Empower CEO: stock market volatility ‘here to stay for a bit’

Empower CEO Edmund Murphy III isn’t ready to sound any alarms over the tumbling stock market, which fell about 3,000 points in one month.

The market self-corrects about every two years on average, Murphy said, a trend that dates to the early-1960s.

“It's going to happen, and there's lots of different triggers, but I think for the most part, what we're seeing among our 19 million investors as they're staying in the course,” Murphy said, later adding: “I think the volatility is here to stay for a bit.”

Murphy spoke to CNBC news producer Stephanie Dhue during the Retirement Symposium: The Forces Transforming Retirement, hosted Tuesday by Milken and the Employee Benefit Research Institute.

Empower is the second-largest retirement services provider in the United States by total participants, and administers $1.7 trillion in assets via retirement plans, advice, wealth management, and investments.

Dhue read several news headlines to Murphy, who reacted candidly with opinions and expectations:

Chances for a SECURE 3.0. Murphy is not optimistic that a SECURE 3.0 bill is in the near future given the priorities expressed by Congress. However, the “tax incentives” associated with saving for retirement are likely to remain unchanged, he said, downplaying the “retirement crisis.”

“I'm not in the camp that the sky is falling,” Murphy said. “I think the system is very, very strong.”

Many of the provisions of the SECURE Act of 2019 and its successor, SECURE 2.0, passed in 2023, are taking effect on staggered timelines and are removing the barriers to annuity sales in retirement plans.

The “saver’s match” is next up. Starting in 2027, low- and moderate-income retirement savers can receive saver’s match contributions from the federal government on their first $2,000 in contributions to a defined contribution plan or individual retirement account.

What should be in SECURE 3.0? Murphy wants to see coverage requirement as part of the next SECURE legislation. Seventeen states have some form of state-mandated retirement savings program in place, including some form of auto-enrollment.

“The balances are small,” Murphy said. “The average is $2,000 but it is spawning. For the companies that will survive, it is spawning and will spawn more 401(k)s. The challenge in that space is 50% of small businesses fail in five years.”

Private equity in retirement plans. Private equity options will “absolutely” come to retirement plans eventually, Murphy said.

Private equity firms are aggressively lobbying to be an option within Americans’ tax-deferred defined contribution plans. With Republicans in control of all levers of government the chances of that happening are better than ever.

“Private equity has existed in defined benefit plans for 35 years,” Murphy said. “So, it's good enough for the corporations to put in their own pensions, but it's not good enough for the 128 million Americans to have access to the best performing asset classes in the last 30 years?”

Litigation reform is needed before private equity can be an option, he added.

Critics, especially consumer advocates, say fees are higher and private equity options are difficult for everyday Americans to fully understand. The Employee Retirement Income Security Act of 1974 blocks private equity from gaining access to 401(k)s.

“There are ways to do it that are very straight, very safe, and straightforward,” Murphy said. “And I'm going to tell you it's going to happen.”

Artificial intelligence. Empower is “all in” on AI helping the company achieve a goal of a 25% increase in productivity, Murphy said.

That means using AI for things like analyzing some of the eight million calls Empower receives to determine what went right and what went wrong. While some employees might need a skills reset, Murphy said he is not seeing the “anxiety on the employee side.”

With more technology comes the potential for hackers and data invasion. It’s the one threat that Murphy conceded “keeps me up at night.”

“Part of the way we're leveraging AI is both defensively and offensively against the bad actors,” he explained. “They pervade the market, and they're really smart, so you’ve got to say one step ahead.”

Trump and DOGE. Murphy chose his words carefully in response to a question about Elon Musk and his Department of Government Efficiency. DOGE is downsizing the federal government via thousands of mass firings and early retirements in what some critics are calling “deregulation by layoff,” as Dhue noted.

“I think there's a belief that many share, that the federal government has become increasingly too large,” Murphy said. The question becomes “how much glass do you break” before essential government operations become negatively affected.

“It's clear that this is the path that they're going down,” he added. “I think that's part of why you see the financial markets reacting the way they are, because there is a lot of uncertainty. Hopefully, it's done with some level of discipline and precision.”

Murphy noted that many analysts assumed Trump’s return to the White House would mean deregulation and a merger-and-acquisition boom. It hasn't happened.

“January was the worst January for M&A in the last 12 years,” he said. “So, you've seen a decided slowdown in that regard. Obviously, rates have stayed higher, so the cost of capital is higher. It's going to be interesting to see how that plays out.”

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