Partnering on Advice
Americans are not just worried about saving for retirement; they face many financial decisions—such as those involved in paying bills, buying a home and saving for children’s college education, to name just a few.
For this reason, retirement plan sponsors and advisers increasingly see the value of adopting and promoting holistic financial wellness education programs for employees. Aon Hewitt’s Hot Topics in Retirement and Financial Well-Being survey found a majority of large employers (55%) now offer help to workers in at least one category of financial wellness—maybe budgeting, debt management or the financial aspects of health care. By the end of this year, Aon Hewitt predicts that more than three in four (77%) large employers will have at least one financial wellness program in place.
In addition, Americans are worried that health care costs in retirement will eat up the money they have saved for other expenses. A 65-year-old couple retiring in 2016 will need an estimated $260,000 to cover health care costs throughout retirement, according to Fidelity’s Retiree Health Care Cost Estimate. Health savings accounts (HSAs) are now being promoted as a way to save for those steep expenses.
So, it makes sense for retirement plan advisers to consider teaming up with other professionals to offer complete, holistic advice about HSAs, 529 college savings plans, saving for a mortgage, developing a sound budget, paying down debt, caring for an elderly parent, estate planning and other similar topics.
Teaching Financial Skill Sets
Jason Chepenik, managing partner of Chepenik Financial in
Winter Park, Florida, says aiding plan sponsors in meeting their goal—i.e., to
help their employees become better financial stewards—should be the primary
objective of a financial wellness program. “The average employee changes jobs
three to five times in his career. I can set employees up for their future by
making them better savers, but, knowing they have real lives and they’re not
average, the real heart is to teach financial skill sets,” he says. “[The
needed education] can’t all be done by me.”
Teaching those personal financial skill sets is a multifaceted effort. Chepenik says, last year, his firm hired its own full-time director of participant communications. The director leverages resources of recordkeepers, defined contribution investment only (DCIO) providers and investment managers. Chepenik notes that advisers have more options than just the cookie-cutter PowerPoint presentations vendors may provide; most vendors today are interested in developing content, so ordering custom materials should be possible, too. Advisers may use PowerPoint presentations, Brainshark video webinars or in-person educational sessions to deliver the content to clients and participants.
Chepenik Financial conducted a series of sessions for a plan sponsor about how to communicate with one’s spouse about money. The sessions covered creating a budget; what a family agenda looks like; and why families should have an agenda, to stay on point. He notes that his firm got the idea from a recordkeeper that had a family budget session.
As another example, Chepenik says his firm enlisted The Branding Company to create a program that is milestone-driven. In it, at age 50, participants get a box from their employer or the retirement plan committee containing a book about visualizing the future and financial planning; this helps them know it is time to get serious. “It’s a milestone gift,” he says.
Chepenik stresses the value of letting the client get all the credit. “It doesn’t matter who the financial wellness vendor is. We want the education to say, ‘Joe’s Plumbing presents …,’ because it’s the client’s plan, and it builds trust between employees and their employers and makes employees more appreciative of their employers.”
Finding Partners
Advisers affiliated with broker/dealers (B/Ds) or financial
institutions may find resources and partnerships for holistic financial advice
at their fingertips. For example, Jim O’Shaughnessy, managing partner at
Sheridan Road Financial in Northbrook, Illinois, says his firm depends on its
partners, broker/dealer LPL and registered investment adviser (RIA) Independent
Financial Partners. “What we do is based on what our partnerships offer. They
give us high-level abilities, and the ability to use other partners,” he says.
O’Shaughnessy says, with the Department of Labor (DOL) fiduciary regulations going into effect next year, a major opportunity exists to bring additional services to plan participants. Such services might include financial planning, asset allocation modeling, HSAs, education funding, etc. His firm provides financial wellness instruction and advice to retirement plans utilizing the LPL Worksite solutions platform and, additionally, offers a transition service to help participants roll money in and out of retirement plans.
Through its partners, Sheridan Road Financial has the ability to create semi- or fully customized solutions. “As an example, we’ve been trying to create solutions, going forward, due to DOL fiduciary rule, for what [we’ll] do for wealth management clients versus participants in retirement plans,” O’Shaughnessy says. He notes that his firm has partnered with Charles Schwab for wealth management and recently created a “robo” service through Schwab. In addition, his firm has a multi-family office partner, Robert Stevens in San Francisco, targeting families with more than $5 million in investable assets. The robo technology through Schwab is for accounts up to $500,000, and the wealth management partnership with Schwab is for accounts up to $5 million.
Retirement plan advisers can also leverage individual advisers. Tish Gray, wealth planning adviser with Sagemark Consulting, a division of Lincoln Financial Advisors in Dallas, has built a team of estate planning specialists, attorneys and certified public accountants (CPAs) to help with a high-net-worth client who was referred a few years back.
Because Sagemark is part of Lincoln, Gray also has that much-larger firm’s resources at her fingertips. “We have an entire retirement specialist department. Retirement and benefit specialists will meet with clients and me to discuss anything from retirement plan design to HSAs,” she says.
Beyond all that, many vendors of financial wellness have blossomed—Financial Finesse, SmartDollar, LearnVest and Retiremap, to name a few. “All have this content, and they thrive, talking about anything but stocks and bonds,” Chepenik says. “[Plus] they have low-cost ways of delivering education.”
As for how to find these providers, many go to industry conferences, where attending advisers could find openings for discussions. Also, reading trade publications can offer clues about what potential partners are out there. Chepenik observes that these providers are good at marketing; advisers need only Google a term such as “financial wellness.”
Chepenik says advisers can reach out to their RIA or broker/dealer for a list of approved partners. In addition, recordkeepers have a list; recordkeepers have access to the money, so partners try to build relationships with them, according to Chepenik. “Empower is how I got to LearnVest,” he adds.
Gray says she has also found partners through the Financial Planning Association and other networks.
Finding the Right Fit
Once potential partners are identified, how do advisers know
whom to choose?
Gray says she does substantial vetting before selecting a partner. “Just because someone wants to do business with my client doesn’t mean he’s a good fit,” she says. Gray sends him a questionnaire, meets him for coffee to see if he is compatible and learns what he does. She then goes to his office to check out the culture. “I make sure I’d use him before I put him on my referral list,” she says.
Gray gives clients more than one name so they can choose. Her list includes many providers, such as mortgage brokers and insurers. “I want to make sure I touch on clients’ total financial life,” she says.
According to Chepenik, advisers should have a list of specific needs they want the partner to fill and should also interview the candidates. He says cost is important—and the candidate should not be expecting to use the relationship for sales. “Ask what their purpose is. You don’t want to provide a portal to a group of planners that sell insurance or other things,” he says.
Chepenik warns advisers to be wise: Use a partner who has been tested “because if you try something cutting-edge, you may get cut. It can backfire if not done right.” He urges advisers to try a partnership out with their own employees. “Everything we’ve done with clients, we’ve done with ourselves,” he says.
Everyone has their own process for vetting who is the best partner, notes O’Shaughnessy. “When LPL acquired National Retirement Partners, we did our own due diligence and researched the marketplace. We interviewed close to a dozen B/Ds to make sure LPL was the right fit and concluded that LPL would be a good strategic partner,” he says.
It’s hard to find partners, O’Shaughnessy says. He has seen many advisers who run solo practices looking to join larger firms, which offer more opportunities to integrate technology and take on other service offerings. He notes that the marketplace is changing, with continuing merger and acquisition (M&A) activity. “We feel there is a big trend for advisory practices to gain scale and give people the ability to specialize in different areas of practice, in order to create best-in-class solutions. Partnering is the best way to do that,” he says.
As to the benefits of partnering, Gray says, “I wish my 39-year-old self could go back to my 22-year-old self and tell her that I didn’t need to know all aspects of planning to speak with clients. I wish I knew it would be better for clients and my practice to use a team approach. I would have been where I am now sooner.”
Chepenik concludes, “Participants are never going to wake up and say, ‘Thank goodness for my 3(38) adviser; he helped me retire.’ They’ll say, ‘Thank goodness for the person who gave me this financial planning book or taught me this financial skill.’”
KEY TAKEAWAYS
- More sponsors are offering full-scale financial wellness programs, which go beyond retirement planning to include: budgeting, reducing debt, saving for a home, funding a child’s education, purchasing insurance and estate planning.
- Advisers can leverage resources from recordkeepers, defined contribution investment only providers and investment managers, as well as their broker/dealer and registered investment adviser partners.
- With the diversity of financial wellness and educational partners available, advisers must ensure they do the due diligence to select the one that best fits their practice and clients.