Advisers Shine Beyond the DC Plan

A new guide published by the Retirement Advisor Council offers plan sponsors helpful guidance about the ways their peers are deploying retirement-specialist financial advisers to maximize the performance of employee benefits, as well as the company’s bottom line. 

One emerging trend involves sponsors asking the retirement adviser to model the consequences of workforce aging on the financial results of the plan sponsor company—both today and in five- and even 10-year increments. Other sponsors are pushing advisers to develop very granular counts of the workforce by age and demographic bands, to help decisionmakers get a sense of the impact aging already has on company financials.

The research shows, as one would expect, that advisers have a greater impact on plan performance when they play a more active role in the retirement plan committee’s ongoing discussions and decisions—particularly when the adviser can provide practical input to help contain labor costs. The idea is that retirement specialist advisers should help their clients not just maximize specific benefit offerings, but also ensure those high-quality benefits make sense in the wider context of the workplace. In other words, advisers can and should also be tapped to “rethink and rationalize the allocation of the benefits budget to counteract the adverse self-selection in recruiting and employee retention.”

As the analysis lays out, the “simple step of reducing the portion of the employer benefits budget allocated to health benefits and increasing the dollar contribution to the retirement plan can alter the demographics of the employee population without employee termination … A lower allocation to healthcare can bring about a change in the profile of applicants who self-select [to apply] for open positions.” Another way to say this: older job seekers tend to gravitate towards companies that have generous health benefits, while younger employees may be more drawn to a generous retirement plan.

Working with advisers in this way, plan sponsors can ensure the retirement plan and other benefits remain connected to the deeper workforce development needs of the employer. Specific strategies to this end might involve implementing high-deductible health plans and health savings accounts, tying this to educational programming linking an understanding of health-directed and retirement-directed savings.

“Lowering the share of employee benefits dollars allocated to healthcare allows an employer to offer a retirement program that makes the firm shine in the segment of the labor pool with the most in-demand skill sets,” the Council suggests. “Employer and employee self-interests are better aligned.”  

The analysis concludes that advisers must be well-integrated into the client’s business to really understand what is best for that client’s retirement plan participants. This effort will involve the use of plan demographic data, but it is also about ensuring the adviser grasps and embraces the culture of a given workplace.

The full analysis is available for download here.