Worth Whiles
I’m sure you’ve seen that commercial where a series of more-or-less everyday events and their price tags are presented.
Reported by Nevin E. Adams
As an industry, we have long worried about the plight of the average retirement plan participant who doesn’t know much (if anything) about investing, who doesn’t have time to deal with issues about retirement investments, and who, perhaps as a result, would really just prefer that someone else take care of it.
What gets less attention—but is just as real a phenomenon—is how many plan sponsors don’t know anything about investments, don’t have time to deal with issues about their retirement plan investments, and who, perhaps as a result, would also really just prefer that someone else take care of it, but how much will they pay for that?
Now, there’s a difference between choosing investments and selecting a trusted adviser to do so. However, as complicated as the former can be, there are certain touchstones that even an amateur can rely on. I’m not saying it’s “easy,” or should be entrusted to amateurs (particularly when issues of fiduciary liability are involved), but it’s certainly manageable.
Quantify Able?
Contrast that with the myriad challenges attendant to selecting an adviser—particularly when you consider that PLANSPONSOR’s surveys routinely show that plan sponsors choose an adviser primarily based on the quality of the advice they provide (primarily to committees, but a close second is the advice rendered to plan participants). One can’t help but wonder how that advice is quantified. Doubtless, that helps explain why so many advisers are hired not on what they know, but on whom they know.
However, for many plan fiduciaries, the obstacle to hiring a retirement plan adviser is financial, not intellectual. Particularly for a plan sponsor who has not previously employed those services—or, more ominously, in the case of one who has hired an adviser that didn’t hold up his end of the bargain—the additional costs of hiring an adviser can be problematic. The question that is asked frequently is, “Why should I hire you?” Yet, IMHO, the question that really is being asked is “Why should I pay you that much?”
There are ways, of course, to quantify the value of your services, ways that quantify not only what you are worth, but also why your fees are what they are. In the most obvious case, you come in and demonstrate the ability to save a plan money. That’s clearly added value, and value that is readily measured (that, of course, only lasts a year, maybe two; after that, the baseline has been reset in terms of savings expectations).
Similarly, your ability to increase plan levels of participation, deferral, and investment diversification also adds value—but value that, IMHO, like the value of retaining qualified talent, is harder to quantify. Many advisers promote their services as a shield against litigation, or at least some kind of buffer against the financial impact of such an event but, in my experience, while most employers are glad to get/take the “warranty” (implied or explicit), they generally aren’t willing to pay very much extra for it.
Where else can you make a difference? You’ve no doubt seen surveys that show that, in the course of a year, most participants spend more time thinking about—and planning for—their vacation than about their retirement plan investments. Ask any plan sponsor clients or prospects how much time they spend working on, or worrying about, their retirement plan, and you’ll probably find a similar imbalance. Of course, plan sponsors, like plan participants, know that they should be spending more time on such matters—and most will admit that, no matter how much time they are spending, they should be spending more.
So, how much time are they spending? How much more do they wish they were spending? How can your involvement reduce the time they spend and/or improve the quality of the attention they give their retirement program? You have the ability to help them make better decisions more quickly because your experience offers insights to which they wouldn’t otherwise have access.
So, save them money if you can, save them aggravation if you have to but, in this crazy, hectic period, if you can save them time—well, IMHO, that’s truly “priceless.”
Nevin E. Adams is Dean of the PLANSPONSOR Institute, the education arm of PLANSPONSOR. Nevin also is Editor-in-Chief of PLANSPONSOR magazine, and the creator, writer, and publisher of PLANSPONSOR.com’s NewsDash. A 30-year veteran of the retirement services industry, he graduated magna cum laude with a BS in Finance, and later received his JD from DePaul University in Chicago.