Practice Management

Passion for the Participant

Many retirement plan participants, especially those with lower incomes, are overwhelmed by projections of how much they need to save, and they feel powerless to do anything about it.

By Rebecca Moore editors@strategic-i.com | September 19, 2013
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But, George Fraser, managing director, and Sean Ciemiewicz, principal, at Retirement Benefits Group, feel advisers can change this. “It’s not about a jazzy website or the lowest cost funds, it’s about sitting down with participants and showing them their power,” Fraser told attendees of the Plan Sponsor Council of America’s (PSCA’s) 66th Annual Conference in Scottsdale, Arizona.

Fraser contended the current model today lacks results. He noted that the industry has spent millions on websites, call centers and enrollment materials, and 70% to 90% of participants never log on to websites or call in to call centers. In addition, 86% of defined contribution retirement plan participants never rebalance their accounts, only 10% of individuals who qualify for the Internal Revenue Service’s Saver’s Credit take advantage of it, and while 22% of plan sponsors offer Roth after-tax accounts, only 10% of participants use them.

“We spend a lot of time worrying about costs and the investments offered—and that’s all important stuff—but, we need to focus on changing participant behavior,” Fraser said.

According to Fraser, empowering participants includes helping them take the guesswork out of investing. He contended most are not as bad off as the media hype makes them feel. The unattainable goal that everyone needs one million dollars saved is not true. Someone in an expensive location with no debt could get by with less.