Forging Ahead

The retirement industry never sleeps—which means financial advisers working with retirement plans can ill-afford to take a breather. Whether it’s dealing with regulations, legislation, provider consolidation or a focus on retirement readiness and retirement income, the industry is undergoing changes in many areas. PLANADVISER spoke with Mike Shamburger, vice president of sales and retention for the Retirement Plans Group at The Hartford, about the shifting retirement plan landscape and how the best retirement plan advisers stay ahead of the changes and help their clients do the same.  

PA: In your opinion, what is the biggest change facing advisers who serve retirement plans this year? What are they doing to address it? 

Shamburger: Our research about what the public wants from advisers in this environment has found that, first, people want realistic messages about retirement. They’re tired of the false picture of retiring on a yacht or at a resort. They want a realistic view of the future and strategies that will give them confidence that they can get to where they want to be and have their needs covered. Advisers therefore need to stay in touch with the changing environment.

Plan sponsors want their advisers to be very responsive. They need more communication in times of change—almost over-communication. The new regulations are a perfect example and a big chance for advisers to differentiate themselves.

Advisers who are successful during times of significant change focus on three areas. First, they are effective consultants—they will help plan sponsors understand exactly what the regulations are and what they mean to participants and to the plan. Second, they are effective communicators; in the past, communication with the plan sponsor has been lacking. Now is the time to really step that up. Third, the most successful advisers will position themselves as specialists; they will instill client confidence and show that they understand the challenges plans may face.

The other thing I think financial advisers really have to think about right now is protecting their business. They have to actively create, enhance and protect their personal brand by leveraging the resources available to them. We’ve done a lot of work, and I know other providers have done a lot of work, as well, to create those resources. At The Hartford, we’ve packaged together the support, services and materials to help advisers through this challenging time.

PA: What is The Hartford doing to help advisers address this regulatory climate?  

Shamburger: One of our most important jobs as a provider is to identify ways to help advisers take advantage of external changes so that they can grow their practice.

Recently, we introduced a practice management portfolio that will help advisers build their brand and reputation, while demonstrating their value as they address new federal regulations and other industry changes.

The industry and advisers both need to solve three growing issues, and we’ve built our practice management portfolio around these: managing plan expenses; fulfilling fiduciary obligations, specifically helping plan sponsors ensure that the fees and services for the plan are reasonable; and understanding plan design, particularly, using it to influence participant outcomes.

The core goals of the program are to help advisers understand how to best respond to the most important sponsor and participant questions and fears, and to provide access to a variety of resources to help them do this.

For example, The Hartford offers free, unlimited access to a system called CustomConsultant. It allows advisers to quickly identify plans that may have concerns or issues related to the new regulations. It also gives them access to a PlanRiskProfile® report that summarizes potential plan issues based on a plan’s Form 5500. This plan-specific intelligence helps advisers take a very consultative approach to discussing plan risks and how to address them.

We’ve also created a plan service commitment that can be customized based on the level of service that an adviser provides. I’ve worked with advisers for years, and I’ve always said, “You have to be willing to put your own commitments on paper. Put your services in print so they can be compared.” This tool helps them do that.

PA: Some of the changes in the industry include consolidation among retirement plan providers. What do you think is the best way for advisers to deal with this changing marketplace?  

Shamburger: Change and uncertainty can create fear. I think M&A [mergers and acquisitions] activity in our industry is no different. Recently, we looked at the amount of M&A activity—and just on the recordkeeper side we identified 13 significant mergers in the last several years. If you expand that and look at the financial services industry as a whole in the last 20 years or so, there have been just shy of 1,500 mergers and acquisitions.

When you think about advisers—whether they’re in the broker/dealer world, the bank world, the specialty lenders world or asset manager world—most have been touched by some M&A activity, or there’s a high probability they will be in the future. Bottom line is the adviser has to be the voice of reason with sponsors and instill confidence.

PA: For those advisers who have been touched by this activity, how do you think they have been responding? What kind of advice do you have for them? 

Shamburger: It’s natural for plan sponsors and participants to be fearful when they don’t know what the future holds. But, generally speaking, advisers shouldn’t be fearful of M&A activity.

Most advisers realize that emotion is their enemy during times of change, whether it’s market volatility, economic turmoil or M&A activity. I think the best advisers are those who really recognize M&A as a certainty in our business, and they share some common traits. One, they take emotion out of the picture and don’t succumb to the fear of the uncertainty. Two, they are calming influences on plan sponsors and help them view situations rationally, based on facts versus emotion.

As I mentioned earlier, I also think they can differentiate themselves by being visible and communicating frequently. The advisers who I think do a really good job in these types of situations are ones who communicate facts with conviction. One thing advisers don’t want to do is disappear during times of change, because silence is deadly.

Knowing the facts and staying visible are practices that will help advisers protect their business and their personal brand. Doing so will also help them avoid rash decisions that, in the long term, may end up reflecting poorly on them.

PA: Retirement income continues to be an area of activity in the industry. The Hartford introduced a new retirement income investment option. How has this product been received by plan sponsors and advisers in the marketplace? 

Shamburger: We recently did a survey just to validate what we already believed about income. There were some interesting findings. We found that younger workers are much more likely than older workers to favor guaranteed income options inside their 401(k) or other defined contribution plans.

Another interesting discovery was that 95% of the survey respondents who were younger than age 30 said it would be “very appealing” or “somewhat appealing” for their employer to offer a guaranteed income option. So we verified the fact that there’s demand among younger workers for this type of option.

These findings are contradictory to the products that have been introduced to the market in the past, most of which are benefit-type products that focus on providing security to investors who have already accumulated retirement assets. Those products are typically very complicated and are designed to help ensure that a catastrophic event in the markets doesn’t impact the accumulation that’s taken place.

The beauty—and difference—of The Hartford Lifetime Income is that it’s so easy to understand and to explain. Participants can purchase units of retirement income during their working years, and each income share provides $10 of monthly retirement income for life.

For example, if you buy 10 shares of Hartford Lifetime Income, you will receive $100 of monthly income at retirement. The share pricing is pretty simple, too. It’s based on age and the current interest rate environment.

Because Hartford Lifetime Income is not tied to the equity markets, it is not subject to volatility risk. Once a share is purchased, it’s owned outright and can’t be taken away, unless the participant wants to give it up.

Addressing the longevity risk is another issue to contend with. The design of The Hartford Lifetime Income guarantees retirement income for life, regardless of how long a participant lives. (Note: Guarantees are based on the claims-paying ability of The Hartford Life Insurance Company.)

Things I like about it: Besides its simplicity, it’s going to be very easy for advisers to communicate, and the response we’ve gotten from the market has been tremendous. We’ve really just introduced it, so we’re just starting to get a feel for how it is going to be received.

PA: You mentioned interest in The Hartford income option by younger survey respondents. How is The Hartford responding to the way the younger generation—meaning those under 50—is approaching retirement savings? 

Shamburger: At The Hartford, we think the employee mindset about how to save is really shifting. They have to be able to save effectively, they want to know where to get help, and they know that they need help, moving forward. The adviser community has to help employees move from an account balance mindset to an income stream mindset, helping participants to visualize what they want in retirement and understand how to get there. Participants need to know what is going to be critical—what expenses they will have to cover in retirement—and understand what type of income stream their account balance can drive.

“The Hartford” is The Hartford Financial Services Group, Inc. and its subsidiaries, including Hartford Life Insurance Co., ­Hartford Retirement Services, LLC (“HRS”), and Hartford Securities ­Distribution Company, Inc. (“HSD”). HSD (member FINRA and SIPC) is a registered broker/dealer affiliate of The Hartford.  

FOR FINANCIAL PROFESSIONAL USE ONLY. NOT FOR USE WITH PLAN SPONSORS OR PARTICIPANTS.