2023 RPAY - Michael Devlin, BCG Pension Risk Consultants

Business at a Glance as of 12/31/22

• Plan assets under advisement: $5 billion
• Median plan size (in assets): $30 million
• Plans under administration: 60
• Total participants served: 30,000+

PLANADVISER: Tell us about your practice and how you got into advising retirement plans.

Devlin: My first job in the business world was when I was an intern at Harrods in London back in 1993 working in the toy department. My boss knew I wanted to get into the business world and knew of an opening at BTR (British Tire & Rubber). I applied and accepted the position in the small M&A division, where I was an A to Z kid, which included faxing, filing, making copies, coffee runs and anything that was asked of me. At one point, they were interested in a major acquisition, and I was asked to find as much information as I could about that company’s pension plan. I went to Penn State and studied business, but I had no idea that this was about to be the beginning of a 30-plus-year career in the pension arena. When I was unable to renew my work visa and returned to Boston, I was able to land a position in the new retirement division at KPMG. This was an attempt, eventually a failed attempt, of a big accounting firm attempting to enter the recordkeeping side of the retirement plan industry. Due to my experience in the U.K. working on that one project, they explained that set me apart from the other candidates. I then went to Hartford Life on the DC side, then over to the pension de-risking side. I always knew I would eventually start a company of my own since being a paper boy. I loved the idea of working hard for yourself and having something that was of your own creation. This was a time when the pension risk transfer market was in the infancy stage of development and mostly overlooked by the market. I was surprised to see a market that was due to grow at some point, but there were just a few companies who specialized in the PRT market. I started my company as a one-person shop in May 2001 and built it to what it is today, which is a team of 16 highly experienced pension professionals who help plan sponsors fulfill their pension obligations by providing current and former employees income for life. We have successfully helped thousands of plan sponsors achieve these goals.

PLANADVISER: As a retirement plan adviser, what do you take the most pride in?

Devlin: What I take pride in is when a plan sponsor engages BCG with an under-funded pension plan that has been frozen for years due to the under-funding. The majority of the time, we can create a custom solution for the pension plan based on several factors, including input from the plan sponsor. In some instances, BCG will be providing what can be viewed as a reality check. Pension models can show plan sponsors a strategy with several assumptions that create desired outcome in five years. The issue is that if you change one variable, the model will go sideways, and each year, the five-year horizon is reset. BCG provides unbiased, non-conflicted advice that brings clarity. Unfortunately, this is sometimes not the best news to deliver, but it is our responsibility to provide a clear picture, as well as how to solve it. Now that we have the plan sponsor on a clear path, the rewarding part is when you meet their objectives, which ultimately means the participant received 100% of the pension benefit that they accrued and deserve over the course of their employment. In addition, for the retirees and those in pre-retirement phase that choose an annuity, they now have a monthly income stream they can’t outlive. We all know that this is the biggest fear for participants: outliving their nest egg. To realize that you helped create a monthly income stream that they can’t outlive—we know that we have helped the participant achieve a more dignified retirement.

PLANADVISER: How do you grow your business? What changes to your practice or service model are you planning for 2023 or 2024?

Devlin: I firmly believe that to achieve consistent growth, you must constantly adapt to the plan sponsor and participant needs, the ever-changing market and be on the front of the wave. In 2008, BCG was one-dimensional and more of a transactional type firm. When the market collapsed, it was a great time to review where we were, what direction we were going and how we could expand how we help plan sponsors. At this point, we shifted our focus to begin hiring experienced pension actuaries so that we could start to help consult on pension plans, instead of being transactional. I used to say to my team, “BCG needs to go 50 miles back up the road to show plan sponsors what the road ahead looks like and to create a clear path to their goals.” This put BCG in a great position when in 2012, General Motors showed the pension market the benefits to annuitize a tranche of retirees, with no intention to terminate. Up to that point, the majority of annuitization was only on a plan-termination basis. Now that BCG was providing unbiased, arms-length advice with the help of senior actuaries, we were able to clearly illustrate the value of moving a tranche of retiree risk to the market. This was also the same time that BCG brought to the market Hickory Springs Manufacturing (2012 Plan Sponsor of the Year) and implemented the first pension buy-in in the U.S. The buy-in had become a popular way to de-risk in the U.K. but had never been implemented in the U.S. With the help of the Prudential, the buy-in was now a new alternative to de-risking for plan sponsors.

A few years ago, BCG acquired Penbridge Advisers so that we could enhance the features of the proprietary Penbridge funding tracker that helps plan sponsors monitor all key pension funding levels, create an efficient annuity lift-out and lock in funding improvements. This is the only on-line tracker in the market, and the key data points we have accumulated are also used by another one of our clients, the PBGC. BCG also created a custom LDI solution that takes LDI to a more interactive level, a solution for asset in kind transactions, solution for illiquid assets, educational webinars/seminars for participants and turnkey fulfillment services. These are all examples of how we have evolved and reacted to the needs of our clients.

We believe due to these enhancements, BCG doesn’t see any major changes needed, because we had been putting our resources into being prepared for the day that interest rates would rise, as that would help improve pension funding levels across all pension plans. We did not expect this type of significant rate increase, but we were prepared for the increase in activity and to serve our clients who were now ready. We typically consult on 40 to 50 de-risking strategies a year, but in 2023, we expect to consult on 70 to 85. All of the resources and services we provide are now being used by unions, PTC, privately held, not-for-profit and health care providers.

PLANADVISER: Please tell us about an important experience you have had while getting involved in your local, regional or global community.

Devlin: I sometimes have a hard time getting my arms around where I am today and the life my wife and I are providing for our children. I certainly did not grow up the way my kids are growing up, but the way I was raised has kept me grounded. We all worked from a young age, and I took over the family paper route in third grade and pretty much always having a job through high school and college. I also remember the community around us growing up. It was primarily a blue-collar neighborhood, and everyone supported each other, be it dropping meals off, helping watch the kids while at work, etc. I don’t recall anyone locking their doors, and all were welcome in the neighborhood. I also worked my way through college and was proud to be the first male Devlin ever to graduate from college. The list of people I would need to thank would take up several pages, so it drives me to keep giving back.

I also loved to volunteer, as it gave me great joy to help and see that you may have changed someone’s life. I am currently heavily involved with End Hunger New England, where each year I have at least three events to help raise money for the food supplies. I have clients, friends and family join for four-hour shifts to pack food for those in need at New England food shelters. We aim to pack at least 30,000 meals each shift, with a record of 70,000 meals we packed for the families in Ukraine. One of my favorite things to watch is my kids, with all their friends laughing and having fun, while assembling food and working hard. They see first-hand that volunteering should not feel like a chore, but can be fun, and they know how good it feels when they hear the numbers of meals packed and how many people will be fed from their efforts. We never have a shortage of volunteers, especially from the younger kids.

I think the greatest experience, which was also a rollercoaster of emotions, was when I left to live in a village in Ghana for three weeks to build a school, bathrooms and clean water stations. I created several fundraisers the year before, and between my clients, friends, family and complete strangers, I was able to raise enough money to get all three projects funded. Now I was going over to Ghana with an interpreter to kick off all three projects and experience life in the village.

We built a school where there was nothing. Up until this point, kids carried their own chairs to a clearing each day to be taught by a teacher. Some kids were also not able to attend school due to needs at home and having to work in the fields. In addition, villagers would clean their clothes and food in the river, while upstream, other villages were using the river to throw out trash, as well as use as a bathroom. It was tough coming from Boston to a place where people appear to have nothing: no access to clean water, no electricity, plantains for pretty much every meal and they lived in huts. I felt for the families and their children, but after the welcome ceremony and first few days, I realized I was wrong. These people were incredibly happy and felt that they had everything they needed. They had their families and friends and were always dancing and singing during the day and at night around a fire. Children were always smiling and playing and simply happy. I used to love to walk to the work site, as I was always kept company by at least a dozen little kids who knew I always had candy in my pockets to share. Everyone loved to sing and joke while working hard, and every day was hot. I was amazed by the women of the village, as they would walk to the river (which was one-quarter mile away downhill), fill up a big jug of water, balance it on their head, walk back uphill to where we were digging and use the water to mix for cement for cinder blocks. Some of them would have their child strapped to their back all day while working. When the cement blocks were dry and ready, they would once again balance a few on their heads and bring them to where we were starting to build the foundation and walls for the school.

It really changed my life as to what was important: Do I continue the chase for material things, not realizing that none of it really, truly makes you happy? It helped me slow down and realize that what I need to be happy, I already had: My wife, my three boys, family and friends. Even today, I need to step back and remind myself as to what is important.

I also remember on the fifth or sixth day of digging, most of the villagers were absent. My interpreter, Kosi, explained that a 4-year-old girl had died the night before. If that didn’t make me sad, then the answer I received as to why she died made me sadder, but also angry: She had died from dehydration caused by diarrhea. It was common, as the water from the river can be contaminated at times, and with no hospital or anyone that could help, she died of something that was so simple to fix. I also will never forget watching everyone coming back from the service. Of course, some were emotional, but most were smiling and singing once again, celebrating the short life she lived. They all came back to the worksite singing and immediately picked up tools and went straight back to work. They knew that what we were collectively doing was for the future, not only for them, but for their children.

After completion, we helped run the school from our house in Hingham, Massachusetts, and created scholarships for those who had not been able to go to school due to the importance of working to help their family survive. My family was also lucky to help Kosi leave Ghana and come live with us for various stints, which was a great experience for my kids. Kosi and I have traveled around to speak at schools, companies and to anyone who wanted to learn more about what we accomplished and how to get involved.

Due to the success of the school we built, the Ghana government got involved and started to provide additional support to the school, and we received attention in the Ghana national newspaper. This helped us double the size of the school to include more villages in the area.

The completed projects in Ghana changed the mortality experience for the village and surrounding villages, while providing the children the proper education and a bright future, especially for the girls in the village. The next step is to get kids graduating to continue their studies by attending college.

PLANADVISER: What advice can you give to your industry peers about developing a successful philanthropic or charitable vision for a firm?

Devlin: Of course, contributions are key to any 501(c)3 success, and a majority simply can’t survive without continued contributions. We have several organizations that we focus on, including financially adopting a boy who lives in the Watts neighborhood of Los Angeles, which is heavily populated with gangs and violence. The money provides assistance through Operation Progress, which was started by one of my childhood best friends, John Coughlin. OP provides a safe place after school to learn and play, and it provides guidance in a safe, positive environment. We have been able to experience how his life has changed and the friendship we are building with Ikeem and his mother. It goes beyond writing a check, as we have Zoom calls, help his mom with things they need, encourage him to continue to have good grades and share breakfast or lunch when I am in town. I think my advice to my peers is to continue to provide financial assistance, but I believe the rewarding part is when you provide your time, energy and knowledge to the charity you believe in. In my experience, getting involved, in addition to a financial commitment, helps with the following:

• It is rewarding to see the changes you are making to those in need firsthand; that you are making a difference. This makes you want to do more.
• Getting your kids involved helps them grow and develop and shows that change is possible.
• When raising additional funds, I feel it helps to show that you are personally involved, as well as share the success from what they contributed last time. For example, for Ghana, I provided regular updates to contributors, no matter if they had contributed $20 or $1,000. When people see real results and see the impact, they want to do more.