In Perfect Alignment
In the ongoing service to a retirement plan, the retirement plan adviser serves as a sort of general contractor, an expert who culls through other specialized experts for resources to provide fiduciary and service support to the plan sponsor and to drive successful outcomes for plan participants.
Partnerships with the recordkeeper and the investment manager are critical to a plan’s success. Each provides essential plan services, along with a wealth of resources, support and information for the adviser, plan sponsor and participant. Recordkeepers perform specialized accounting and data management involving thousands of transactions each month per plan. Investment managers offer investments and diversified asset classes to meet plan objectives, as well as share industry expertise.
Both recordkeepers and investment managers provide a range of participant-focused resources and tools, practice management tools and technology for advisers, conference invitations and educational events, and research and insights into investor behavior.
The abundance of tools and services currently offered by recordkeepers and investment managers to specialist advisers stems from a recognition of the important role advisers play in the current industry.
Recordkeeper Tools and Resources
“A good, committed retirement plan recordkeeper will provide tools, resources and training to help plan advisers demonstrate their value to their clients, differentiate themselves from the competition and save time so they can focus on building their business,” says Tim Minard, senior vice president of distribution at Principal Financial Group, in Des Moines, Iowa. “That includes providing the flexibility in services and backroom support to make the adviser the star with his clients.”
When working with a plan sponsor to select a recordkeeper, advisers typically look first and foremost for reliability of data management, sources say. However, a recordkeeper can tailor its services to plan sponsor goals and budgets, says Pete Swisher, senior vice president of national sales at Pentegra Retirement Services in White Plains, New York. Some plan sponsors “want good, quality recordkeeping service, with no frills, at minimal cost,” he says. “Others want a robust platform to improve participant satisfaction and outcomes, and to make the client’s life easy.”
“Many advisers see most retirement provider services as more and more commoditized,” says Hugh O’Toole, senior vice president of client management at MassMutual in Enfield, Connecticut. “We have to be prepared to differentiate ourselves and show clear examples of how we’re doing that.” Top of mind for the advisers MassMutual surveyed is the need for help in standing out from other advisers. Therefore, this provider, which sells only through advisers, invests heavily in a spectrum of provider support services, ranging from brand development tools and technology to writing workshops, webinars on social media use and iPad-based tools—all helpful for adviser business-building. The company recently launched Get Real, a website to help advisers build and strengthen their brands for prospecting and requests for proposals (RFPs).
Timely, relevant ideas that generate business appointments and help sponsors solve issues are staples, O’Toole says. “[Advisers] know that fresh ideas or leads can generate business-owner meetings, which generate appointments. Appointments generate proposals or RFPs—and a sale.”
Most recordkeepers offer practice management tools that help advisers assess and measure their retirement plans or that address different aspects of an adviser’s practice, such as branding, marketing, communication and prospecting, sources say. Some of these providers offer training for the adviser and the service staff. Many also hold top producer conferences and due diligence meetings.
“When the day is over, most advisers simply say, ‘Help me build my business,’” O’Toole says. “That means referrals, clever sales ideas and ways to accomplish this.”
Investment Managers
The plan adviser regularly monitors investments with the plan sponsor, and the investment managers should conduct quarterly reviews, says Patrick Lulley, vice president of defined contribution investment only (DCIO) and insurance at Van Eck Global in New York. The adviser and investment managers discuss strategy and industry changes, such as current hot buttons, income projection and retirement readiness, according to Lulley, who adds that participants must know where they are and if they are headed in the right direction—both important topics for the investment manager and the adviser.
It is up to the adviser whether he wants to consolidate information from all the investment managers he works with or to select one presentation. Regardless, information must be easy to understand, especially materials used to explain investment performance, according to Michael Rosenberg, director of defined contribution (DC) business for Prudential Investments in Chicago. Prudential Investments creates client-related materials to help plan participant investors understand the marketplace. Topics include the basics of equities, bonds, asset allocation and other investment concepts. The tone of the presentations should be clear, concise and engaging, and describe fund performance without jargon that might intimidate plan participants: “We have to remember that many participants in a retirement plan may not understand complex investment concepts,” Rosenberg says.
Many investment managers help an adviser sort through behavioral finance theories and apply them to a plan in order to optimize participant decisionmaking and, in turn, improve outcomes, says Michael DeFeo, managing director of DCIO and strategic platforms at Nuveen Investments in Chicago.
For instance, a core menu with 20-plus offerings is too large and complex, says Andrew Scherer, director of defined contribution and intermediary for Russell’s U.S. adviser-sold business in Chicago. It could confuse participants, even cause paralysis.
The investment manager is a vital partner in understanding and designing an investment menu, and Scherer has witnessed great changes in core menu design in recent years. “We’re advising the largest plan sponsors to pare the core menu back to six to eight offerings,” he says. Another trend is designing investment menus with three tiers that align with three profiles of investor behavior: those who want complete guidance, those who are self-directed and those who are a combination of the two.
“We can do participants a great service by helping them understand if they are passive, or even reluctant, investors,” Lulley says. “They may be more suited to a target-date fund [TDF] or managed account.”
Regulatory and Fiduciary Matters
Investment managers and recordkeepers are also key partners for advisers on regulatory and fiduciary matters. Evolving regulations and increasing Department of Labor (DOL) scrutiny are just two topics investment managers and recordkeepers should watch, Lulley says. “What are the latest developments? What is changing? What are others doing? Advisers need to be in a position to share the competitive landscape,” Lulley says.
Members of a retirement plan adviser’s team who are seeking to broaden their expertise—especially in newer and potentially liability-prone areas—can take advantage of topical support materials from vendors. OppenheimerFunds offers guides to Employee Retirement Income Security Act (ERISA) budget account considerations and participant allocations, as well as several benchmarking services. “These reports can save the adviser and clients both time and money compared with a full-on request for proposal approach,” says Kathleen Beichert, senior vice president and director of retirement marketing at OppenheimerFunds in New York.
“Advisers should be vocal about their needs, request resources that they may not be receiving from their broker/dealer, and work with investment managers who are willing to listen and respond,” DeFeo says. Adviser feedback from the firm’s 401(k)ollege Advisory Council was used to develop Nuveen’s practice management tools.
“Many asset managers have resources to help plan sponsors better understand and manage their fiduciary role and responsibilities,” DeFeo says, “as well as knowing product development trends to meet participant needs, from target-date or target-risk funds to products addressing the need to manage retirement income.”
Prudential Investments’ Plan Level Review and Investment Policy Scorecard can help advisers evaluate the investments in a menu, determine which ones meet the criteria outlined in the plan’s policy, compare the performance against benchmark indices and help evaluate necessary changes.
“We help plan advisers provide information [to plan sponsors] by making sure it’s presented in a way that tells the whole story, especially information about investment performance,” Rosenberg says. A plan adviser should be able to find out directly why the investment manager’s funds are performing a certain way in a given market so that the adviser can explain it to his plan sponsors and participants. With help from the investment manager, the adviser will be able to provide all the analytical data to communicate that.
The Fiduciary Focus series from OppenheimerFunds dives deep into issues that the retirement specialist will likely be fluent in but plan sponsor clients may not be, Beichert says. He cites, for example, the potential benefits and drawbacks of hiring a 3(21) investment adviser versus a 3(38) investment manager, or designing an audit-ready approach to documentation and retention.
Russell Investments can provide advice directly to the plan sponsor in a meeting, Scherer says. “We coach advisers on the structure of the investment offering and [give] our insights on how plan sponsors and advisers should structure participant communication.”
Many plan participants lack basic financial literacy, and, for advisers, that need drives their most solid professional relationships. “Plan participants don’t need to be financial experts—they need to know how to save for retirement,” Scherer says.
Help for Plan Sponsors
Advisers should expect recordkeepers to supply “all the resources needed to effectively service plan sponsors and help them meet their administrative and fiduciary duties,” Minard says.
Fee disclosure support from The Principal includes enhanced disclosure documents that comply with the regulations rolled out last year, as well as tools to help plan sponsors evaluate the reasonableness of fees.
OneAmerica, a provider of retirement products, holds workshops to address fiduciary responsibility and delivers presentations to new or prospective clients, side by side with the adviser.
“Consistent technical competence is a key element of the solid service foundation advisers demand as their first priority,” says Swisher of Pentegra. If clients have questions, advisers want them to get definitive answers from the recordkeeper “with as little fuss as possible, and the more muddled the answers, the less warm and fuzzy the adviser and client both feel about the vendor.”
A recordkeeper must handle all questions correctly and quickly. Topics can range from the simple, such as how to counsel a client that has failed an actual deferral percentage (ADP) test, to the complexities of the issues regarding inclusion of a nonpublicly traded employer stock in a plan. “Advisers need to feel the recordkeeper has the bench strength to get them the answers they need in a form they can use,” Swisher says.
Help for Participants
An adviser should look for a recordkeeper that recognizes that the plan sponsor and participants are the adviser’s clients, according to Denise Preece, OneAmerica’s assistant vice president of field services, in Indianapolis.
“Recordkeepers should be flexible enough to let the adviser take the lead on part or all of participant education,” Minard agrees, adding that a well-rounded offering should include tools and materials for enrollment, education and reporting. Support comes in the form of educational resources such as retirement planning kits and participant communication documents.
“There is great innovation going on in this area, and advisers have varying degrees of interest in it,” Swisher says. iPad enrollment meetings and postcard enrollments use simplicity to drive participation. “Many advisers see this as their role and don’t want or need this sort of thing from the vendor, but others love it,” he says.
The Principal also offers self-service options, such as online tools an adviser can use to create education plans.
OneAmerica’s resources include a communication planning kit, communication documents, and consultation with the adviser and plan sponsor to ensure these materials are relevant. “The adviser should ensure that the materials support the adviser’s model and services,” Preece says. At OneAmerica, participant materials are available as meeting certificates, landing pages, custom communications and timelines.