PANC 2011: What’s In Store for the Retirement Plan Industry?

Paul Ballew, SVP, Customer Insights and Analytics for Nationwide, said the industry is currently in the most unique market environment in seven decades, and advisers will have to help clients navigate this environment, probably for the next decade, as it takes time to heal structural imbalances. He noted that this environment has a significant impact on the retirement savings market; for example, it has already brought about many private pension reforms.  

However, Ballew said this is a great opportunity for advisers if they are able to come up with unique solutions and sell those to clients. He predicts the industry will outperform the general market by 2% to 2.5%, but advisers will have to employ a different business model with more value-added services.  

Edward O’Connor, Managing Director, Morgan Stanley Smith Barney, expressed concerns with legislators’ “tinkering around” with the retirement plan market and the effect this will have on retirement savings. For example, he mentioned the idea some are suggesting to take away the tax advantages of retirement savings.  He urged the audience to be proactive with legislators on this issue and to get their clients to as well.  

Phil Fiore, SVP, Institutional Consulting, FDG Institutional Consulting Group – UBS, contended that advisers need to change their focus from developing good products to looking at participant outcomes and educating participants. Ballew added that he predicts more advisers will specialize in the retirement plan market, but they will need a level of expertise in markets and a focus on participant education and calming fears.

Fiore said advisers must be bolder with plan sponsors about their approach and assumptions about their retirement plan program; for example, the fear of reaction from participants if they adopt auto enrollment.

O’Connor concluded that at the end of the day, it’s about access and participation; advisers should distill down measures of plan success to participant replacement rates. In additions, said Fiore, recordkeepers need to change what they tell participants. Statements should show their balance converted to monthly payments.

O’Connor also said offering more education and replacement rate measures adds value and advisers can approach fee disclosures with this, asking the client, “How much is that worth?”.

Fiduciary Roles  

When Nevin Adams Editor-in-Chief, PLANSPONSOR and PLANADVISER, asked the panel for their thoughts about the U.S. Department of Labor’s definition of fiduciary proposal, all agreed that it is a good idea to embrace efforts to be on the side of clients and participants.  Fiore added that in order to do the business the way it needs to be done, retirement advice must be unconflicted.  

However, O’Connor said he though the regulation is trying to solve a problem that is not there, and Ballew added he believed it is overreaching.  

When Adams asked the audience whether employers are paying attention to this new proposal, the consensus was no, they aren’t even thinking about it.  

As for predictions for next year, O’Connor said the new subject of health care will be in advisers’ conversations, while Fiore believes the industry will be talking about income, and Ballew said what’s coming out of Washington will be atop of advisers’ minds.