Deals & People September 14, 2023

Adviser Product Partnerships – 9/14/23

The Standard and NFP launch PEP solution; Flywire and Vestwell partner to streamline 529 college plan payments; CalSTRS and Sapphire Partners invest in next-generation VC managers.

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The Standard and NFP Launch Pooled Employer Plan Solution

The Standard and NFP Retirement are initiating Your 401(k) Retirement Plan PEP, a customized pooled employer plan.

“At The Standard, we’re very excited to collaborate with an industry leader in NFP Retirement on the Your 401(k) Retirement Plan PEP,” said Steve Chappell, vice president of retirement plan sales distribution for the Standard. “PEPs have emerged as a tool to help a variety of employers provide employee retirement plans more efficiently while managing their fiduciary responsibilities through outsourced solutions.”

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The new PEP offering offers flexible plan design to meet the needs of each employer. The Standard will serve as the pooled plan provider and ERISA 3(16) fiduciary, while NFP Retirement will provide ERISA 3(38) investment management and consulting services.

“The new 401(k) Retirement Plan PEP is a strategic solution for businesses which offers a customized retirement plan option,” Joel Shapiro, president of NFP Retirement, said in a statement. “The PEP helps employers save time, minimize fiduciary risk and reduce work by outsourcing time-consuming retirement plan responsibilities—including plan investment choices—to an expert team.”

Vestwell and Flywire Partner to Simplify 529 College Savings Payments

Vestwell has partnered with Flywire, a global payments enablement and software company, to reduce the time and friction for families to pay tuition and education-related expenses from 529 savings accounts. 

Through the partnership, the tuition payment processing time will take only a few days and provides families using a 529 education savings account full visibility into the status of their payment. By digitizing the payment experience and eliminating the reliance on paper checks, colleges and universities will also benefit from the faster payment time, according to the firms.

 

“Tuition costs are at an all-time high and continuing to rise. It’s imperative for most families to utilize tax-preferred education saving programs to help offset education expenses for their children’s future,” Aaron Schumm, founder and CEO of Vestwell, said in a statement. “We have long admired Flywire, making education savings more accessible for families across the country, and are proud to partner with them. At Vestwell, we’re committed to expanding enhanced savings access helping individuals save for the critical aspects of life –– education, healthcare, and retirement.”

529s are the second most common account used for college savings after a standard savings accounts, the firms noted in the announcement.

“At Flywire, we’re always looking for ways to add more value to the colleges and universities we serve, and to make the lives of students and families easier,” said Sharon Butler, EVP of Education, Flywire. “As more families leverage 529 savings plans to pay for education-related expenses, our innovative solution is helping to streamline the overall payment experience, providing families a digital path to payment and creating operational efficiencies for institutions.” 

 

 

Plan provider Ascensus partnered with Flywire on 529 savings plans in February, 2022.

CalSTRS and Sapphire Partners Invest in Next-Generation VC Managers

The California State Teachers’ Retirement System, the world’s largest educator-only pension fund, with more than $320 billion in assets, and Sapphire Partners announced a partnership to invest in emerging managers focused on early-stage venture capital.

Sapphire Partners, the fund investing strategy of Sapphire Technology Ltd., a specialized technology investment firm with more than $11 billion in assets under management, will assume investment management responsibilities of five existing CalSTRS “New and Next Generation Manager Funds”, representing approximately $1.4 billion in assets under management.

“Emerging managers are critical to the venture ecosystem and an LP’s portfolio, and both CalSTRS and Sapphire Partners have long histories of supporting them on their journey,” Beezer Clarkson, a partner in Sapphire Partners, said in a statement.

“One of CalSTRS’ primary goals since the [New and Next Generation Private Equity Manager Program]’s inception in 2005 is to partner with diverse GPs that represent the demographics of California, and we know greater diversity is a natural byproduct of focusing on small emerging managers,” Christopher Ailman, CalSTRS’ CIO, said in a statement. “This partnership with Sapphire aligns with our long history of finding diverse investment managers.”

Correction: Roundup corrects by updating to a more recent parternship announcement.

In Practice September 14, 2023

How Pennies, Instead of Percents, Can Drive Participant Engagement

An adviser and plan sponsor discuss the way simplicity and communication turned around retirement saving fortunes at California’s Bicycle Casino.

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Simplifying the often jargony language of retirement savings, such as explaining money in terms of cents instead of percents, can significantly drive participant engagement, according to George Fraser, managing director of the Fraser Group, speaking at the 2023 PLANADVISER National Conference.

“If you ask the average person what 1% of $1 is, they always say 10 cents. Almost always,” Fraser told a group of advisers and plan sponsors at the Scottsdale, Arizona-based conference, emphasizing that the correct answer is one cent. “We use words in our industry that are terrible. We need to simplify things, and the penny method works. Everybody believes they can save a penny.”

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Research by behavioral experts from UCLA revealed through a years-long study that using words like pennies instead of percents did, in fact, encourage people to save. That research was inspired, in part, by the real-world work of adviser Fraser and the success of his client, Bicycle Casino, while working alongside Joy Harn, then its chief counsel.

Harn and casino leadership had reviewed advisers as they looked to improve retirement plan participation from rates of around 50% of their employees. Fraser and team’s message of simplicity resonated with the Bell Gardens, California-based company.

“George was not dressed like he is today,” Harn noted, pointing to Fraser seated beside her in a blazer. “He would come in wearing a T-shirt and jeans. He met them as people and wanted to know what they needed.”

The first major change Fraser and team recommended for the Bicycle Casino was automatic enrollment for new employees to drive participation. At first, Harn was apprehensive about auto-enrollment for the casino workers, despite Fraser’s insistence.

“Given the fact we did not want to be paternalistic, that it’s [the worker’s] money, and knowing that they are minimum wage-earners … the idea of us as a company automatically taking their money set off red flags for me,” she said.

Eventually, in part because participants could opt out, Harn agreed to auto-enroll workers at 2 pennies for every dollar of their paycheck, she said. In time, leadership at the company saw that employees were not opting out. The casino then put longer-term employees into the auto-enrollment plan. Once more, almost nobody opted out.

“Using a casino term, they were letting it ride,” Harn said.

Eventually, the firm implemented auto-escalation, also on Fraser’s advice, and Harn said that, too, stuck. “[Employees] are in for Year 1 … and then it would automatically escalate on that anniversary,” she said. “We held our breath. Again, very few people opted out.”

Along with the automatic features, Fraser and Harn pointed to consistent interaction with participants as crucial steps to improve engagement. Whenever Fraser had an opportunity to meet with casino employees, he jumped at the chance.

“Whenever we had multiple employees in a room at one time, he would say, ‘Give us a booth in the back and let us do that engagement,’” Harn said.

Fraser said he believes an important part of engaging participants is to have fun with the interactions. His team will arrive at a facility with a taco truck and a large banner stating, “Prepare for a Spec-taco-lar Retirement.” The taco truck gave his team the opportunity to grab the employees’ attention so they could have more in-depth conversations.

“I find that when you break bread with someone, it changes the dynamic when you get together with them,” Fraser said. “It really works.”

After the work had been done, Bicycle Casino staff were up to a 98.2% participant rate for an average of 9.2 pennies on the dollar.

“This plan with Joy was the best plan in the country,” Fraser said.

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