Why 401(k) Advising Alone Isn’t Enough

Retirement plan advisers should approach plan sponsors with a holistic conversation around employee benefits and retention methods to be effective in today’s market, a group of panelists told an adviser group audience on Sunday.

When working with plan sponsors, advisers should no longer just discuss the importance of participant savings, but they should dig into the needs of the plan sponsor and its participants to also take into consideration compensation, benefits and areas such as student loan and education needs, a panel of three advisers and one human resources lead told a workshop at the National Association of Plan Advisors conference.

“I’m a business consultant who happens to know a lot about retirement plans,” said Erin Hall, a managing director at Strategic Retirement Partners. “The conversations we’re all having is around employee retention. What can we do from a benefits perspective to hook employees sooner? Does that mean immediate eligibility? … It’s about getting [a plan sponsor’s] wheels turning and how we can be part of the benefits conversation.”

These conversations can include retirement-specific levers, such as starting employee eligibility for the plan sooner, moving up vesting schedules or using a company match to go toward an emergency savings account or student loan debt, panelists said. But they might also include discussion of the employer’s overall compensation programs, health savings accounts and disability insurance.

“As a 401(k) person who offers the financial wellness side, it is my job to start that conversation of the paycheck and health benefits areas before I start getting to the budgeting and retirement planning,” said Courtenay Shipley, chief planologist at Retirement Planology, as well as board president of the Retirement Advisory Council.

High-Value Conversations

The need for a holistic conversation stems from a market in which employers are struggling to keep employees, said moderator Lisa Buffington, vice president of retirement services for the Marsh & McLennan Agency. Buffington noted that hiring and then losing an employee is costly no matter the level and can generally be one-and-a-half to two times the employee’s annual salary for key technical roles.

Losing employees can also have a psychological impact on teams and companies, leading to negative results, said Gabrielle Turner, director of human resources for TCL Communications Inc.

“There is a moral and team loss for employee turnover,” she said, noting experience at prior roles. Turner advocates for plan advisers to work closely with HR department to understand both the demographics and needs of an employer’s participant base, as well as the employees themselves and their key issues.

“Plan advisers should build a relationship with my employees,” Turner said, noting that some advisers come in for regular sessions with participants. “Having a face to the name and building that trust is so crucial.”

Beyond 401(k)s

While retirement advisers don’t have to be experts in all areas, they should be well-versed enough to talk about the tax and savings advantages of health savings accounts, emergency savings plans and nonqualified deferred compensation plans, among other employee benefit areas. That knowledge, in turn, may lead to more business with clients, according to Hall.

“We are better to start the conversation and not let the recordkeepers or other benefits partners bring it up first,” she said.

If, for instance, a plan sponsor notes that 20% of participants are taking a loan from their retirement plan, an adviser can suggest making available an emergency savings program so workers are not tapping 401(k) savings, Hall said.

Shipley noted a setup she created with one employer in which they built a student loan matching program that incentivized employees to stay to a point where they could get up to $20,000 toward student loan payments. But to address workers who did not have student loans, she worked with the plan sponsor to also offer a 529 matching program for those saving for educational needs.

“It was helping those who had a student loan now, as well as helping those saving for the next generation,” Shipley said.

The panel also discussed financial wellness programs, whether through a third party or via the advisory itself. Overall, the speakers noted that winning and keeping clients is now about more than just saving guidance and plan design.

“The days are gone of us just being the 401(k) adviser,” Hall said.