Compliance September 26, 2018

PANC 2018: Plan Committee Excellence

To this day, one of the most common reasons plan sponsors turn to advisers is to get assistance with governance, including items such as putting in processes that help avoid litigation and running an efficient committee meeting.

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The second day of the 2018 PLANADVISER National Conference in Orlando included a broad discussion about the challenges of building great retirement plan committees.

Bruce Lanser, senior retirement plan consultant with UBS Retirement Plan Consulting Group, moderated the panel, which featured Stephen Rubino, senior vice president of institutional services at Financial Engines; Tim Irvin, consultant with Cammack Retirement Group; and Robert J. Rafter, president of RJR Consulting.

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While all agreed the retirement plan industry has evolved substantially in the last decade, they also agreed that to this day, one of the most common reasons plan sponsors turn to advisers is to get assistance with governance, including items such as putting in processes that help avoid litigation and running an efficient committee meeting. Advisers do this by working hand in hand with retirement plan committees.

According to Rafter, there is a “terrific opportunity out there” for advisers to work with retirement plan committees because, simply put, many employers simply do not have the internal expertise to ensure the retirement plan is run in an efficient and compliant manner.

“Doing regular training and working with plan committees will remain a terrific opportunity as the legislative and regulatory picture shifts, and it is a win-win for the adviser and client,” Rafter said. “In my opinion, working with plan committees to make sure they are fulfilling their responsibilities makes your 3(21) fiduciary and 3(38) fiduciary investment services that much more powerful.”

Irvin agreed with that take and added that “getting the right people in the room who can consistently make the right decisions for the plan is a challenge, but it is so crucial.”

“I don’t know that there is a right number of individuals for the committee,” he noted. “Two people is probably not enough. It’s really more about getting good representation of the demographics in the plan, and expertise across finance, staff roles and benefits. I think a group in the mid-single digit range is sensible. And having an odd number of people seems to be helpful to prevent gridlock.”

Rubino and Rafter suggested that, apart from regular ongoing committee training, when there is a change in the committee makeup, this is a great time to level-set the existing members and to educate the new members on the fundamentals.

“A focused training session will make the new people much more confident and, importantly, more competent,” Rafter said. “To a large extent it is the adviser’s role to orchestrate all of this. Through regular and ongoing committee training, you can do a lot to put peoples’ minds at rest while improving the plan outlook.”

The panel agreed that advisers can use litigation examples to wake up plan sponsors, but the real benefit of talking about litigation is to help define the lessons learned and the key processes and procedures that will help defend against a lawsuit in the future.

“You can talk about prudence as a concept but it’s more powerful to point to cases where prudence was an issue,” Rafter suggested.

When it comes to plan committee turnover, the panel agreed that ideally there won’t be a lot, because of the need to view the plan over the long term and with lasting consistency. To this end, the majority of committees the panel works with do not spell out a committee member term limit.

“How do you get people involved and excited in committee meetings? It’s easy, with free food,” Irvin only half-joked. “Simply put, as the adviser, you need to work hard to make the committee meetings engaging and informative. Those of us in the industry may love this topic, but the average person doesn’t find it exciting. One practical tip is to play on peoples’ strengths. Let people know their particular skills are are needed and that they are serving an important and noble purpose.”

The panel shared the final point that documentation of deliberation is so crucial when it comes to proving that a plan committee is acting prudently—and this documentation should be kept up to date and readily available in case the plan receives a Department of Labor (DOL) audit notice.

“The DOL will expect that many documents be sent in advance of the audit,” Rafter explained. “They want plan and trust documents, IRS determination letters, investment policy statements, the last three years of Forms 5500, the most recent investment valuations, minutes from committee meeting and service provider contracts. Having these documents ready to go immediately is so key. It makes the plan look way better in the eyes of the DOL. If you have to ask for extensions this immediately raises red flags for DOL.”

In Practice September 26, 2018

PANC 2018: Practice Efficiencies

The importance of hiring the right people and managing their functions efficiently.

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Speaking at the 2018 PLANADVISER National Conference panel on “Practice Efficiencies,” David Griffin, founder and owner of Atlanta Retirement Partners, LLC, said that hiring the right people is the first step in achieving practice efficiencies. “When I started, I was doing everything myself,” Griffin said. “I realized I needed to supplement my weaknesses with someone who has those strengths in order to make me more efficient.”

Griffin found a candidate from a recordkeeper who was making six figures. He negotiated with them to pay them $65,000 and allow them to work from their house. The following year, he hired another person from Principal. This allowed him to focus on sales, while his staff handled Excel spreadsheets and requests for proposals (RFPs).

“Getting people in the right role improves client service,” he said. It also enabled him to move his profit margin from 30% to 60%, which then allowed him to lower his fees. Griffin also said he uses a Colby screening process to figure out people’s strengths. “This can help organizations be more profitable,” he said.

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Joseph DeNoyior, managing partner with Washington Financial Group, said he also uses Colby screens, not to hire people but to figure out how best to communicate with his staff. “It helps us to better manage human capital in order to best serve clients,” he said.

“Once every six months, we have every team inventory what they do every week,” DeNoyior said. “Our CFO then analyzes these functions to figure out what positions or services we need to fill.”

In addition to this, Washington Financial Group offers three different service tiers to clients. “This allows us to deliver consistent service,” he said.

Another way that the practice ensures that it can deliver consistent service should a team member be on vacation or out of the office is to have team members trade jobs for a day so that they can fulfill those functions. “It also gives them an opportunity to suggest how their peers could be doing their jobs more efficiently,” he said.

Another way to achieve efficiencies is to have multiple retirement plans operating off of the same platform, DeNoyior said. Likewise, Griffin said that “some recordkeeper providers allow us to cascade trades across all plans.”

Griffin also said that many retirement plan specialists are reluctant to use the resources available from recordkeepers. In his experience, these services, such as participant education, are very valuable.

In order to work more efficiently with its 15 recordkeeper partners, Washington Financial Group has created a catalog of the services they offer as well as a calendar of them should they roll them out, DeNoyior said. “We want to offer maximum touchpoints with minimum costs and turn the plan into an experience for participants,” he said.

Yet another way that Atlanta Retirement Partners, LLC and Washington Financial Group have found to be efficient is to outsource marketing. “It has been helpful for me to push that off of our desks,” Griffin said. “They have done a good job of keeping the pipeline filled with opportunities.”

Washington Financial Group’s marketing firm holds educational events, such as fiduciary training, to engage participants, DeNoyior said. The practice has also formed a speaker’s bureau and has been invited to events around the country to speak. This can lead to prospects, he said.

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