In Practice April 21, 2021

IAA Endorses Adviser Diversity and Inclusion Data Act

The full title of House Resolution 2123 is the Diversity and Inclusion Data Accountability and Transparency Act; among other goals, it seeks to require regulated financial firms with more than 100 employees to disclose diversity data.

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This spring, U.S. Representatives Joyce Beatty, D-Ohio, and Nikema Williams, D-Georgia, introduced House Resolution 2123, which they titled the “Diversity and Inclusion Data Accountability and Transparency Act.”

Beatty, who is the chairwoman of the House Financial Services Subcommittee on Diversity and Inclusion, said they introduced the bill in order to amend Section 342 of the Dodd-Frank Wall Street Reform and Consumer Protection Act to require regulated financial firms with more than 100 employees to disclose diversity data. Williams and Beatty said passage of the “D&I Data Act” would enhance transparency and accountability in the financial services industry, while creating a more inclusive economy for all Americans.

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“For more than two decades, my House Financial Services colleagues have made persistent calls for leaders in the financial services sector to embrace in ‘good faith’ diversity, equity and inclusion throughout their businesses,” Beatty said. “That’s because diversity and inclusion are more than buzzwords. In fact, good diversity and inclusion performance has been proven to unequivocally increase innovation, boost a business’s bottom line and lower regulatory risk.”

Beatty said the bill is needed now because progress isn’t happening nearly fast enough. She cited statistics from the Government Accountability Office (GAO) and other agencies showing that from 2007 to 2015, the hiring and promotion of African American employees actually declined, while the rate for women remained unchanged in senior leadership roles.

“In such a diverse country that is America, we need to see increases in the number of women and people of color in leadership roles, especially in the financial sector,” Williams said. “That’s why I am proud to join Congresswoman Beatty in introducing this legislation to ensure companies are tracking their diversity efforts and selecting qualified candidates from all backgrounds. Not only is it good for business, but it’s the right thing to do.”

Among the adviser industry leaders to endorse the D&I Data Act is Karen Barr, president and CEO of the Investment Adviser Association (IAA). In a letter to the representatives, Barr says the investment adviser community “must address the issues that have resulted in lack of diversity and must make meaningful progress towards change.

“To that end, the IAA is committed to working collectively with its members and with policymakers to seek to promote diversity, equity and inclusion as a value for our industry and to providing education, information and resources to help foster significant progress,” Barr writes.

While discussing her endorsement letter with PLANADVISER, Barr reiterated the fact that having access to high-quality data is critically important to making progress in this area.

“As many have said, you can’t manage what you can’t measure, and so getting access to the data is foundational to making progress,” Barr said. “We need to have baselines, and we need to be able to measure progress as we go.”

During the discussion, Barr took time to explain exactly what the D&I Act would and wouldn’t do. The bill would amend key sections of the Dodd-Frank law to allow various regulators—mostly notably the U.S. Securities and Exchange Commission (SEC)—to compel the firms and markets they are supervising to disclose staff and leadership diversity data. It would not in any way compel firms to alter their hiring practices beyond mandating the collection and publication of such data.

“Dodd-Frank already created diversity-focused offices within many regulators,” Barr explained. “To date, however, these offices have not been allowed to require their regulated entities to provide this type of information. What has happened, to date, is that they ask for voluntary information, but very few firms respond to these requests in any detail. That really points to the need to require the information be disclosed.”

Barr encourages firms that may react to this development with hesitancy to understand that this is an opportunity to drive progress on a longstanding and unacceptable problem.

“It’s not about calling out firms that right now don’t have strong diversity,” Barr said. “Everybody should feel confident that we are pulling in the same direction on this. We really hope this bill will garner the bipartisan support that it deserves. I feel optimistic that this will pass the House, and we will be reaching out on the Senate side and advocating for passage.”

In Practice April 21, 2021

15th Anniversary of RPAY: Francis Investment Counsel

The practice remains as dedicated to providing top-notch retirement plan services as when it won the 2018 PLANSPONSOR Large Team Retirement Plan Adviser of the Year award.

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Joseph Topp

Since Francis Investment Counsel was named the 2018 PLANSPONSOR Large Team Retirement Plan Adviser of the Year, Joseph Topp, principal and vice president of investment consulting services at the firm, says its focus has not changed at all. “We have remained steadfast in our qualified retirement plan advisory work and in providing participants education and financial coaching,” he says. “This is the firm’s sole focus. We do not offer any retail wealth management or other institutional consulting services.”

One notable development for Francis Investment Counsel, however, is that the firm has opened an office in Minneapolis with three full-time team members, in addition to its main location in Brookfield, Wisconsin, Topp notes.

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The practice has also added two people to its participant education team and two other individuals with more than 25 years of combined experience as plan recordkeepers. The latter has helped the practice “work more closely with plan sponsors on plan operations and design,” Topp says. “We have continued to expand our team’s depth and breadth of expertise in all aspects of running retirement plans. That is consistent with our service model being progressive and providing forward-looking ideas on design, investments and participant communication—including education beyond retirement.”

Francis Investment Counsel primarily serves 401(k), 403(b) and nonqualified plans among manufacturers, professional service firms, universities, nonprofits and health care providers. “It is a pretty broad client base,” Topp says.

As to how Topp views changes in the industry in the past decade, he says, “There continues to be a great deal of fee compression. The continuing and growing threat of litigation heavily influences pricing of both recordkeeping and advisory services. There is still a large pool of old-school investment advisers who are primarily focused on the investment menu and delivering investment analysis to their clients—but who don’t have a broader understanding of the other critical components of the plan or an appreciation of the impact they could have through progressive design, communication, oversight and operational proceedings of a plan.”

With mergers and acquisitions (M&As) among retirement plan practices continuing to reach new levels—particularly acquisitions by large aggregator firms—Topp says he has witnessed a growing appreciation among his clients for independent shops such as Francis Investment Counsel.

“More and more plan sponsors are really recognizing and understanding the difference between conflicted and nonconflicted advisers like us, who serve fully to the definition of an ERISA [Employee Retirement Income Security Act] fiduciary,” he says.

Topp adds that he is extremely enthusiastic about the future prospects for the retirement plan industry.

“Plan sponsors need our help, and while many don’t fully appreciate the value and the role of an adviser, they do eventually come around to appreciate our painstaking level of service. I actually think that sponsors will only continue to appreciate our role helping them and their participants more as time evolves.”

Topp says he believes advisers need to do more than simply provide participants with financial wellness tools and content.

“We need to work one-on-one with participants to understand their struggles and concerns, and to find out if they want a library of content to consume on their own or someone to walk them through their money decisions,” he says. “Ultimately, what we think most employees want is to have someone they trust as a nonjudgmental, unbiased financial coach. There are countless surveys pointing out the financial stress Americans are suffering from. Financial basics are rarely taught. Since the retirement planning industry has shifted from defined benefit [DB] plans to defined contribution [DC] plans, it is incumbent on our industry to help participants make sound financial decisions.”

Topp says his practice was able to readily pivot to remote service during the pandemic because it had already developed a proprietary mobile app to communicate with participants in 2018.

“While we miss the face-to-face interaction and rapport-building that takes place under normal conditions, we know we will return to that one day,” Topp says. “In the interim, we have been supporting our quarterly meetings with our plan sponsor clients with intra-quarter communications and outreach.”

Finally, Topp says there are several ways retirement plan advisers can improve DC plans and participants’ retirement readiness.

“Advisers have to truly embrace the definition of acting as an ERISA fiduciary with absolutely no conflicts, keep the participant’s best interest foremost in mind, and help drive the plan sponsors to really understand the needs and the perspective of their plan participants,” he says. “It’s their responsibility to help their workers successfully prepare for retirement.”

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