2019 PLANADVISER National Conference

Art by Uijung Kim

One adviser stressed the importance of making sure plan sponsors and their committee members understand what annuities are and that there is no one solution for all plans. Other advisers have worked to recruit the next generation by taking the job of the adviser out of one defined box and elaborating on the many roles they play.

These are just two examples of lessons attendees learned at this year’s PLANADVISER National Conference (PANC), held in Orlando, Florida, in September. For three days, industry experts discussed topics such as these inspired by the conference theme: “Contagious Ideas: It’s all about the outcomes.”

Many of the conference speakers were PLANADVISER TOP 100 Advisers and PLANSPONSOR Retirement Plan Advisers of the Year, who responded to audience questions about their practices, client services, team structure, and whatever else people cared to ask. Subscribing to the growing movement among American companies to acknowledge their corporate social responsibility (CSR), many advisers told us how they have consciously set out to define a community service role as part of their adviser culture.

Risk Management for Advisers

Moderator: Alison Cooke Mintzer, editor-in-chief, PLANADVISER. Panelists: Jamie Fleckner, partner with Goodwin Procter and chairman of the firm’s Employee Retirement Income Security Act (ERISA) litigation practice, and Rhonda Prussack, senior vice president and head of fiduciary and employment practices liability at Berkshire Hathaway Specialty Insurance.

Photo by Matt Kalinowski

Asked for an overview of recent action in ERISA lawsuits, Jamie Fleckner said the wave of litigation unfortunately just keeps coming.

“It’s been now almost 20 years of evolution in this space,” he noted. “These lawsuits really began back when Enron collapsed—that was the initial trigger, in some sense. The litigation first focused on the offering of nondiversified company stock. Then, in 2006 or 2007, we started seeing suits about the diversified investments as well.”

As Fleckner and Rhonda Prussack observed, the suits initially targeted plans with $1 billion or more in assets, but, over the years, the size of the plan sponsors being sued has diminished significantly.

“There are now more than 15 firms that are zooming into this area, including some traditional securities litigators, Prussack said. “These other firms are very happy to have a payday of even several hundred thousand dollars.”

“Hopefully, one result of the rush of new firms entering the space will be that the trial judges realize many of them don’t really know what they’re doing,” Fleckner said. “We’ve seen this occur in other areas of the law. When it becomes clear that plaintiffs’ attorneys are chasing results without a clear understanding of the law, you start to see courts push back. I think there’s a chance that could happen here.”

Fleckner and Prussack suggested that it appears more advisers are being dragged into litigation alongside their smaller-plan clients. They theorized that smaller employers may lack large pots of money to pay settlements, so the litigators charge as many parties of wrongdoing as possible. Litigators also presume that, in these smaller plans, the advisers’ expertise is more central to the plan’s ongoing design and operation.

Asked for insight about what advisers and their plan sponsor clients can do to protect themselves ahead of the filing of litigation, Prussack said, “Well before we get to the stage of active litigation, and the underwriting of putting up millions of dollars in fiduciary insurance, we try to determine that they have prudent processes and procedures in place,” she said. “For advisers, we examine closely their fee structures; whether there have been recent changes to the compensation model and why those were made; how they are dealing with the industry pressures being placed upon them to change the fees structures; and more. A big component of these lawsuits revolves around revenue sharing, so we take a close look at that as well.”

Both experts agreed that documented proof of a prudent process is paramount in defending against ERISA fiduciary breach cases. Fiduciaries will appear in a good light, from trial judges’ perspective, if they can show their decisions were driven by a recurring process, featuring regular meetings and ongoing flow of information. Fiduciaries must be able to show they are paying consistent attention to the plan. —John Manganaro

The Fundamentals of Retirement Income Products

Moderator: James A. Lyday, managing director, Pensionmark Financial Group LLC. Panelists: Doug McIntosh, vice president, investments, Prudential, and Sean Murray, principal and chief revenue officer, Retiree Income.

Photo by Matt Kalinowski

There are three main ways to offer retirement income products in a retirement plan, said James Lyday. “[These] are best efforts, fixed annuities and other approaches.”

In the case of best efforts, “This is the work being done by experienced investment professionals to use a nonguaranteed product to deliver income over a set period of time and still leave something behind to beneficiaries,” said Doug McIntosh. “Fixed annuities, be they immediate or deferred, return guaranteed income to the owner for the rest of [his] life. Should [he] die early, [he] leaves money behind to the beneficiary. There’s a lot of innovation being done with deferred annuities.

“Guaranteed withdrawal benefits are a hybrid type of annuity that guarantees payments for the rest of the owner’s life, but [the person] can back out of the product,” McIntosh continued.

As far as other approaches, these are innovations that combine all of the above, he said. “There’s a need for guaranteed income, which is why regulations are in favor of innovation.”

Lyday noted there are already 30 different types of retirement income products on the market, with many of the manufacturers being not just insurers but also recordkeepers. “Retirement income solutions are coming to retirement plans,” he said.

As to pros and cons of in-plan vs. out-of-plan annuities, the in-plan annuities “layer the guarantees before the market risk and are institutionally priced because of the larger risk pool,” McIntosh said. “But you need to make the plan committee understand what [those products] are, and there is no one solution. Every plan is different.”

With out-of-plan annuities, “the retail market price is not as advantageous,” he added.

Retirement plan advisers also need to inform their sponsor clients “there has been fiduciary protection for sponsors for quite some time,” Lyday said.

“The QDIA [qualified default investment alternative] regulation of 2007 specifically said that [the QDIA] may embed a guaranteed income element,” McIntosh pointed out. “And, in 2008 and 2015, the Department of Labor [DOL] issued safe harbors for sponsors to offer annuities. The SECURE [Setting Every Community Up for Retirement Enhancement] Act will expand on this solid safe harbor already in place. So, you need to know there is a safe harbor that is fairly comprehensive.”

Advisers should keep in mind, as well, that people’s biggest fear is outliving their assets, Sean Murray said. To date, the sole focus of defined contribution (DC) plans and those who serve them has been accumulation, Murray said. “We have developed a withdrawal methodology, looking at a household’s entire assets, that makes these assets last seven years longer than they otherwise would. There is technology available to help people draw down assets.”

Retirement income is a topic that advisers will eventually be addressing en masse, Murray predicted. “This is a massive issue for many plan sponsors.”  —Lee Barney

Prospecting and Asking for Referrals

Moderator: Jason A. Johnson, senior vice president – wealth management, retirement plan consultant, wealth advisor, UBS Financial Services, Inc. Panelists: David T. Griffin, director – institutional retirement plans, Atlanta Retirement Partners/LPL Financial; David Hinderstein, president, Strategic Retirement Group Inc.; and David M. Kulchar, managing director, retirement plan services, Oswald Financial.

Photo by Matt Kalinowski

The trio of Davids on the panel encouraged advisers who have growth aspirations to not focus on one or two tactics but to build a strategic framework for becoming more referable. Another point they stressed is that advisers can leverage technologies that will help them scale their business, support growth and add more value for their existing clients.

Hinderstein emphasized how utilizing centers of influence—attorneys, benefits consultants, Certified Public Accountants (CPAs) and others—had helped his practice grow.

“At this stage, we are a 100% referral-based business,” he said. “Our referrals come most often from [Employee Retirement Income Security Act] attorneys and the staff members of companies we work with. When they change jobs, they speak highly of us to their new employer and advocate for bringing us on.”

Hinderstein said it is no accident that these people advocate for his practice. “We have a systematic approach to building a referral network,” he said. “We’re constantly staying in contact with our clients and building that deeper, trusted relationship.”

Griffin pointed to strong success his firm has had in building relationships with payroll service providers. “We need to get to know these people well, because they are generating new plans and growing plans all the time,” he said. “Importantly, I’m not trying to do business with all of them. Instead, I look for real quality relationships with a handful of great people. That’s been my strategy, and, as I bring on new producers in the practice, I push them to form their own distinct relationships. It’s a great way to generate referrals.”

Kulchar shared a unique approach his firm is taking to build a dynamic database of cross-referenced centers of influence. “Over time, we get to know every service-provider partner our clients have, and we populate a customized database accordingly, built on RedTail technology,” he said. “We have built the system so we can dig in and cross-reference these centers of influence, to get a clear picture of who in the network knows each other and in what capacities. For advisers thinking about growing their referrals, that’s where I would start, with a database.”

Kulchar also noted how his firm works with many nonprofit clients. He has found it quite useful to get to know their boards of directors and to establish a rapport with entities such as the Better Business Bureau (BBB).

“If you get a new HR [human resources] vice president who joins one of your clients, you may consider asking [him] to come in and meet other HR people in the area,” Hinderstein suggested. “You host a lunch, and all of a sudden you have 20 HR vice presidents together in one room, and you are leading the conversation. It’s powerful.” —John Manganaro

Building the Next Generation Of Advisers

Moderator: Daniel J. Peluse, director, Wintrust Retirement Benefits Advisors. Panelists: Stephanie Hunt, retirement plan consultant, Atlanta Retirement Partners, and Keith J. Gredys, J.D., chairman and CEO, Kidder Advisers, Inc.

Photo by Matt Kalinowski

How do retirement plan advisers bring young newcomers into the industry? Stephanie Hunt said offering the ability to work remotely has been very successful. “Young folks don’t want to sit at a desk all day and commute—they are looking for flexible schedules.”

Keith J. Gredys pointed out that attracting talent is not just a problem in the adviser market. With unemployment at its lowest rate in decades, many industries are having trouble filling empty positions. He suggested seeking out students in community colleges. “There’s a lot of talent there, plus a lot of diversity.”

In terms of working with individuals, “We need to do better,” he said. “I have a 25-, a 35- and a 45-year-old employee, who all do things differently. We need to be open to doing things differently—focus on what’s important to them.”

Dan Peluse noted that communicating what advisers do is key. “We’ve been put into one box. But there are so many roles that advisers play. Bring in interns. Let them gravitate to what they are interested in.”

Gredys concurred. He also stressed that candidates should indicate a passion for the culture. “They’ll need to care about what they do. They could play a role in the area of communications or in helping others plan for their future. It requires a caring attitude.”

Peluse said, “We’ve always thought candidates for financial adviser positions should have a finance background, but some have a degree in music. It can help if you have an aptitude for investments, but there are so many other parts to the business. We should broaden the scope of what we are considering.”

Most students don’t come out of school saying they specifically want to be an adviser, Hunt observed. And though there are more women in the business now than 10 years ago, those who enter the field need to be mentored, she advised. Both men and women need to be mindful to share opportunities with newcomer women, she said.

Taking a long view when acclimating new employees is important, the experts agreed. “At Kidder Advisers, we have always looked toward the future with our employees,” said Gredys. “We have weekly meetings so we can dialog back and forth with our up-and-coming advisers. We create a schedule and purposefully give up the reins.

“Your ego can’t get in the way,” he added. “Our purpose is to take care of our clients.”

“Let your mentees have a purpose in every meeting they attend with you,” Peluse said. “And let them be their individual selves.” —Judy Faust Hartnett

Beyond the Buzzwords: Making ‘Cents’ of Financial Wellness

Moderator: Sean M. Ciemiewicz, founder and managing partner, Retirement Benefits Group (RBG). Panelists: Kenneth Forsythe, head of product strategy, Empower Retirement; Jim McDonald, partner, Channel Financial; and Kelli Send, principal, senior vice president – participant services, Francis Investment Counsel LLC.

Photo by Matt Kalinowski

The way Kenneth Forsythe visualizes one, “A true financial wellness program should consist of solutions that help people make progress to better their financial lives and that move the dial.”

The success of a financial wellness program also hinges on whether it includes a financial coach and advice, noted Kelli Send.

“There are many financial wellness programs out there, but they don’t get used unless they are paired with a coach, accountability for the participant, and making the participant confident enough to use them,” agreed Jim McDonald. “On January 2, the gym is packed. On February 2, it’s empty—unless you have a personal trainer keeping you on track. The same concept applies with a financial coach.”

It is also important to keep goals for participants attainable, Forsythe said. This is why Empower developed a new tool, the Next Step Evaluator, he said. Empower plans on rolling out the tool, now in pilot, to all of its clients by this coming February. “Don’t overwhelm people with the entire path they must take to achieve a financial goal,” he said. “Instead, focus on the very next step they must take, the best use of [their] next dollar. Maybe that’s establishing an emergency savings account.” The tool will also track users’ achievements, for sponsors and advisers to follow.

To ensure that people actually use a financial wellness tool, Send said, gamify it by building incentives into it such as points earned toward a useful gift, or money contributions to their retirement plan.

Incentives definitely work, Forsythe concurred. A company pilot-testing the Next Step Evaluator is one of the top 10 retirement plans in the country by assets and employs mostly professionals, he said. This company promised to give every worker who completed the tool $100. “Within 30 days, 78% of this company’s workers had engaged with and completed the tool. It’s amazing what financial incentives can do.”

As to determining a wellness program’s return on investment (ROI) in order to get a company’s human resources (HR) department or chief financial officer (CFO) to buy into the cost, “it’s easy to track improvements in the retirement plan but harder to measure assets outside of it,” Send said.

Francis Investment Counsel has developed a means to score the financial wellness of its participants. When the firm first took the measurement, the average score was 60; it is now at 72. The firm has reported this back to its plan sponsor clients, she said.

“Justifying the ROI [for a program] to the CFO or C-suite is going to take a while,” McDonald observed. For now, they need to realize “there are many folks working past retirement age,” which should be something of a wake-up call. They also have to know that improving a worker’s financial house makes him more productive and less financially stressed, which affects a company’s bottom line, he said.

Additionally, advisers should be cautioned not to overpromise improvements, Forsythe said, noting that the “big promises made for health wellness programs did not come to pass. Some CFOs who have been down that path are skeptical.” For instance, “Don’t position a student loan repayment program as the silver bullet to reduce turnover,” he said. “There are too many other variables at a company, such as its culture. Be careful quantifying it, from a dollar perspective.”

Most wellness programs start off at a slow boil, Send said, and their popularity hinges on the sponsor letting its workers participate during work hours. If the sponsor does not, usage typically begins with just 5% of the workforce, she said. If the employer allows participation “on the clock, within one to two years, there will be 30% participation, and, within three to four, everyone will be in the program.” —Lee Barney