PANC 2014: Plan Sponsor and Participant Education

“Lesson one is maximizing deferrals,” said Chris Augelli, vice president for product marketing and business development at ADP. “Second is diversify, and third is measure and improve income replacement ratio. The job of the adviser is to ask: How can we deliver and measure and define all these things in a clear and digestible way?”

While it sounds like a simple enough program, Augelli and other panelists warned attending advisers that even conveying these three lessons to sponsors and plan participants is difficult. “For example, how do you define pre-retirement income?” Augelli asked. “Is it the last five years of the participant’s career? The top five years of income? Or do you average all the working years?”

He pointed to the example of blood pressure testing and other highly standardized medical procedures as an ideal the retirement industry should strive toward. “You can go anywhere in the world and walk into a hospital, have your blood pressure checked, and get a number that means the same thing,” Augelli said. “We need to do something similar for retirement readiness metrics. We need to standardize the conversation and establish some true baselines to think about these issues.”

Beyond adding simplicity and standardization to retirement messaging, Augelli and other panelists urged advisers to work with recordkeepers and other service providers to produce customized education materials and to take a more holistic approach to offering advice directly to participants. Rocco DiBruno, another panelist and retirement group director at Thornburg Investment Management, agreed with that assessment.

“I did more than my share of enrollment meetings—today the demographics of the work force are so diverse by age and lifestyle and all the other factors,” DiBruno said. “As the adviser, you have to be able to customize the approach for individuals. One of your roles as the adviser is to make retirement real for them.”

DiBruno suggested advisers could partner with enrollment specialist resources commonly employed by recordkeepers to develop customized messaging for different demographic segments in each plan. Advisers can be even more effective by partnering with data-mining resources to identify specific problems that may be prevalent in a given plan—perhaps many participants display age-inappropriate asset allocations, or there could be a heavy concentration in employer stock. Whatever the problems are, advisers should also work hard to put systems in place to measure education-related outcomes and the progress of their plans as a whole, DiBruno said.

“At the end of the day, one of the biggest questions is: Can you document the results of your education efforts?” DiBruno asked. “You need to own that information and know how to present it and use it in the value-add conversation. That’s how you get on your way in this business.”

Scott Buffington, vice president for national sales at MassMutual and another member of the “Plan Sponsor and Participant Education” panel, underscored the point that all participants are different—so it matters that advisers customize their message to the individual's needs.

“It’s been said before, but we need to focus on the new way of doing things—we need to look at the Amazons and Googles of the world,” Buffington said. “It doesn’t have to get too crazy about how customized to get, because you’re ultimately delivering a similar message—get prepared for retirement—just folded into different packages. You don’t have to reinvent the wheel for each group.”

Buffington also stressed the importance of a holistic approach to advice, especially as employees’ overall benefits packages become increasingly complex and, at least in the case of health care, more expensive to maintain.

“Participants are telling us they are more and more confused about their overall benefits programs,” he said. “With all that’s happening in health care reform, it’s all become more confusing. So, we feel that providing advisers the tools to have a holistic benefits conversation is essential for the industry to move forward in the ways we are discussing. You don’t have to be an expert on health care, or on life insurance, but you do need to understand the participant’s hierarchy of needs.”