BlackRock, the world’s largest asset manager, wants to help the average investor manage their personal finances too.
On Wednesday it unveiled its LifePath spending tool to educate clients about proper retirement preparation, joining other mutual fund providers offering similar tools, such as Vanguard, Fidelity and Charles Schwab.
Coupled with the firm’s LifePath target date funds, the spending analyzer requires a clients’ age and assets to get started and can recommend what spending habits they will need in retirement to maintain a comfortable lifestyle, the firm says.
“We’ve spent a lot of time and effort teaching clients how to save,” says Nick Nefouse, BlackRock’s head of DC investments and product strategy team. “But, very little of that intellectual property is geared toward how we spend.”
The spending analyzer utilizes the firm’s long-term capital market assumptions based on their LifePath funds, and clients get spending impacts on their accounts up until the age of 95, according to the firm.
The free tool is currently in beta testing with BlackRock clients and being made available to plan sponsors. Eventually it will be made available on BlackRock’s website for any investor to use, the firm says.
“This supplements the advisor conversation,” Nefouse says. “How much money do you need and how much money are you going to be able to spend?”
Retirement savings is becoming a growing problem for clients, especially baby boomer customers, according to new research. Seventy-three percent of baby boomers expect to delay retirement and 31% say they have not started a retirement budget, according to a new survey by the national non-profit the NHP Foundation.
BlackRock's own research notes the vast majority of clients in defined contribution plans say they need additional guidance on retirement income and only 36% are confident they will have the income they need to maintain their lifestyles after work.
The asset manager's new tool follows a series of announcements in the 401(k) space, as fintechs and incumbents offer providers new tools to help address the lack of retirement assets, while lowering the cost of the plans for clients.
“You’re seeing the tools in the market where more people are looking for tools that understand and contextualize the information,” Nefouse says, adding that the most recent innovations have come at the lower end of the market.
While complexity continues to evolve the retirement planning market, simplicity might be best course forward for clients, he says.
“The more options offered on the defined contribution menu, the lower the rates of participation,” Nefouse says. “People become overwhelmed with choice. It’s about getting into a low-cost target date fund and letting time take over.”