent with
the investments they make available, and to monitor them consistently, Von Wald
says. She notes that retirement fiduciaries are now commonly sued for investment
decisions that are far less volatile and new than cryptocurrencies.

“If you’re going to be challenged for the most vanilla of investments like a
stable value fund, or a money market fund, then selecting something like a
virtual currency or bitcoin should definitely require additional time and
review,” she says.

Matustik of Pensionmark Austin says they don’t have any clients that offer
crypto in their plans. But rather than avoid the discussion, they introduce the
topic proactively in client plan review meetings, noting the pros of including
it—mostly to satisfy the “small percentage” of employees asking for it—versus
the cons, including the risk of large losses by individual participants.  

Matustik noted that she may be proven wrong, but that as a retirement plan
adviser she doesn’t see widespread adoption of cryptocurrency in 401(k) plans
any time soon.

“The collapse of FTX simply illustrates the point,” she says. “It may actually
provide a great (though unfortunate) future illustration of what risk really
means when investing in the most speculative and volatile instruments.”

Tagged: 401k, Bitcoin, cryptocurrency, Fidelity, ForUsAll, FTX


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Home > News > Deals & People > Retirement Industry People Moves
Deals & People November 11, 2022


RETIREMENT INDUSTRY PEOPLE MOVES

Credit Suisse Asset Management appoints head of product; Milliman expands
Employee Benefits Administration sales team; Strategic Investment Group hires
head of non-U.S. equity; and more.

By DJ Shaw
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CREDIT SUISSE ASSET MANAGEMENT APPOINTS HEAD OF PRODUCT

Scott Ebner has been appointed head of product at Credit Suisse Asset
Management, effective November 21. Ebner will become part of the management
committee of the asset management division and will be based in New York.

Ebner brings over two decades of experience in product strategy and development
for institutional and wholesale clients. Prior to joining Credit Suisse Asset
Management earlier this year in the product function, he held various product
development roles at State Street Global Advisors, most recently as head of
global institutional product. Previous professional positions were with NYSE
Euronext and the American Stock Exchange.

In his new role at Credit Suisse Asset Management, Ebner will be responsible for
further developing and implementing the product strategy, in close partnership
with the investment and distribution departments, ensuring continuous alignment
with client needs and the division’s strategic priorities.


MILLIMAN EXPANDS EMPLOYEE BENEFITS ADMINISTRATION SALES TEAM

Milliman, a global consulting and actuarial firm, has announced that Jim
Quartarone has joined the Employee Benefits Administration sales and marketing
team as a regional sales manager. In this role, he is responsible for sales of
retirement plan administration and consulting services, and for building
strategic relationships with consultants and advisers across the Western region
of the U.S.

Based in Colorado, Quartarone has more than 30 years of experience with ERISA
qualified and nonqualified retirement plans, most recently with T. Rowe Price.
His expertise includes plan design, compliance, communication, consulting,
administration, implementation, relationship management, and investment advisory
services for defined contribution and defined benefit retirement plans. Before
entering the retirement industry, he served as a captain in the U.S. Army.


STRATEGIC INVESTMENT GROUP HIRES HEAD OF NON-U.S. EQUITY

Strategic Investment Group is pleased to announce that Jackie O. Gifford has
joined the firm as a managing director and head of non-U.S. equity, to co-head
the public equities team with Ted Joseph, managing director and head of U.S.
equity. Gifford joins a team of nine senior investment professionals that have
an average of 28 years of industry experience and 16 years of collaboration at
Strategic.

Gifford earned an MBA from Loyola University Graduate School and a B.A. in
economics with a minor in finance from Pennsylvania State University. She joined
Strategic from The Annie E. Casey Foundation, where she spent over 10 years,
most recently as director of marketable investments, and prior to that, director
of hedge fund investments. She also served for over a decade in leadership roles
within the board of directors for the Baltimore Child Abuse Center including
vice president, treasurer, and secretary.


NORTHWESTERN MUTUAL ADDS TO PILLAR FINANCIAL GROUP

Northwestern Mutual has announced that Trudy Leen and her two-person team have
joined Seattle-based Pillar Financial Group, part of Northwestern Mutual’s
Private Client Group. Coming from Gateway Financial Partners with LPL Financial,
Leen and her team officially joined Pillar Financial Group on October 27.

With over 30 years of experience in the finance industry, Leen has extensive
knowledge in financial planning, wealth management, investment services, legacy
building and insurance programs. Leen’s expertise will add to the 200 years of
combined experience already represented at Pillar Financial Group.

In addition to Leen, Ashley Scribner and Dara Fogg will lead the office as
service coordinators. Pillar Financial Group now has offices in Seattle, WA,
Phoenix, AZ, Chicago, IL, Sandpoint and Priest River, ID.

This transition is in partnership with Northwestern Mutual’s distribution growth
ventures team and other supporting functions. Northwestern Mutual’s DGV team is
focused on nontraditional ways to grow the company’s distribution system.


UBS HIRES LAS VEGAS FINANCIAL ADVISER

UBS Wealth Management USA today announced that Sara McCue has joined the firm as
a financial adviser. She joins the UBS Desert Mountain market, managed by
Charles Powers, and is based in the Summerlin office

McCue manages $145 million in client assets for high-net-worth individuals and
families. She focuses on providing clients with wealth management advice to
address their individual financial needs, including insurance and retirement
planning, trust and estate services and philanthropy.

McCue joins UBS from Merrill and brings more than two decades of financial
services experience. She began her career in 2002 as a bond analyst for Babson
Capital, where she worked with institutional and ultra-high-net-worth clients,
before joining State Street Bank as a private equity analyst. In 2006, Sara
joined Morgan Stanley as a financial adviser and then joined Merrill in 2009. By
2014, McCue was the lead portfolio manager for a high-net-worth physician-based
clientele in Beverly Hills. She relocated to Las Vegas in 2015 to be closer to
family to raise her two children.

Sara graduated magna cum laude with a degree in finance from Boston University’s
School of Management and is a Chartered Financial Analyst.


AIG ANNOUNCES FIVE-YEAR EMPLOYMENT AGREEMENT WITH CEO

American International Group, Inc., has announced that AIG and Peter Zaffino,
president and chief executive officer and chairman of the board, have entered
into an agreement securing Zaffino’s employment through November 10, 2027.


LINCOLN FINANCIAL NETWORK HIRES 2 FINANCIAL PROFESSIONALS

Lincoln Financial Network, the retail wealth management affiliate of Lincoln
Financial Group, has announced that Scott LoPresti and Dean DiPierro have joined
the firm. As part of the LFN community, LoPresti and DiPierro are empowered to
deliver independent, comprehensive financial advice to clients, with the
support, services, network and strength of Lincoln Financial to grow their
practice and have an even greater effect on their clients, community and the
industry.

LoPresti and DiPierro will continue to operate as partners in their independent
wealth management practice specializing in helping clients preserve wealth and
manage risk, with nearly $500 million in client assets under management. The
team brings approximately 30 years of combined financial planning experience,
both most recently with LPL Financial, and prior to that, Ameritas Investment
Corp. Based in Croton-on-Hudson, New York, LoPresti and DiPierro are registered
with LFN’s independent broker-dealer Lincoln Financial Advisers.


NORTHERN TRUST ADDS TO FOUNDATION & INSTITUTIONAL ADVISORS PRACTICE

Northern Trust has announced that Michael Janko has joined the Foundation &
Institutional Advisors practice as a senior investment adviser in Boston, where
he will support the firm’s foundation, endowment and institutional nonprofit
clients.

Janko, who has more than three decades of investment experience, was most
recently part of BNY Mellon’s outsourced chief investment officer team, working
with a broad range of nonprofit organizations. Prior to that, he led BNYM Wealth
Management’s Endowment & Foundation practice group. Previously, he served as a
portfolio manager at SunTrust Investments in Florida and as a portfolio manager
at BayBank Investments (Bank of America).

Janko graduated from Suffolk University with an MBA in finance from the Sawyer
School of Management and a B.A. in industrial and organizational psychology.
Janko has authored articles on topics specific to investing for non-profits and
is a frequent panelist and speaker on these topics.

He is on the Advisory Board of The Copernicus Institute for the Arts, Sciences,
and Law of New England. Previously, he served at a Lynn, Mass. non-profit
organization seeking positive outcomes for at-risk youth on Boston’s North
Shore.

Tagged: Investment Managers, retirement plan advisers, retirement plan providers

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