October 12, 2017

2016 RPAY – Francis Investment Counsel LLC

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PLANADVISER: Tell us about your practice and how you and your team members got into advising retirement plans.
Francis Investment Counsel: The team at Francis Investment Counsel LLC has been providing investment advisory and employee education services to qualified retirement plans since 1988. We are proud to say we continue to serve our first client to this day. Our team was initially developed while affiliated with a national brokerage firm and over a 15-year period was recognized as the firm’s top 401(k) advisory team.

In March 2004, in order to eliminate numerous conflicts of interest (e.g. shelf-space payments by mutual fund companies, the strong incentives to gather assets from retail investors, etc.), we formally severed ties with the national firm and established Francis Investment Counsel as an independent Registered Investment Advisor (RIA) focused solely on serving the qualified retirement plan marketplace. With no conflicts, clearly fixed fees, and decades of experience, Francis Investment Counsel continues to provide investment consulting and employee financial education and advice to plan sponsors and their participants.

PA: How is your team/process/structure unique? How has it evolved?
FIC: Most advisers invent something unique about the way they run their businesses, yet when compared side by side, actual differences in services and process may be difficult to discern. Francis Investment Counsel breaks this mold. Our firm is unapologetically different in what we do.

We are truly unique in our exclusive focus on qualified plan consulting and plan participants, while not accepting individuals as clients for retail or wealth management purposes. We intentionally structured our firm in this manner to provide exceptionally objective advice to participants, while collecting a tremendous amount of valuable information that can help plan sponsors maximize the utilization of their retirement plans.

Our exclusive focus and conflict-free approach makes our client experience not only different, but also definably better. Plan sponsors and participants who have partnered with Francis Investment Counsel have the peace of mind that comes from working with a conflict-free advocate. They enjoy the certainty of expert Employee Retirement Income Security Act (ERISA) fiduciary advice from people they trust. This relational transparency shapes all parts of our service model, integrating the participant perspective into our proprietary research, plan governance process, investment menu construction, and overall cost management strategies. With the knowledge and experience gained from thousands of participant interactions each year, we effectively counsel our clients’ oversight groups, assisting them in designing a retirement benefit that truly meets the needs of their participants.

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While the financial services industry continues to evolve, Francis Investment Counsel stands out in the marketplace as a voice that has remained steadfast. We are unapologetically straightforward, continuing to deliver ERISA fiduciary advice that makes plan sponsors better employers and plan participants better family finance managers. While our services have modified to incorporate increased technology to reach out to greater populations, we remain committed to building relationships with people, through our people. The trust we build with our clients and their participants supports the advice we provide and the actions we facilitate.

Francis Investment Counsel is definably different in what we do: We connect the people we serve to the ERISA fiduciary advice they need. And we are truly unique because that is all we do.

PA: Describe a difficult client relationship issue, and how it was resolved.
FIC: Francis Investment Counsel was retained by a client for investment consulting and employee education. At the time of hiring, our client maintained a provider relationship with the same company for both lending and recordkeeping services. While the banking relationship was strong, our client experienced consistent problems and mistakes with the recordkeeping services. Our client initiated a vendor search in order to evaluate and potentially replace the current recordkeeper.

While our client was determined to run the vendor search internally, Francis Investment Counsel participated in a consultative role throughout the process. Per our recommendations, the client’s committee of finance and human resources professionals narrowed the search to five different providers. Upon completing the finalist presentations, the incumbent provider and one other remained in the final decision process.

It became evident during the decision-making process that a divide existed within the committee. Those members on the financial side of the business favored staying with the incumbent provider. They had greater exposure to the banking and lending relationship. Being a family-run company, they desired to remain loyal to a relationship that had remained steadfast for better or worse over the years. The human resources professionals on the committee were prepared to make a change. With frequent exposure to the headaches produced by the recordkeeping mistakes, they were ready to move on with a new provider who would meet the service standards they expected.

As the decision-making process came near a close, the CEO spoke to the committee as well, emphasizing there must be a compelling reason to implement a relationship change. The ensuing decision led to the retainment of the incumbent provider, with specific performance expectations outlined. The relationship was to be reassigned to the large market service model, and a new service team was to be put in place. Additionally, the committee established a one-year probationary period, where the recordkeeping services would be closely monitored. Within three months of installing the new service team, the mistakes at the recordkeeping level continued.

Concurrent with the recordkeeping search, our client was in the process of renegotiating its entire lending relationship. During these talks, it became clear to Francis Investment Counsel that the terms of this provider’s lending relationship were contingent upon the inclusion of recordkeeping services. Based on the vendor search process, this provider was more expensive than other options in the marketplace and had a well-documented history of service shortfalls. When the committee acknowledged that the service and price of the lending relationship was inclusive and dependent upon retention of the recordkeeping relationship, Francis Investment Counsel felt the need for a dramatic course of action.

The overt act of linking the terms of the client’s lending relationship to the decision of terminating or retaining the recordkeeping assignment put our client at risk of engaging in a prohibited transaction. Maintaining a plan service provider because of the further benefits this provider brings to other areas of the organization breaches the duty of loyalty to plan participants outlined in ERISA. While Francis Investment Counsel understood the value of a long and strong relationship between our client and the provider in question, we could not endorse retention of a recordkeeping relationship that was not motivated purely by the plan participants’ best interests.

In a final meeting with the committee and their CEO, we discussed the service issues experienced during the probationary period. We further discussed the potential of a prohibited transaction resulting from the dual relationship with this provider. We therefore advised our client to move forward in retaining the alternative provider identified in the vendor search process. In recognition of the situation and our role as an ERISA fiduciary to the plan, we further requested a letter of indemnification acknowledging our recommendation should our client choose to maintain the current provider relationship. Our client pushed back, refusing to sign the letter of indemnification. Confident in our recommendation, we informed our client that our ability to remain as their ERISA 3(21) fiduciary was dependent on their decision regarding the recordkeeping service provider. Francis Investment Counsel’s continued engagement was clearly at risk.

Ultimately, this organization decided to fire their banker and retain a new recordkeeper for the plan, preserving our partnership with them. Afterward, one of the committee members commended the “managerial courage” of Francis Investment Counsel’s relationship manager in leading these difficult discussions of fiduciary responsibility versus corporate interests with the committee and CEO throughout the recordkeeping evaluation process.

This difficult client relationship issue demonstrates Francis Investment Counsel’s commitment to the fundamental tenants of ERISA and willingness to put participants’ interests before its own.

PA: As a retirement plan adviser, what do you take the most pride in?
FIC: The “ah-ha moment” occurred in 1988, while helping a small manufacturer design and roll out its new 401(k) benefit to its employees. The financial services industry is really good at helping rich people get richer, but not set up to help average American workers ensure their financial security in retirement.

In this moment, the dream of Francis Investment Counsel was born: A firm solely dedicated to getting the necessary tools, training, and advice into the hands of the workers desiring to plan for a financially secure retirement.

We are most proud of how much progress, over the last 27 years, we have made fulfilling this dream. We created a Firm devoid of the common industry conflicts that make it so hard for workers to get good advice and have a well-designed benefit into which they can deposit their hard-earned savings. Each day, our advisers’ pride comes from the “lightbulb” moments in the eyes of plan participants, when they learn they CAN achieve their financial goals. Daily we are thankful for the opportunity to help Americans’ retirement readiness, one participant at a time.

With decades of experience, advisors with a missionary zeal to help the common worker, and complete objectivity that comes from the elimination of industry conflicts, we strongly believe Francis Investment Counsel is the best firm on the planet to help a retirement plan sponsor fulfill its fiduciary duties.

BUSINESS AT A GLANCE

LOCATION: Brookfield, Wisconsin
TOTAL ASSETS UNDER ADVISEMENT: $5.8 billion
MEDIAN PLAN SIZE (IN ASSETS): $27.5 million
TOTAL PLANS UNDER ADMINISTRATION: 72
October 12, 2017

2016 RPAY – Newport Capital Group

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Newport Capital Group believes it is important to thoroughly understand each plan sponsor’s goals for its company, so immediately upon starting with a new client, the practice asks it what issues are most pressing—both for the company and for employees. As the firm puts it, having an “open dialogue during onboarding sessions” is key.

“By asking these questions, some seemingly outside the realm of retirement plans, Newport Capital Group can realign the strategy to best fit the specific needs of that client,” says the firm. “Only by assessing the real aims of our clients can we craft a coordinated retirement strategy that best serves to incent, attract, reward, retain and eventually retire its work force.”

For example, the group may discover that a company is at risk of losing top talent to a competitor. Or that its defined benefit (DB) plan’s funding status is negatively affecting the company’s financial statements. Or that the company has a disproportionate number of older employees who are unable to retire and are costing the company high health care benefit premiums.

With this information in hand, the firm can work to assuage the finance department’s frequent motivation to keep retirement benefit costs down while meeting human resource (HR)s’ goal of attracting and retaining the best talent. Knowing the goals and the challenges of each employer, the advisory team can often make the case for automatic enrollment, re-enrollment and automatic escalation.

“Many of our clients are aware of some of the shifts in industry best practices and have even received feedback from their peers, but they are still hesitant to make changes,” says Dominic DiPiero, president of Newport Capital Group. “Plan sponsors assume a negative reaction from their participant base and have been concerned about adding costs to their bottom line. Taking things like this into consideration, we have found that framing these changes as a long-term benefit has resonated best in most cases.” Indeed, it appears to be working, as 87% of Newport Group’s clients use auto-enrollment, 52% use auto-escalation, and 99% offer an asset-allocation solution, such as a managed account or a target-date fund (TDF).

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Once a client has been onboarded, the firm conducts annual plan health assessments, which reveal progress on already identified issues or may uncover new ones that can lead to further improvements in plan design, down the road.

Educating the Committee
In line with Newport Group’s emphasis on open communication at the onset of a client relationship, DiPiero refers to the firm’s initial process as a “two-way interview” that creates an open line of communication with all committee members. The adviser team’s service model also includes education that engages committee members with topics such as current best practices, legislative updates and regulatory issues.

The team’s model allows for customization, based on the needs of each client. Newport Capital acts as a 3(21) fiduciary for all of its clients and makes 3(38) fiduciary services available, as well.

“Part of our service model revolves around performing a fiduciary forensic audit on all new client relationships,” DiPiero says. “At the onset of the relationship, we perform the audit to bring the plan into the high standard we require as a co-fiduciary. During this process, we aim to uncover, rectify and document any existing plan-related issues. Competing this thorough analysis serves not only to protect the interests of the committee but also to set the foundation for a successful relationship between Newport Capital Group and our clients.”

While establishing a strong rapport with the sponsor and committee and improving plan design are vital, so is participant education, the firm believes. This is why it develops a tailored education policy statement (EPS) for each plan sponsor. “Increasing participation begins with a robust educational and communication initiative to explain to participants the importance of saving for retirement and to reiterate to employees the value of the benefit offered by their employer,” it says.

“Using our tailored EPS as a road map, we first identify the participant and demographic groups not contributing or participating in the plan,” DiPiero says. “We then work with the plan provider to target those employees directly, using language and methods specific to each individual or group.”

The next step is to increase deferrals. The firm scours the demographics and offers solutions specific to the groups that are either falling short in deferral amounts or are projected to be unable to replace enough income in retirement, DiPiero says. Again, using the EPS as a road map, the firm “deploys tailored educational and communication resources from the provider focused on changing participant behavior.”

Here is where Newport Group has found one-on-one education to be effective, so the firm has engaged providers that can supply “the same cutting-edge technology and methods that are offered by the most sophisticated wealth management firms,” he says. “By offering an education resource willing to sit down directly with participants and advise them, we’ve seen incredible success in increasing deferrals and helping participants achieve retirement readiness.”

Client Survey
Last fall, the firm hired Advisor Impact to conduct a confidential, Web-based survey of its clients. “We feel that asking our clients what they want from us, as their adviser, is the most important step to providing an unmatched client experience, as well as delivering cutting-edge services,” DiPiero says. “We also wanted to show our clients that we care about the quality of our relationships and services and, most important, give voice to their experience and opinions.”

The survey came back with a client satisfaction score of 99%. While “thrilled” with the results, Newport Capital decided to take the survey a step further with one-on-one brainstorming calls between DiPiero and the clients, starting this past January. Based on the clients’ feedback about what could help them with plan administration, Newport Capital will be designing an in-person and webinar seminar series to further educate plan sponsors on best practices.

The group plans to conduct another client survey within the next few years and has reinforced its open-door policy with all of its clients.

As to what the team takes the most pride in as retirement plan advisers, DiPiero says, it is “improving participants’ retirement readiness and helping them realize their future potential.”

BUSINESS AT A GLANCE

LOCATION: Red Bank, New Jersey
PLAN ASSETS UNDER ADVISEMENT: $8.5 billion
MEDIAN PLAN SIZE (IN ASSETS): $155 million
TOTAL PLANS UNDER ADMINISTRATION: 104
TOTAL PARTICIPANTS IN PLANS SERVED: 100,000-plus
SUPPORT STAFF: 15

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