In Practice October 14, 2010

PANC 2010: Things You’re (Probably) Doing Wrong as a Plan Adviser

A panel at the recent PLANADVISER National Conference discussed things retirement plan advisers may be doing wrong without knowing it.
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Melissa Cowan, Director and Program Manager, UBS DC Advisory Program, said benchmarking their own fees is important as a business practice and many advisers don’t take the time to do this. Benchmarking fees, to ensure that the services offered and the time spent on them are reasonable, will show whether an adviser’s business is profitable.  

Cowan also pointed out that many advisers don’t properly prepare for meetings. She said advisers should put the “meat” of the agenda on top, collaborate with plan sponsor clients about what should be on the agenda, and keep to the time limit.  

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Nevin Adams, Editor-in-Chief of PLANSPONSOR and PLANADVISER and moderator of the panel, added that advisers shouldn’t include in or start off the meeting with irrelevant information, such as what the market is doing. And, an attendee of the conference adds that if the sponsor is a prospect, advisers should sell themselves first in the meeting; if the sponsor is already a client, start the meeting off with the client’s concerns.  

Bradford P. Campbell, of Counsel, Schiff Hardin LLP, says one mistake advisers make is not knowing whether they are a fiduciary. “If you act like a fiduciary, you are one,” he says. He warns that advisers that don’t know whether they are a fiduciary are probably not charging clients as such and are probably not insured as such by an Errors & Omissions (E&O) policy.  

Campbell also says advisers that are cross-selling rollover accounts for terminating participants are entering a grey area. If advisers are fiduciaries, regulators might see them as taking advantage of their fiduciary status. 

Campbell says advisers can do this right with a thoughtful approach. Only approach participants after they separate and offer a tremendous volume of disclosure. Or, advisers should only do it if a participant approaches them, or put it in the contract with the plan sponsor client that cross-selling is ok.  

Rick Shoff, Managing Director, Advisor Support Group, CAPTRUST Financial Advisors, contends that advisers have a tendency to make the simple complex. They have so much information and desperately want to get it out that they can overload the client with too much.  

Shoff adds that advisers sometimes get distracted by always chasing the newest or better process or solution. “Don’t keep changing on clients, especially if not adding value,” he warns.  

In addition, Shoff says advisers should not get off track from getting and keeping clients.
Diversions October 14, 2010

Diversions: Use it or Lose it

In a recently released study called, “Mental Retirement,” researchers found a link between the age at which a population retires and the population’s cognitive skills capacity.
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The link suggests that the earlier people retire, the sooner their memories begin to decline.  This latest piece of evidence bolsters the commonly believed – but difficult to prove – hypothesis that says in order to maintain strong cognitive skills, one must actively engage their mind in daily activities.  And in retirement, intellectual engagements tend to go by the wayside.   

Memory test results were compared from surveys done in the U.S., England, and 11 other European countries.  Participants were told 10 nouns and asked to recall them immediately.  Then for about five minutes, researchers asked the participants other random questions.  After about five minutes, participants were asked to recall the 10 nouns again.  A perfect score would be 20 if all the nouns were recollected.   

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People in the United States did best, with an average score of 11. Denmark and England participants were close behind, with scores just above 10.  The average score in Italy was around 7, in France it was 8, and in Spain it was a little more than 6.

While analyzing the data, researchers found that the countries with better scores on the memory test also had an older age of retirement, on average.   The majority of men in the U.S., England, and Denmark (between 65%-70%), were still working in their early 60s.  But in France, Italy, and Spain, less than 40% of men were still working into their 60s.

The link is not without its skeptics of course.  There are other differences besides average age of retirement in each of the countries that can affect cognitive skills.  In countries with more disability support and pension plans, people are more likely to retire earlier than in countries where finances play a major role in determining when one can retire.

Nevertheless, the study will open the door to many more related studies – such as, what is it about the work environment that can keep memory sharp?  Does the degree of intellectual difficulty matter, or is simply interacting with colleagues key?  But at least this study provides a silver lining for the many Americans who are facing the realization that retirement might not come as soon as they hoped.   

To read complete results of the survey, click here.   

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