Plan Sponsor Confidential
Plan sponsors want different things from their advisers, and this year’s plan sponsor panel was no different. It seems, however, that they could agree that the best advisers are those that are knowledgeable, proactive, and able to communicate effectively.
The perfect example is an adviser who calls on a day like the day of the panel when the markets were tumbling, said panelist Perry Wolkowitz, Controller (in charge of Human Resources and Finance) at Ewig International Marine Corporation, a small company (32 employees) with big plan issues (operations in six states) and a $2 million 401(k) plan. In the less-than-optimal market environment, the sponsors said they and their participants want a voice of reassurance in their adviser. “I think we need the soothing voice of the adviser,” Wolkowitz said. It is helpful to receive a reminder from your adviser that the markets might be bad, but history still will tell you to stay in, he added.
What They Want
Other good traits in an adviser include knowledge, reputation, professionalism, and the ability to communicate with and educate people from all walks of life, said panelist Brittney Moore, benefits administrator and human resources generalist of Platte Valley Companies in Scottsbluff, Nebraska. The company has 220 employees and $3 million in assets in its 401(k). As Moore put it, it is important to have an adviser “who is willing to take the [necessary] time and not talk above their heads.” Similarly, Margaret Campbell-Rivers, Human Resources Director at ENTEK International, said an adviser needs to connect with employees and appreciate their wide variance in lifestyles and what they want from retirement savings. Campbell-Rivers manages a $20 million plan at a Lebanon, Oregon-based factory.
Michael D. Cartwright, Benefits Manager at North Carolina Baptist Hospital, and the panelist with the largest plan (7,000 employees with a $500 million 403(b) plan), said an adviser with access to “real marketplace information” and fund managers is important. Like many large plans, the hospital separates the adviser tasks of plan administration and participant education. “We don’t employ our fund advisers to be our communications experts,” he said. Also, objectivity is important in knowing the markets: “We’re looking for an adviser who isn’t tied to a mutual fund family.”
In contrast, at Wolkowitz’s plan, he said he needs “more of the hand-holding” and comprehensive advising. He looks for an adviser who can “not only just focus on the 401(k), but also give it a little extra value,” he said, including services such as estate planning for some of the senior employees. Moore expects her adviser to advise the committee as well as the plan. “A big thing that we expect is for him to be a bridge between those two things,” she said.
What the sponsors are looking for in an adviser differs, and so does the level of service they receive, evidenced by how often their advisers contact them (twice a day, twice a month, once every couple of months, etc.). Another area of variation among the panelists was in their opinions about target-date funds. Wolkowitz and Moore both have target-date funds in their plans, but the other two are hesitant about the funds. Cartwright said the fund vehicles are just still too new, and he does not want to put them in his plan until there are more solid points of comparison. Campbell-Rivers said her plan has purposely “avoided” target-date funds. She added that her plan’s fund lineup offers enough diversity; they don’t see the need for a target-date offering when participants can diversify their portfolios themselves.
Not on the List
What none of them mentioned in their overall laundry list of adviser traits were fees or fiduciary status. As Moore said, fiduciary status was “nice” but not the most important thing when looking for an adviser. While service needs might differ, the panelists all asserted that fulfilling the right services was much more important than the amount of fees being paid. More than one mentioned that integrity and resources were higher on the list of considerations than fees.
Cartwright was the only sponsor that pays a flat fee. Moore and Campbell-Rivers pay asset-based fees. Campbell-Rivers said she knows the basis points but not the exact dollar amount. Wolkowitz admitted he has seen his fees but does not understand them.