Client Service June 29, 2015

Differentiating Yourself by Being Candid

Ask more. Assume less.
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“How many of you have had a client leave, and you were surprised; gave a great presentation, but received no call back; can’t get along with an intermediary you deal with or have a low-performing employee and don’t know why?” Shari Harley asked attendees of the National Tax-Deferred Savings Association (NTSA) 403(b) Summit in Nashville.

Harley, founder of Candid Culture and author of the book “How to Say Anything to Anyone,” contends every frustration such as these that advisers have is predictable. “Ask more. Assume less,” is one of Harley’s mantras.

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“To strengthen business relationships, request candor,” Harley said. She suggested approaching new and existing clients with, “Your business is important to me, and I want a good relationship with you. If we work together long enough, I will do something that violates your expectations. When I do, I hope you will tell me. I promise I will say ‘thank you.’”

Harley said advisers should also turn it around and ask permission to give feedback. Say something like, “I’d like to be able to do the same with you. If something is preventing us from doing the best work for you or providing you with the best service, is it ok if I tell you?”

Finally, Harley told attendees not to guess. Ask about a client’s working style preferences, how they like to receive information, what they are satisfied with and what would make them more satisfied.

NEXT: Clients may lie to you.

“Clients have no incentive to tell you the truth when they are not happy,” Harley said. She noted that our mothers taught us that if we don’t have anything nice to say, don’t say anything. Also, people naturally respond to criticism with anger and defensiveness. Likely a client has experienced this reaction with someone, so they think it is easier to fire an adviser than confront him or her.

“People may lie to you, but ask anyway,” said Harley. “No one else is asking. It is a simple, cost-free differentiator.”

Harley said even if you have worked with a client for 20 years, it is not too late to ask these questions, and if a client makes a request you cannot or will not honor, it’s ok to not accommodate them, but tell them why.

She suggested that advisers not send questions via email as part of a survey. “Surveys may be a good way to get data, but they are not a good way to build relationships.” However, she said advisers may want to tell clients what questions they want to discuss before a meeting, so clients may prepare.

“People have expectations of us, and they think we know what they are, but we need to ask,” she concluded.

In Practice June 29, 2015

Introducing Automatic Enrollment to K-12 403(b)s

“In 22 states, plan sponsors can use automatic enrollment right away,” said Matt Spina, executive vice president and chief operating officer at AdminPartners.
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Federal and state lawmakers have responded to the retirement crisis with the idea of automatic individual retirement account (IRA) plans.

President Obama introduced the myRA program in his 2014 State of the Union address. Senator Marco Rubio (R-Florida) suggested private-sector workers be allowed to participate in the Federal Thrift Savings Plan (TSP), and several states have established their own state-run plans for private workers that do not access to employer-sponsored retirement plans.

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Jessica Kovachick, registered principal and retirement plans specialist at The Legend Group, told attendees at the National Tax-Deferred Savings Association (NTSA) 403(b) Summit in Nashville, among 403(b) plans for public school systems, only about 30% of eligible participants are participating. “That is a part of this nationwide retirement crisis too,” she said.

Now is the time for K-12 403(b) plan sponsors to consider using automatic enrollment, Kovachick told summit attendees, noting that research shows plans with automatic enrollment average about 21% higher participation rates than plans that do not.

Automatic enrollment is not only good for participants, the Internal Revenue Service (IRS) is specifically looking at K-12 plans with low participation rates and questioning why.   

Ray Harmon, Esq., government affairs counsel at the American Retirement Association in Washington, D.C., said employers should consider whether they want to provide something “bare bones” to participants—i.e., the myRA program—or develop a more beneficial and attractive benefit for employees.

NEXT: Best practices for implementing automatic enrollment.

Matt Spina, executive vice president and chief operating officer at AdminPartners, said the NTSA formed a committee to research the use of automatic plan features for K-12 and governmental plans. It has developed a guide of suggested best practices for introducing automatic enrollment.

One issue preventing school systems in many states from implementing the feature is state law that doesn’t allow employers to divert pay from employee paychecks. But, Spina noted, there are three states in which automatic enrollment for non-Employee Retirement Income Security Act (ERISA) plans has been made legal—Colorado, Kansas and Arkansas—and there are 19 states in which automatic enrollment is legal because the federal government allows it. These include Washington, California, Idaho, Arizona, New Mexico, Texas, Nebraska, Iowa, Michigan, Kentucky, South Carolina, North Carolina, Virginia, Maryland, Delaware, New Jersey, Connecticut, New York and New Hampshire.                  

“So, in 22 states, plan sponsors can use automatic enrollment right away,” Spina said. He added that plan sponsors and advisers should keep checking because more states could make it legal in the future. However, he noted, there may also be restrictions in collective bargaining agreements that plan sponsors may have to negotiate.

For school systems that do implement automatic enrollment, the NTSA guide suggests they use best practices used by ERISA plans; the default investment should be a qualified default investment alternative (QDIA) as defined by ERISA. In addition, plan sponsors should designate which person or entity is going to handle automatic enrollment so as not to run afoul of universal availability rules. The NTSA guide includes an instructional checklist, model participant notice and frequently asked questions (FAQs) that Spina said the association recommends plan sponsors include in plan documents.

Spina also suggested that advisers working with plans that use automatic enrollment should offer participants plan-level, product-neutral financial literacy education.

“Automatic enrollment will help participants by keeping participation rates increasing and participant assets growing,” Spina concluded.

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