PLANADVISER National Conference 2023
At the 2023 PLANADVISER National Conference, held in September in Scottsdale, Arizona, advisers heard from experts and leading professionals about the skills and knowledge increasingly needed in today’s marketplace. Advisers could learn how to better communicate with clients, support junior staff, market and build a narrative, and solve savings and income challenges. Highlights follow. Next year, we will introduce PLANADVISER 360, an interactive event, utilizing enhanced formats, that focuses on the complete adviser experience, from team building and growth to practice management, and efforts beyond the adviser’s firm. —PA
Driving Participant Engagement
Simplifying the often jargony language of retirement saving by explaining money in everyday terms can significantly affect what participants save, said George Fraser, managing director of, and financial consultant with, the Fraser Group at RGB, speaking in the session “Driving Participant Engagement.”
“If you ask the average person what 1% of $1 is, almost always they say 10 cents,” Fraser told attendees and stressed that the right answer is 1 cent. “We use words in our industry that are terrible. We need to simplify things, and the penny method works. Everybody believes they can save a penny.”
Research by behavioral experts from the University of California, Los Angeles, revealed, through a several-year study, that using common words such as pennies instead of percents did, in fact, encourage saving. That research was partially inspired by the real-world work of adviser Fraser and the success of his client, Bicycle Casino, which he helped with the assistance of Joy Harn, the establishment’s then chief counsel.
Harn and casino leadership had reviewed several advisers in looking to improve the plan participation rate from around 50%. Fraser and his team’s message of simplicity resonated with the Bell Gardens, California, company.
“George was not dressed like he is here today,” Harn said, pointing to Fraser, seated beside her in a blazer. “He’d come in wearing a T-shirt and jeans. He met [the leadership] as people and wanted to know what they needed.”
“George was not dressed like he is here today. He’d come in wearing a T-shirt and jeans. He met [the leadership] as people and wanted to know what they needed.”
The first change Fraser recommended was automatic enrollment for new employees. At first, Harn was apprehensive about the feature for the workers, despite Fraser’s insistence.
“Given that we didn’t want to be paternalistic, that it’s the workers’ money, and knowing they are minimum wage-earners … the idea of us automatically taking their money [raised] red flags for me,” she said.
In part because participants could opt out, Harn agreed to auto-enroll workers at 2 cents for every dollar of their paycheck, she said. In time, company leadership saw that employees were not opting out. The casino then put longer-term employees into the auto-enrollment plan. Once more, almost nobody opted out.
Eventually, the establishment implemented automatic escalation, also on Fraser’s advice, and Harn said that too stuck. “[Employees] are in for year one … and then it would automatically escalate on that anniversary,” she said. “Again, very few people opted out.”
Along with the success of the auto-features, Fraser and Harn pointed to consistent interaction with participants as crucial to improving engagement. When Fraser had an opportunity to meet with casino employees, he jumped at the chance, Harn said. “Whenever we had multiple employees in a room at one time, he would say, ‘Give us a booth in the back, and let us do that engagement,’” Harn said.
“I find that when you break bread with someone, it changes the dynamic when you get together with them,” Fraser said. “It really works.”
After the changes had been made, Bicycle Casino staff were up to a 98.2% participation rate for an average of 9.2 pennies on the dollar.
“This plan was the best in the country,” Fraser said. —Natalie Lin
Seeing Opportunity In Change
When consultants and advisers from 32 adviser firms were surveyed recently, an overwhelming majority expressed interest in blended target-date funds for the future. The percentage using the investment vehicles currently is in the single digits, said Michael Doshier, a senior defined contribution adviser strategist at T. Rowe Price, speaking at the PLANADVISER National Conference.
Based on T. Rowe Price’s most current information, Doshier said, 48% of TDF assets are passive, 31% are active, and only 9% are blended. Yet, when advisers were asked “What would you likely put as the front option for your clients, moving forward?” 93% of respondents said they would opt for blended TDFs, whereas just 3% were interested in either only passive or only active. That answer “really blows me away,” he said.
“I don’t know how it’s going to happen. I don’t know if it’ll happen in five or 10 years, but, with that level of focus from many of the most significant influencers in the industry being asked what they think, I’m not going to bet against it,” he said.
In terms of a shift that has happened within retirement plans, Doshier said, T. Rowe Price’s research shows that 48% of the target-date assets in defined contribution plans—not just what are considered large-market plans—are now in collective investment trusts. For years, Doshier said, there was already widespread conversation about CITs. Now T. Rowe Price is the largest active manager of TDFs in the industry; 52% of those TDFs are CITs. Just five or so years ago, the industry number for the share of CITs was in the low 20 percentages.
“I don’t know that I’ve seen much happen that fast in the DC space, ever,” Doshier said. “But there’s clearly a big, big drive. [Advisers] probably personally have experienced this or seen that there are a lot of relationship pricing arrangements going on, trying to drop that lower minimum number so more plans can qualify for a CIT and not get closed out by minimums.”
The value proposition of why CITs are being chosen rather than mutual funds is almost solely based on price, he noted. When people want to build a custom solution, it is quicker, easier and less expensive to create that in a CIT structure than in a ’40 Act mutual fund structure, which requires an extensive registration process, he said. Many large firms have launched their own white-label qualified default investment alternative TDFs, which are almost exclusively CITs, he added.
“The big pushback on CITs used to be that participants were going to [object] because they couldn’t look them up on the Wall Street Journal’s webpage,” Doshier said. “I don’t hear that now, but I used to hear that nine times out of 10 when CITs would come up. Now it’s one time out of 10. I think there’s clearly something shifting.” —Natalie Lin
Independent vs. Affiliated
It is no secret that the retirement plan advisement industry is moving toward increased merger and affiliation with large firms.
But industries do ebb and flow. Take wealth management, where financial advisers are more frequently leaving national broker/dealers to join smaller registered investment adviser firms, according to tracking by consultancy Cerulli Associates.
While, for a retirement plan adviser, independence can have its advantages, affiliating has numerous benefits too—including for the end client, said two plan adviser firm executives speaking in the session “Independent vs. Affiliated.”
“When we looked at the No. 1 criteria, [affiliating] was better for our clients,” said Kristi Baker, managing partner in CSi Advisory Services LLC, which joined Hub International Ltd. in 2022. “There have been some significant opportunities to lower costs through the power of being with a larger organization. We had some opportunities to bring in some new resources and investment tools to be able to drive costs down.”
“There have been some significant opportunities to lower costs through the power of being with a larger organization. We had some opportunities to bring in some new resources and investment tools to be able to drive costs down.”
Barbara Delaney, a principal in another Hub firm, StoneStreet Renaissance, noted that another benefit of affiliation is freedom from having to frequently renew contracts and other paperwork, a time-consuming process for her clients and her team.
“I just got into the practice of telling my clients every other year we have to repaper, so they [had] come to expect that,” she told the audience of advisers. “That’s one thing people consider when leaving an independent and becoming part of a bigger group.”
Having the support of a large organization has also enabled her firm to better weather clients’ staff turnovers, Delaney said, citing one plan committee that had 100% turnover during the COVID-19 pandemic. Having the technology and support of Hub helped her through this, she said.
“We really felt, together, that this is something we’re going to accomplish: We’re going to do this together, and we’re going to see it through together,” she said.
For Baker, affiliation additionally has let her provide career paths that would have been unavailable to her if she stayed independent. When one of her staff members had hit a ceiling and was looking for a new job to gain more experience, Baker was able to call the Hub office and find that employee a new position within the larger firm.
“If that employee had walked into my office before, I would’ve had to say, ‘All right, … see what you can find, and best of luck,’” she said.
Moreover, Baker said, affiliation also lets her firm outsource talent acquisition. “It’s hard to find good people, and that’s not my area of expertise.” She now has someone who specializes in talent acquisition whom she can call to help backfill positions.
Delaney, who founded her advisory in 2008, said most firms have moved to affiliate with larger organizations. “It was hard to find someone who’s not affiliated; thus it’s me and Kristi up here,” Delaney joked during the session. “The independent crowd has gotten much thinner.”
Yet, the two advisers agreed, there are advantages to staying independent.
“A key advantage is that you’re still making all of the decisions relative to the business,” Baker said. “You get to determine your branding. You get to determine the direction of your business. I think that’s a huge appeal to staying independent.”
Another important upside is getting to choose the company’s footprint and make budget decisions without supervision.
“Definitely, being in the corporate environment now, we have … some guidelines that we have to go by,” Baker said.
Ultimately, despite most advisers choosing to affiliate, she said, the model should not completely take over.
“I think there’s still a place for independents,” Baker said. “There always will be in the marketplace.” —Natalie Lin
The Psychology Of Financial Planning
“The psychology of Financial Planning”—referred to in the title of one of the sessions—is how people think and feel about money. An advisory practice can leverage findings from the social science to produce better results for both adviser and client, said Sonya Britt-Lutter, Ph.D., CFM, and a licensed marriage and family therapist.
The study of financial planning differs from behavioral finance, which is often cited by advisers and providers in relation to retirement saving. The psychology of financial planning considers how the mind works, whereas behavioral finance tells the person what she should think and feel, Britt-Lutter said during a fireside chat with Alison Cooke Mintzer, ISS Media publisher.
“It’s how they feel that guides how we communicate with them,” Britt-Lutter said. “It’s not therapy; advisers are not treating [their clients].” Behavioral finance is a tiny segment of the psychology of financial planning, the certified financial manager noted. It is what a professional uses to make suggestions to help people improve financial behaviors.
According to Britt-Lutter, advisers’ own psychology about money will affect what clients do. “If we can check our own psychological stress, it will have an influence on clients,” she said.
Advisers can assess their psychological stress, she said, by considering their reactions to terms such as “old money” or clients who belong to “Generation Z.”
When advisers are feeling stressed, they should consider whether they are being authentic, Britt-Lutter advised.
To detect clients’ psychological stress, the quickest means is by shaking the person’s hand. “When clients are having a difficult time, their bodies go into self-protection mode,” Britt-Lutter said. “They might make statements to prove they’re in charge or start arguing.”
If advisers recognize that a client is feeling stressed and unprepared for a conversation, Britt-Lutter said, ask the person how her day is going, or, if the adviser knows the client well, ask about her family. “Within a matter of seconds, this light conversation can raise the temperature of the person’s extremities,” Britt-Lutter said.
Ready for Change?
Advisers can also listen with their eyes, Britt-Lutter pointed out. “When you say, ‘Let’s talk about retirement,’ does the client start shifting around, look at his spouse or change the subject?”
She said advisers should be comfortable saying what they see. For example, they can say, “This doesn’t seem important to you. Why is that?”
In a short time, advisers can focus on whether the client is ready for change or not. “If they’re saying, ‘I’m good,’ or ‘I’m just here because my friend/spouse suggested it,’ they are not motivated to change,” Britt-Lutter said.
If a client says he is there because of someone else, extrinsic value will move him to be ready for change, she said. For example, the adviser can ask the client a question such as, “If you don’t change, how will this affect your children?”
If a client shows ambivalence, Britt-Lutter said, the adviser can focus on education and building confidence.
Look to the Future
Another way to get a sense of a client’s feelings about money and potential for change, according to Britt-Lutter, is to ask how the person’s allowance—or lack of one—was handled when the person grew up. “Ask them what they’re doing now and how that compares with what it was like growing up,” she said.
In terms of generational differences, Britt-Lutter said, Millennials and Gen Zers often value experiences and impact over building wealth.
“Turn the conversation into how they can have experiences and/or make a difference in the future,” she said.
Speaking to the idea that the industry is having a hard time defining financial wellness, Britt-Lutter said she is confident most people actually have a good idea of what financial wellness means.
“Looking at what people think, feel and do with money, when all three are in line, that is financial wellness,” she said.” —Rebecca Moore
Session Speakers
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George Fraser, |
Michael Doshier, |
Barbara Delaney, |
Joy Fernbach Harn, |
Kristi Baker, |
Sonya Britt-Lutter, |