Adviser Opportunity in Educating the Plan Committee

The adviser is a key player in providing ongoing education to retirement plan committee members.

“Education for the committee is one of the major services an adviser provides,” says Steve Bogner, managing director of HighTower at Treasury Partners. “The adviser should be able to come in and address the major areas: risk, the employee experience, the cost of the funds and of the platform,” he tells PLANADVISER. “The committee members need this information to make sure they fulfill their fiduciary responsibility.” 

As retirement plans increasingly use plan advisers—north of 85% of plan sponsors use one for help with the overall plan, says Jordan Burgess, senior vice president of specialty field sales at Fidelity Advisor Solutions—they benefit from the insights an adviser can share with the committee.

Typically, says Bill McClain, senior defined contribution (DC) consultant with Mercer, plan committee members need updates on judicial, regulatory and legislative issues, in addition to updates on general retirement planning trends. “There’s so much happening in the DC world, it’s difficult for a committee member to keep up with everything going on without support,” he tells PLANADVISER.

From the adviser’s standpoint, McClain says, the regulations that influence DC plans are an important subject to bring before committee members on a regular basis. Regulatory changes in the retirement space are often complex and nuanced, he warns: “You need to be able to understand how a given regulatory change applies to the particular situation, and how it has practical grounding for the client,” he says. “How does it apply to the committee members?” A skilled adviser should be able to answer this question clearly and directly.

Plan committee members’ backgrounds run the gamut, from finance to HR to legal to those from the corporate side, McClain says. “A well-structured committee should be diverse and provide opportunities for sharing different perspectives.”

NEXT: Committees need a free exchange of ideas and opinions.

The diverse backgrounds of committee members will have a big impact on the way a given committee does business, McClain says. “Sometimes you see situations where everybody waits for one person to conduct the committee, and everyone follows that person,” he says. “For fiduciary decisions, you want a free exchange of ideas and consensus.” The ideal committee environment creates an opportunity for people to share and help other committee members learn from their peers.

A finance person, for instance, who is not as up to speed on the Employee Retirement Income Security Act (ERISA) can hear the opinions and insights of someone in HR. McClain notes that when it comes time to select a managed account provider—in many cases, the choice is dependent on the recordkeeper of the plan—the finance person might choose the provider with the lowest cost. The HR person may understand that choosing this provider carries a lot of fiduciary responsibility, because it affects the investment options for participants. The HR person might be more attuned to the sales techniques of the provider than the finance representative.

Cost used to be the top concern, Burgess tells PLANADVISER, but now, the No. 1 issue is preparing participants for retirement. “About 30% of plan sponsors name that as their top concern,” he says. “That leads the best advisers to focus on plan performance, outcomes and participation rates, and they can provide suggestions that improve performance and make sure the plan has a prudent process to select investments.”

“With the recent Supreme Court decision [in Tibble vs. Edison], DC committees need to make platform costs a big focus,” Bogner says. “Committee members will want to make sure that the overall platform costs are in line with the industry.”

NEXT: Focus on the topics that support the goals of the plan.

Employee education should be a very big focus, Bogner says, since it ties into the participant experience and ultimately can affect plan outcomes and retirement readiness. “Is the plan providing enough ways to educate them so they put enough money into the plan and increase on a regular basis?” he asks.

Advisers can use their expertise for plan aspects the committee is considering, McClain says. Perhaps the committee is mulling a brokerage window for the plan. Committee members can benefit from a walk through the typical considerations, pro and con, and a member who is more focused on the regulatory side can bring the committee up to date on the Department of Labor’s (DOL) scrutiny on brokerage windows.

Bogner suggests platform costs and a highly detailed overview of plan costs as two more topics for the committee to tackle. How to align corporate and fiduciary interests is a topic, he says, but not a particularly thorny one. “There’s been a lot of consolidation in plan providers,” he says. “You don’t have to sacrifice service to reduce costs. Many large plan providers are super competitive, and you can get a very good one at a reasonable cost.”

The committee can also examine various areas of risk: what it means to be a plan fiduciary; what risks are involved; the importance of choosing the right platform and the right adviser. Once the committee is built, how to take minutes, establish and review an investment policy statement and an education policy.

Anyone supporting the committee members should understand the issues that matter to them, McClain says, and filter for what is important. “You might think there are things they don’t need to know, but at the same time, most committees are strapped for time,” he points out. “It’s a delicate dance between what’s important but making sure you’re not leaving out information they need.”