Trendspotting

What’s In Store – Top trends for 2011 

Laying it all out on the table, PLANSPONSOR and PLANADVISER’s Editor-in-Chief, Nevin E. Adams, opened the first Virtual PLANADVISER National Conference (VPANC) by outlining the top 10 trends most likely to have an impact on the retirement industry this year.

The first trend to watch for in 2011 was dubbed “’Share Alikes?” referring­ to the expected proliferation of revenue-sharing lawsuits. Adams said it’s not only large plans that need to worry about this anymore. The first wave of lawsuits came about in 2006 and, so far, most plaintiffs have not been successful. However, as more law firms are becoming “experts” in the Employee Retirement Income Security Act (ERISA), Adams predicted we can expect to see more lawsuits this year.

The biggest concern for plan sponsors, however, may not be fee-related litigation. Rather, lawsuits about employer stock and stock-drop cases will be more troubling, Adams said.

The second topic under the microscope was taxes, and the question was posed: “What if your taxes won’t be lower in the future?” Adams said there has been a long-standing presumption that deferring taxes on retirement savings is the smart move, so you pay taxes at a lower level when you’re ready for the distribution; it is supposed to be a win/win situation, but what if taxes are higher in the future? In a “virtual” show of hands, he questioned those listening to the Webcast who thinks taxes will go down in the future. This is not likely—younger workers might be at the lowest tax rates of their lives today, Adams suggested. Yet, the number of plans offering a Roth solution has been sluggish—18.8% of plans offered Roth in 2009, with a median usage rate of 5%. The “accepted” understanding of the role of tax savings may have to be reevaluated this year.

The avalanche of disclosures was the third trend Adams discussed. He expects it indeed will feel like information will be “dumped” on plan sponsors and, in the beginning, it will lead to more questions than answers. Some of the disclosures sponsors will have to sort through are the 5500 Schedule C, 401(k) fair disclosure, the Pension Security Act, the pending 408(b)(2) regulations, and then they’ll have to figure out what participant disclosures they’ll have to provide. As Adams said, “Disclosure is not (necessarily) clarity, and more disclosure is not (necessarily) more clarity. However, it beats the alternative.”

“Missed” behaving—the reluctance about retirement income—was the fourth trend Adams discussed at the Virtual PLANADVISER National Conference. As it stands now, Adams said there are four ways to approach retirement income: 1) accumulate, then buy an annuity, 2) never stop accumulating (target date to infinity), 3) buy into annuities as part of your asset-allocation strategy, or 4) buy an annuity while you accumulate.

The question about retirement income for plan sponsors is whether they see the issue as protection—or more of a liability? The 2008 PLANSPONSOR­ DC survey asked sponsors if they feel they have a responsibility to manage retirement income distributions for retired participants. Seventy-seven percent said they do not feel that responsibility. Seventy-seven percent also said they are not encouraging participants to keep assets in the plan once they retire.

Adams said that product development will continue to be a key component of retirement income in 2011. He also mentioned that the industry is waiting to see how the Department of Labor (DoL) will influence the debate; there have been proposals to give participants a “preview” of what they can expect to have available to them in retirement. Adams left listeners with the thought that, while many people are still attached to the idea of a pension, the same attraction has not been carried over to annuities.

“Automatic transmission” was the fifth trend Adams talked about: the legacy of prospective perspectives, substandard defaults, and (even more) disengaged participants. The 2010 PLANSPONSOR DC Survey found that the rate of plan sponsors adopting automatic enrollment has virtually flatlined. From 2007 to 2008, the percentage of plans using auto-enrollment increased nearly 29%, going from 23% to 30% of plans with auto-features. However, since 2008, approximately 30% of plans are using automatic features and the increases have been negligible.

There are a few conclusions to draw from these auto-feature trends. For one thing, participants in auto-enrolled plans are being defaulted into the plan in a suboptimal rate of deferral, and will most likely stay at that rate for a few years. Also, plan sponsors that are adopting auto-enrollment typically still are doing it on a prospective basis—for new hires—as opposed to implementing it retroactively. The fact that the adoption rate of auto-plans has flatlined in recent years should cause advisers to wonder if this is a temporary hiatus, or if we’ve reached a saturation point. One positive sign that Adams highlighted was that studies have shown sponsors are interested in auto-feature plans based on a true desire to help their employees be better prepared for retirement.

The ever-popular “to” versus “through” debate surrounding target-date funds (TDFs) was Adams’ next topic. In the 2010 PLANSPONSOR DC survey, sponsors were asked if they would consider replacing a TDF with a target-risk fund (TRF) to eliminate the to-versus-through debate. Forty percent hadn’t considered it yet, 13.8% said they were not at all willing to do so, 6.2% said they were somewhat willing, 1.6% said they were very willing to make that switch, and a substantial 38.4% of plan sponsors were not familiar with the “to” versus “through” dilemma.

The “problem” first came to light in 2008, when some funds were not as affected as others due to the market downturn. Now that the market has recovered somewhat, it has taken the “edge” off the issue. Yet, confusion surrounding TDFs persists, and advisers should help elucidate the issue for their plan sponsor clients.

The impact of Baby Boomers reaching retirement was the seventh trend of the discussion. As if the recession weren’t enough to strain the savings of Baby Boomers approaching retirement, several statistics show the added financial burden Boomers have of assisting grown children and, oftentimes, their children’s children.

The slow strangulation of pensions was the eighth trend analyzed. Adams said funding challenges are not new, but are more “visible.” Accounting and regulatory changes have created some new issues, and there is added pressure to reduce benefits, at least for newer workers in the public sector. Whatever the future holds for pension plans, Adams predicts it will take a long time for them to fade away completely.

Rounding out the list of the top 10 trends to watch for in 2011 were two interrelated subjects—health-care reform and the 2010 midterm elections. As far as health care is concerned, Adams said there has been a “scramble to react, respond, and communicate” the changes with employees. Some questions that will have to be addressed include if costs continue to rise, will that cost be transferred to plan sponsors or employees and what will be the impact on dependent care? Plan ­sponsors will care about the answers to these questions because, according to Adams, people do make job decisions based on health care.

Helping Hands – Five issues your clients most need help with

Panelists at the Virtual PLANADVISER National Conference discussed ways advisers should reconnect with plan sponsors and sweep away some of the old cobwebs surrounding retirement plans.

Alfred Hammond, Institutional Consulting Director of Graystone Consulting (Morgan Stanley Smith Barney); Manuel Rosado, Vice President­ of Spectrum Investment Advisors; and Chad Wilson, Director of Investment Consulting for PSA Financial Advisors, were the panelists for this discussion and homed in on the following five topics.

1. Marketing the 401(k).

Hammond of Graystone said there has been a change in approach to “pitching” 401(k) plans to employees. “Traditionally, the plan sponsor would put the plan out there and partic­ipants picked it up. Now, they’re trying to market it as a benefit,” he said. He also pointed out that the education is changing; it’s becoming more paternalistic. “[Sponsors] are reaching out; they’re making sure participants are doing what they need to,” he said.

Hammond also noted that more sponsors are choosing to market the plan using their company’s brand versus that of the provider. He said the reason for this is that, since the recession, people think negatively of the big financial services firms. So, instead of buying into the “Fidelity plan” or the “Merrill Lynch plan,” for example, sponsors are having better luck with participation if it’s seen as the “Company plan.”

2. Focusing on benefit adequacy.

Rosado of Spectrum said that, because 401(k)s have become so common, enrollment alone isn’t enough—partic­ipants have to be educated so they understand the realities of retirement planning in today’s world. “There’s been a participant mentality that ‘I’m going to retire at a specific age.’ We need better education that teaches participants they can retire when they’ve saved enough. Only teachers, police, and firefighters can say they’re going to retire at a certain age. Everyone else needs to do the math.”

Wilson of PSA continued this idea by saying many defined contribution participants “still think they have some sort of pension-type benefit coming to them at the end when they hit 65, but they won’t have that; people have expectations that aren’t real,” he said.

Wilson said education would be a nice solution, but “inertia rules…you can educate people until they’re blue in the face, but they’re still not going to save enough.” He said benefit adequacy will have to be dealt with on the plan-design level (dealing with auto-features).

However, Rosado also said advisers should take better advantage of the data that are out there in order to reach participants. He discussed technology platforms that are available to help participants see their “gaps,” which may make the situation—the potentially critical situation—more meaningful to them.

“[Seeing the gaps] is a hard pill to swallow but we have to bring it up. We have to move past enrollment alone. We’ve hired part-time retirees to give their perspective, to help us talk to other participants because they have that level of credibility,” said Rosado.

3. Understanding plan costs and fees.

The panelists said advisers can make a big impact by helping sponsors sort through provider fees. Wilson said his firm has fiduciary education modules that they go through with clients and one of them is about plan costs—“but it’s still confusing, we often have to go through it more than once [with the sponsor].” He said talking about plan costs and fees is easiest to do during the RFP process. Once a provider has already been servicing a plan for years, the costs become more difficult to decipher.

Hammond agreed and added that larger plans typically have an easier time getting hold of fees from the provider. It’s more difficult for smaller plans to get the same level of transparency. The panelists all said this was the case, and found it to be quite troubling. Rosado said this is where benchmarking really comes into play—the adviser is supposed to be able to see if the fees are too high and should be negotiated down, or if it’s time to start “shopping around.” Sponsors can’t do that on their own, he concluded.

4. Proper evaluation of target-date funds (TDFs).

Rosado said sponsors are getting too caught up in the performance of TDFs, when really it’s the asset-allocation strategy that is most important to understand. He said advisers need to “look under the hood” of a TDF; many are loaded with subpar funds that wouldn’t attract investors as a stand-alone investment, and then some of the better-performing funds are left out.

5. Getting the most out of plan design.

The panelists said many sponsors haven’t evaluated their plan in years. Ask them things like, “What’s the goal of this plan? Is it to attract new employees? Does the plan have a large portion of workers nearing retirement? Do we need to revamp the education strategy?” Sponsors who follow the markets are great, panelists said, but retirement plans are much more than investment strategies alone.—Nicole Bliman

Starting Small – Start with plan design for small-business owners

Small-business owners are slowly starting to realize that they can’t handle retirement planning on their own, according to E. Thomas Foster Jr., Vice President and National Spokesperson of The Hartford’s Retirement Plans Group.

Speaking at the Virtual PLANADVISER National Conference, Foster said small businesses can be a great market for financial advisers. They need a lot of help; taxes are a major concern for them, as is health care. While many do have plans, it is far from a saturated market.

One topic that is elusive to many small-business owners, said Foster, is the benefit of Roth conversions. Many sponsors and participants were scrambling to make the conversion before 2010 was out, but the conversion is still possible since the tax rate won’t change in 2011 or 2012. It’s a matter of education, he said; once small-business owners understand the benefits, they will be more likely to take action.

Plan design is where advisers can make the most difference for small-business owners, suggested Foster. Many may be under the impression that the only type of retirement plan available to them is a 401(k). Advisers need to broach the idea of profit-sharing or cash-balance plans. Foster gave the example of a 63-year-old doctor he had spoken with recently. This doctor had chosen to take care of his own 401(k) for years—but, after the recession, he told Foster it looked more like a “201(k)” than a 401(k). He realized that, since time was no longer on his side, he needed a professional to help get him back on track.

Foster said the “beauty” of a profit-sharing plan is that you’re not locked into anything, which is a strong selling point. If the demographics of the business change, the adviser can sit down with the third-party administrator (TPA) and reassess the asset allocation. Suggesting an option other than a 401(k) plan will also prove to a small-business owner your creativity, Foster asserted.

Cross-testing is an effective tool to demonstrate hypothetical profit-sharing designs that maximize the percentage of an employer’s retirement plan contribution­ that is allocated to the employer, Foster said. He cited examples of three types of tests: integrated allocation, age-weighted allocation, and new comparability allocation. Integrated allocation takes unequal treatment into account. These cross-testing scenarios may appear to be discriminatory, but they’re not, said Foster; they’re making up for factors that need to be balanced.

Why haven’t more small-business owners adopted this kind of plan design, Foster questioned. His answer is that many think it is just too complicated and, in fact, for many it is. He cited a recent report from the Department of Labor that said 77% of all plans require some sort of corrective­ action. There are lots of opportunities for advisers to help; it’s not about selling products, but finding solutions. Advisers can discuss things like safe harbor 401(k)s and the Saver’s Credit.

New Definition of Fiduciary? Hold That Thought – It may be some time before proposed changes are made final

With Washington causing quite a stir in proposing changes to the definition of fiduciary, the Virtual PLANADVISER National Conference brought together experts to discuss the realities of such a proposal.

Joining the conversation were Bradford Campbell, Counsel at Schiff Hardin LLP and former head of Employee Benefits Security Administration (EBSA); Jason Roberts, Founder and CEO of Pension Resource Institute; and Roberta Ufford, Principal, Groom Law Group.

The discussion began by looking at how the definition of fiduciary is applied currently. The governing body over broker/dealers (B/Ds) is the Financial Industry Regulatory Authority (FINRA), which is a self-regulating organization (SRO). The body of law B/Ds adhere to is the Securities Exchange Act of 1934 and the standard of care applied to them is the suitability standard, not a fiduciary standard. Registered investment advisers (RIAs), on the other hand, are held to the fiduciary standard of care. Their body of law is the Investment Advisers Act of 1940 and the Securities and Exchange Commission (SEC) serves as their governing body.

In January, the SEC issued two reports, as mandated by the Dodd-Frank Act. One report examined if RIAs should continue to be regulated by the SEC, or if an SRO would be more effective. The second report questioned if there should be a uniform fiduciary standard for both B/Ds and RIAs. The SEC staff had this to say about a uniform fiduciary standard:

“The Staff recommends the consideration of rulemakings that would apply expressly and uniformly to both broker/dealers and investment advisers, when providing personalized investment advice about securities to retail customers, a fiduciary standard no less stringent than currently applied to investment advisers under Advisers Act Sections 206(1) and (2). In particular, the Staff recommends that the Commission exercise its rulemaking authority under Dodd-Frank Act Section 913(g), which permits the Commission to promulgate rules to provide that: the standard of conduct for all brokers, dealers, and investment advisers, when providing personalized investment advice about securities to retail customers (and such other customers as the Commission may by rule provide), shall be to act in the best interest of the customer without regard to the financial or other interest of the broker, dealer, or investment adviser providing the advice. The standard outlined above is referred to in the Study as the ‘uniform fiduciary standard.’”

Redefining “fiduciary” would require redefining “advice”:

The Employee Retirement Income Security Act (ERISA) and the Advisers Act employ different definitions of “advice,” the panelists pointed out. The ERISA definition includes advice relating to “property” other than securities. The Advisers Act definition is broader because it includes any advice about the advisability of investing in securities, and issuing reports or analysis relating to securities. Also, under the Advisers Act, advice doesn’t need to be “individualized” or “regular,” nor be “a primary basis for decisionmaking.” Brokers who are exempt from RIA registration may still provide fiduciary “advice” for ERISA purposes (ERISA does not include an exception for advice “incidental” to brokerage services).

Fiduciary status under ERISA and Securities law is different:

• ERISA fiduciary must act prudently (objective duty of care).

• ERISA fiduciary must act solely in the interest of the participants and beneficiaries.

• ERISA fiduciary is personally liable to make whole losses due to breach of duty.

• ERISA fiduciary status a “functional” test based on conduct—if you act like a fiduciary, you are one, despite disclaimers in your contract.

• ERISA fiduciaries are subject to prohibited transaction rules and generally cannot receive variable compensation from investments regarding which the fiduciary provides advice.

Do you pass the test?

Since 1975, the Department of Labor (DoL) regulation has defined a fiduciary investment adviser through a five-part test. The adviser is an ERISA fiduciary if it gives advice regarding the value of or advisability of investing in securities or other property; the advice is individualized; provided for a fee; provided on a regular basis; pursuant to a mutual understanding; and the advice will form a primary basis for the plan’s decisionmaking. Campbell noted that it does not matter if you say you are not a fiduciary—if you performed these five services, you are an ERISA fiduciary.

The DoL proposed a new rule in October 2010 to redefine and expand “fiduciary” advice. The proposal revises the definition of “advice” to include recommendations as to advisability of investing in securities or other property appraisals and fairness opinions, and “management,” which isn’t defined in the proposal, but includes advice regarding proxy voting and investment manager selection.

The proposal also outlines four categories of “advisers”:

• Person holding him or herself out as an investment advice fiduciary

• Person who is already a fiduciary for another purpose (including ­affiliates)

• Adviser as defined in 202(a)(11) (primarily RIAs)

• Person providing individualized advice for a fee that “may be considered” in decisionmaking.

The proposal eliminates “regular basis” and “a primary basis for investment decisionmaking” requirements.

Ufford emphasized that the proposal is very complex. Not that the five-part test was simple, she said, but this seems to be exceptionally complicated.

The proposed rule includes several “exceptions” as well. One is the “Seller’s Exception”—one must be able to demonstrate that the recipient of advice knows (or reasonably should know) that the seller represents a person with adverse interests and is not trying to provide impartial advice. There is also a “Platform Operators” exception, which says those who operate or make available a menu of defined contribution plan investment alternatives, and provide general information to assist sponsors in selecting from the menu. Investment education (IB 96-1) provided to plan participants is not included in the new fiduciary advice, nor are valuations for reporting and disclosure purposes, but only if there is a generally recognized market for the asset.

How will this affect your practice?

The panelists said that advisers or brokers who now avoid ERISA fiduciary status will have to limit their services, or acknowledge fiduciary status. Even if you already accept fiduciary status, some “nonfiduciary” activities may become “fiduciary” activities, such as recommending other advisers or advice to participants on rollovers. This will require redesigning compliance infrastructure and a review of compensation procedure.

Business partners or competitors may reposition their services as well:

• Providers or recordkeepers may seek to partner with advisers to limit their fiduciary risk.

• Brokers may increase service levels by agreeing to provide ERISA fiduciary advice or increasing nonfiduciary services.

• Trustees/custodians may change valuation-related services for “alternative assets” or limit services for alternative assets.

The panelists concluded by giving advisers some actionable ideas:

• Meet frequently with plan sponsors­ to educate on new and changing regulations.

• Conduct due diligence on remote advice programs offered by providers.

• Enhance commitment to partic­ipant education with a focus on increasing participation and contr­i­butions and retirement readiness.

• Track participant success measurements.

• Develop tools and training to assist plan fiduciaries in assessing service arrangements, disclosures, etc.

• Standardize plan sponsor and participant communications and resources (such as ERISA compliance checklists or investment education).

These changes should be looked at as new opportunities to redefine your value proposition, leverage provider-based fiduciary solutions, or fill the need for stronger participant advice. —Nicole Bliman 

Careful Consideration – Succession planning: a new beginning or the end of the road?

Many advisory firms grapple with the possible benefits (or consequences) of participating in a merger or acquisition; a panel at the inaugural Virtual PLANADVISER National Conference discussed the importance of succession planning.

Joining the discussion were Paul T. Lally, President and Co-Founder of Gladstone Associates; Randy Long, Managing Principal of the Sageview Advisory Group; and Michael Paley, Senior Vice President of Focus Financial Partners, LLC.

Why consider a merger or acquisition?

2010 was a record year for merger activity among registered investment advisers (RIAs). Lally of Gladstone Associates saw this in his firm as well; he said merger conversations have increased by 20% from a year ago. What is driving this trend toward M&A? The panelists highlighted several reasons.

Paley of Focus Financial Partners said it’s simply a realization that “no one’s getting any younger.” Many entrepreneurs of RIA firms are in their 50s or 60s today; perhaps they’re starting to think about who will take the reins when it’s their turn to retire.

Lally also pointed out that the recession hurt everyone’s wallet, which, in turn, has led to decreased revenues. “At the peak of a raging bull market, a lot of firms are feeling good about themselves; they have new clients, healthy profit margins…but then the downside looked like a roller coaster,” he said. “Now, asset levels have dropped, and revenues therefore are down…[RIAs] used to be fiercely independent, now they say, ‘I still want to be independent but I don’t know how fierce I am about that.’”

Long of Sageview said a merger is not just a result of fear—it also can be used as a tool for growth and scala­bility. “It’s hard to grow a business on your own,” he noted.

A form of succession planning?

The panelists were asked why advisers generally avoid talking about succession planning. Lally pointed out that there aren’t clear “reference points” for how it should be done. “Not many firms are second or third generation,” he said.

Paley brought up the point that many advisers may see succession planning as a form of “selling” their business, and selling the business may feel too much like an “end game” for someone who built up a successful practice from scratch. However, he cautioned, succession planning is not a matter of saying, “on this date, I am going to pass my practice off to the next owner.” It’s an ongoing process that needs to start much sooner than many expect, he said.

Long brought up the notion that this is a “relationship business.” Having a succession plan in place is in the best interest of your clients; it’s a long-term approach to let them know you’re with them for the long haul. Keeping your clients and your practice in mind, teaming up with another practice may help get you to the next level of client service. “It doesn’t have to be an exit strategy,” Long concluded.

What’s your business worth?

If teaming with another firm seems like the best choice for your practice, the panel discussed the importance of knowing the value of your business. Lally said it starts with looking at cash flow and where that cash flow can lead. “Tongue in cheek, sellers care more about the multiples than the buyers,” he mused. “Buyers or investors are looking for a return on investment; they have a threshold, they will do calculations, then back into the multiples.”

He added that there are two key points to the valuation discussion. There is the financial valuation, but there is also the “intangible component: the strength of the management team, the client base, the demographic of the client base, and the structure of the practice,” he said.

Things will look different for a single-adviser practice, said Paley. A single-adviser practice is built entirely on the relationships that an adviser has with his or her clients, he said, and these advisers are being squeezed out of the marketplace.

Long said his firm has had great success adding single-adviser practices. He said they bring in solid client relationships, and the acquired adviser gets the benefit of the larger structure already in place.

Mergers and acquisitions: the cold hard truth.

While there are many upsides to “teaming up” with another firm, part of which is the necessity of having a succession or “continuity” plan in place, advisers need to see the two terms for what they really are.

“There is usually never a merger; one will always have to be in charge,” Lally said. Sometimes, there are “lateral acquisitions,” which are more like a true partnering, “but, at the end of the day…you may not have full control of your business,” he cautioned. He also said there can be “true mergers,” between two large companies, when money isn’t even exchanged and it’s just a matter of combining structures. “Lots of firms talk about mergers, but someone is usually a lead dog,” he asserted.

Lally also gave five suggestions for what goes into a successful merger or acquisition. First, he said, you need to have a “defined vision” and know where you are headed. Second, think about the infrastructure of your firm and the firm you will be joining. How will they mesh? Third, Lally says every firm should have a well-defined story. Fourth, understand your culture. Lastly, and most importantly, according to Lally, remember the importance of capital. “Having capital and wanting capital are different. Know what you have, and don’t go after an acquisition without having capital.”

Moving On – Accumulation to income: time to fill the “gap”

For years, retirement education focused on the need to save but, as Baby Boomers are starting to reach retirement, they’ll have to turn that accumulation into a source of income.

At the end of an hourlong discussion about retirement income during the inaugural Virtual PLANADVISER National Conference, one of the panelists, Paul Powell, Managing Director, 401(k) Advisors, brought the conversation full circle by saying, “We’re only at the beginning.”

Powell was joined on the panel by Mark N. Fortier, Head of Product and Partner Strategy, AllianceBernstein Defined Contribution Investments, and Sherrie Grabot, CEO of GuidedChoice.

The central question was whether plan sponsors should care about what happens to their participants once they reach retirement; should they do more to ensure that employees get the maximum value from their retirement savings? The panelists said sponsors are still largely divided on this front; advisers will need to figure out strategies with clients on a case-by-case basis.

To best understand where the retirement income is going, the panelists discussed industry history. As defined contribution plans gained in popularity, education focused on active saving and the fundamentals of asset allocation. Plan design focused on open architecture to give participants as many options as possible. However, the realities of participant behavioral finance soon began to sink in; participants were not heeding the lessons and inertia reigned supreme. Most recently, auto-design features have gained in popularity and accumulation is happening “automatically.”

The question about retirement income specifically, then, becomes one of in-plan solutions or at-retirement solutions, the panelists said. Grabot of Guided­Choice pointed out that a major hurdle of any type of solution would be to calculate all the different savings a participant may have. She said that seven out of 10 households will use more than one savings account or source in retirement. These fragmented situations would require some sort of blended solution.

Another challenge pointed out by Fortier of AllianceBernstein is that many participants don’t put longevity risk into the equation; people generally are concerned about living too short a time, and not many consider running out of money while they are still alive.

Powell said, for participants, it’s a matter of framing the issue in the right light. He said advisers should undertake more gap analyses with participants—that can be a highly effective way to show someone the criticalness of their situation­.

An in-plan solution is when the plan has both an accumulation and income part, provided by the plan sponsor. Fortier mentioned that a guaranteed minimum withdrawal benefit (GMWB) is a “sweet spot in the middle.” He also said many products have an “if we build it, they will come” attitude, but that’s clearly not the case. Both sponsors and participants still require ample education before any product appeals to them.

As far as at-retirement solutions go, Grabot says they will run the gamut and participants will be more or less on their own to find solutions that work for their unique situations.

Mentors Make More Difference For Men Than Women

Although having a mentor is beneficial for both genders, it is more beneficial for men, according to the latest study from Catalyst, a nonprofit research organization working on behalf of women in business.

Catalyst surveyed 4,000 graduates from top MBA programs around the world in 2008; the participants had to have graduated between 1996 and 2007. The survey found that men with mentors are placed into higher-level jobs faster than women with mentors, and are compensated more as well. The cause of this is that people tend to have mentors who are similar to themselves; therefore, men would be mentored by men, and women by women. The male mentors are typically higher on the corporate ladder than female mentors, which means they have more clout and influence when it comes to deciding whom to promote.

The study also found that men who had a mentor were 93% more likely to be placed at mid-manager level or above than men without a mentor. Yet, women with a mentor increased their odds of being placed at mid-manager or above by 56% more than women without a mentor.

Compensation benefits were substantially different, according to the study:

• Men who had a mentor received $9,260 more in their first post-MBA job than women with a mentor.

• Men with a mentor were paid $6,726 more than men without a mentor.

• Mentoring made less of an impact on women’s compensation. Women with a mentor were paid $661 more than women without a mentor.

The takeaway lesson Catalyst offers is that mentors must be both highly placed in the organization and actively advocating on their mentee’s behalf to have an impact. —Nicole Bliman