Illustration by Yuko Shimizu
Plan sponsors want to educate participants so they
can make informed choices about saving and investing in their retirement
plans, but when a participant is ready to exit the plan, do sponsors
just want to send them out to the wolves? The recent industry focus
on lifetime income options shows there is a renewed interest in helping
plan participants with rollovers as they approach the end of their working
lives—and even after they retire.
Traditionally, as participants reach age 60, they
are solicited by local insurers and banks that want to sell certificates
of deposit (CDs) and individual retirement accounts (IRAs), says Stace
Hilbrant, managing director at 401k Advisors in Chicago. If an employer
genuinely cares, Hilbrant contends, it wants employees to work with
providers that have their best interests at heart and are not just looking
to make money. The future of the adviser business, Hilbrant says, will
go to those that meet that need.
“Part of our engagement with a new client is letting
them know we will be guiding participants when ready to retire, but
we do not accept fees for rollovers,” Hilbrant says; this appeals
to sponsors that want to help participants make the right decisions.
One way plan sponsors can successfully guide retiring
participants is to hire an adviser whose educational efforts continue
beyond the point participants exit their retirement plan. The bar is
being raised in educational efforts about how to be a better participant,
and this will help participants be more educated retirees, Hilbrant
maintains. “In all of our education efforts, we tell folks, ‘When
you get near retirement, we are glad to give you a list of fund companies
and insurance companies we think you should get to know,’” he adds.
Providing transition services counseling is important
to advisers because they have been providing advice to participants
throughout their working years, notes Bill Chetney, executive vice president
at LPL Financial Retirement Partners. Offering transition counseling
creates a continuity of the independent guidance advisers have been
supplying in the retirement plan. If a product manufacturer were to
suddenly communicate directly with a participant, the adviser would
not be working in the participant’s best interest, Chetney says.
Some participants are more comfortable with familiarity,
so they turn to their banks to roll over assets when they retire. However,
with the adviser’s help, they could work directly with a fund provider
to avoid commissions or other fees, Hilbrant says.