PLANADVISER: Tell us about your practice and how you and your team members got into advising retirement plans.

Pension Consultants, Inc.: We started Pension Consultants in 1994 after realizing that a high percentage of employer-sponsored retirement plans were not being managed right, exposing the plan’s sponsor and fiduciaries to liability. We set out to protect our clients from this risk, while at the same time giving them top-performing retirement plans and doing it in the best traditions of professionalism. These underpinnings have stayed with us for nearly 23 years and resulted in a firm very different from most in our industry.

These differences have created a strong, values-conscious culture that is uncompromisingly focused on three things: plan performance; protecting the employer, and saving the employer time.

Headquartered in Springfield, Missouri, we have grown to service clients with retirement plans of all sizes and in locations around the Midwest and southern United States.

PA: What is your mission statement?

PC: Our purpose is to improve the financial security of American workers. An employer with a top-performing, retirement plan is secure and able to devote more time to managing its core business. Successful businesses are able to employ more individuals and provide them with a platform to build a secure retirement. People who are secure in their employment and are able to prepare for retirement are more productive workers. They are also less dependent on others, leading to a stronger society and a robust economy.

PA: How is your team/process/structure unique? How has it evolved?

PC: Here are just a few examples of how we are unique:

• We emphasize performance, not relationships.
• Our entire consultant staff is, and always has been, salaried.
• We do not accept any commissions, gifts or other compensation from firms that we might recommend to our clients.
• Our staff is highly credentialed, holding JD, CFP® and CFA® designations/credentials.
• Each of our consultants and analysts are dedicated to one of the following areas: ERISA, investments, participant education, or vendors.
• We operate as a business, not a practice.
• We were early pioneers of many practices that have recently become more common among plan advisers.
• In 1996, we started providing written service agreements with detailed listings of each service, the amount provided and the fee charged. Our client engagements also included on-going ERISA compliance audits.
• In 1997, when we were receiving product commissions, we accounted for and reported any commissions or other revenue-sharing arrangements to the client each quarter, and fully offset our fee with any revenue sharing received. In addition, we provided written acceptance of fiduciary status for our investment recommendations.
• In 2005, we developed a multi-disciplinary consulting model, moving from generalists to creating teams of specialists in each of the four areas of retirement plan management: ERISA, Investment, Participant  Education and Vendor. This allowed us to provide the most thorough, expert advice possible to our clients and their employees.
• We were one of the first to implement service standards with recordkeepers, which were accompanied with financial penalties if the recordkeepers did not meet the standards.
• Although now more common, we have been working with recordkeepers to rebate revenue sharing for the last three-plus years.

PA: Describe any particular initiatives you have led with your customer base in the past 12 months (investment or education or plan design or communication).

PC: One of the most common services that plan advisers provide is the recommendation of mutual funds for the plan. While nearly all plan advisers track the performance of each fund and compare it to a defined benchmark, surprisingly, no one benchmarks the advisers’ performance of picking those funds. So we started. We began reporting internally how our recommendations have performed from the time they were added until they were removed. That performance is then benchmarked, net of fees, including our own, against an index line-up.

Our Vendor team has been working to create a fair, transparent process in paying for the plan’s recordkeeping fees. As a result, we have been working with our clients to ensure that all funds are in the lowest expense share class and, if revenue sharing is occurring, it is rebated back to the participants in that investment. The fees are then paid on a pro-rata basis, which creates transparency and fairness among participants and is a prudent process to help protect the plan fiduciaries. In addition, we have worked diligently towards having all of our plan’s recordkeeping fees in the lowest quartile.

Fiduciary governance has been an emphasis for our ERISA team for several years. As a result, last year we developed comprehensive, committee by-laws for our clients. We consult with our clients to create formal plan governance documents to incorporate into their permanent plan documents. These include committee by-laws and committee member acceptance and resignation forms.

We have also created a plan management system, where all fiduciary and administrative functions have been identified and the process on how to perform those functions has been created. We then interview our clients to determine whether they are performing the functions, and if so, how are they performing them and how long does it take them. This allows us to uncover any gaps of oversight and also look for ways to save our clients time in streamlining processes. This gets reviewed and updated annually as part of our goal to continually make our client’s plans better.

We also have created a new Settlor/Named Fiduciary annual meeting service. This annual meeting clearly separates the Settlor/Named Fiduciary duties from the plan committee. The purpose of the meeting is to review the plan’s terms and document the oversight of fiduciary delegation.

PA: As a retirement plan adviser, what do you take the most pride in?

PC: Simply put, we take pride in playing a role in improving the financial security of American workers.

Moreover, it has always been vital that we do that with an uncompromising commitment to transparency and accountability; it is the basis of our business model. Our clients always know what service deliverables and fees to expect from us. And as a fee-only firm with no parent or subsidiary companies to consider, our clients can trust that the advice we give them is always objective and in their best interest.

PA: What benchmarks do you use to measure plan and client success?

PC: We believe a successfully managed retirement plan has these elements:

a. It is top performing;

b. protects an employer from fiduciary liability, and;

c. is easy for the employer to oversee the plan.

With these thoughts in mind, we regularly track and report on metrics to monitor the success of the retirement plans we manage.

Our Investment team measures success by its ability to create an investment line-up that can consistently outperform a comparable index line-up. The team selects and maintains a buy list and measures and reports its performance internally against the index benchmark on a monthly basis. The team has a fixed income analyst and equity analyst whose ability to pick successful active managers is a key component of their compensation.

Our Participant Education team determines success by defining, measuring and improving retirement readiness metrics of plan participants by using plan participation rates, plan deferral rates, investment diversification, income replacement ratios / percent of participants on target to meet retirement goals. We conduct these benchmarks on both a plan-level and on age-group basis. We also benchmark average account balance and plan features such as auto enrollment, auto deferral increase and match structure. Lastly, we benchmark the plan’s income replacement ratio against plans within their industry, with the goal of having an income replacement ratio in the top 35% of all plans within that industry.

For our ERISA team, we measure success by keeping the employer and plan fiduciaries out of trouble. Client plans should be fully compliant and able to withstand a Department of Labor or IRS audit if one should occur. In addition we measure the time it takes our clients to administer their retirement plan with the goal of finding ways to save them time without compromising our job of protecting them.

Our Vendor team’s success is defined and measured by its ability to make our clients’ plans compliant with ERISA’s 408b(2) regulation, which states plan fiduciaries must ensure that arrangements with service providers are “reasonable” and the services are “necessary”. We have both an internal benchmark that is used along with a national benchmark service. When benchmarking, it is the vendor team’s goal to have the recordkeeping fees in the lowest quartile. When that isn’t the case, we actively renegotiate to lower the fees with that quartile.

When a plan is top performing and the client does not have to worry about potential audits or lawsuits, they can focus on managing their business and the financial security of their workers is improved.

PA: How do you react to clients or prospects who don’t share your goals for their retirement plan?

PC: We realize that our industry is still largely based on relationships and not performance based, which means we aren’t the best fit for all plan sponsors, and on occasion, this isn’t evident until we are hired. As an example, last year we were hired and it became obvious that the plan sponsor did not want to provide participant education or utilize some of the other services that are provided by contract. As part of doing the right thing and being transparent, we came to an understanding that we were not a good fit and disengaged from that plan.

That being said, last year we began measuring our Net Promoter Score (NPS). When looking at other similar industry NPS scores, we set our goal to have a NPS of 60-65. A year into measuring the score and with 90+ responses back from our clients, our NPS is 89. This reinforces to us that our clients appreciate the services we are providing and share the same goals for their retirement plan and participants.

BUSINESS AT A GLANCE:

Plan assets under advisement: $3.6 billion

Median plan size (in assets): $15.7 million

Total plans under administration: 93

Total participants served: 265,211