Call it Robert Reynolds' Hail Mary pass.
Mr. Reynolds, who was plucked from Fidelity Investments less than a year ago to resurrect the once-mighty Putnam Investments, earlier this month made his first big public play as the Boston-based firm's chief executive officer by unveiling a sweeping list of proposals aimed at fixing the defined contribution system.
Among Mr. Reynolds' proposals:
•creating a national insurance charter and an FDIC-like fund to back up lifetime income guarantees;
•requiring employers to offer a lifetime income option, either through annuities or other insured methods, adding tax incentives to employees who invest in lifetime income products and extending tax credits to employers who match worker contributions;
•setting caps on the equity exposure in target-date funds as they become mature; and
•adopting legislation that would require employers to enroll all of their workers in 401(k) plans automatically and increase their contributions over time.
“Usually after a tough period like this you're presented with an opportunity to make the system better,” Mr. Reynolds said in an interview. “We need to fix 401(k)s, which have become the retirement plan of this country. At Putnam, we want to get out in front of the issues.”
While the call by Mr. Reynolds, an NCAA college football referee for 15 years, was viewed as a reaction to public scrutiny of the $4 trillion DC market following last year's market crash, competitors and industry insiders say it has as much to do with Mr. Reynolds trying to get Putnam back into the DC game. And while many find fault with the details of his proposal, they say he might just bring the entire industry along with him.
“Some of the proposals in (Mr. Reynolds') manifesto struck us as a marketing advantage to Putnam,” said Richard Davies, head of product strategy at AllianceBernstein Defined Contribution Investments of New York. “To advocate for more conservative funds in target-date products when Putnam has some of the most conservative funds is a little self-serving.”
Michael Francis, president of investment consultant Francis Investment Counsel LLC, Pewaukee, Wis., said Mr. Reynolds' proposals were a “way for Putnam to get back into the conversation of defined contribution plans. “Every big mutual fund company wants these assets — they're sticky, the contributions are predictable — they're dream customers.”