Products April 25, 2018

Vanguard Enhances Retirement Readiness Tool and Other Offerings

A new brokerage window option allows advisers with relationships with 401(k) participants have access to participant accounts.

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Vanguard has enhanced certain service offerings for 401(k) and non-qualified plan sponsors and participants.

It has decided to partner with TD Ameritrade to offer a self-directed brokerage account. Martha King, Vanguard managing director and head of the Vanguard Institutional Investor Group, tells PLANADVISER that Vanguard has been offering brokerage windows in 401(k) plans for years. “The majority of plans don’t offer them, but even if they do only a small group of participants use them. Still, we don’t want to ignore their needs,” she says.

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King notes that an important differentiator of the TD platform from Vanguard’s platform is that advisers will have access to participant accounts. “It is not uncommon for participants to have relationships with advisers,” she says.

This new service will give registered investment advisers access to the TD Ameritrade institutional account management and trading platform for RIAs—called Veo. Using this service, advisers who work with Vanguard 401(k) plan participants can view and manage client accounts individually or collectively. Participants will still need to verify their financial advisers’ access as part of the enrollment process.

The difference is that when using Vanguard Brokerage Services, participants could grant account access and management to their personal advisers; however, advisers are limited in that they have to manage each client account individually and cannot download/transfer information to their own proprietary software. Vanguard Brokerage Services was tailored to its primary user—the do-it-yourself retail investor.

New retirement readiness tool

As part of its participant website enhancements, Vanguard is offering the Retirement Readiness Tool to provide actionable advice about retirement savings. It can aggregate participants’ 401(k), pension, individual retirement account (IRA) and projected Social Security benefits to offer a full retirement savings picture. Participants may need to input information about outside assets.

In addition, the tool uses assumptions, such as future contributions and forecasts from the Vanguard Capital Markets Model, to project how savings will grow over time. Applying a customizable 4% withdrawal rule, the tool is then able to produce an estimate of future monthly retirement income. The information can also help plan sponsors calculate the projected income replacement ratios for their participants through Vanguard’s new Retirement Readiness Plan Assessment.

According to King, knowledge gleaned from the retirement readiness tool helps with Vanguard’s new Personalized Participant Journeys offering. “Plan sponsors can use the knowledge they’ve gained from analytical capabilities to utilize personalized messages/nudges so they can get participants engaged [in retirement planning],” she says.

More about this offering can be found here.

Non-qualified plan administration

Vanguard has also decided to partner with Newport Group, a provider of non-qualified (NQ) plan administration, which specializes in the complexities of NQ plans. King explains that Newport’s recordkeeping system will be used by Vanguard, but Vanguard will continue to be in front of relationships—participants will speak to Vanguard and so will plan sponsors. “We are leveraging significant investment in the technology Newport offers,” she says.

“In any of our businesses, we can never just stand still. We consistently evaluate offerings, systems and what we’re providing clients,” King says. “In the course of our review, we saw opportunities for better service experiences for clients. We can build some capabilities ourselves, and we can partner with others to bring things to market more quickly.”

More information about all of the changes can be viewed here.
Client Service April 24, 2018

Ways to Increase Retirement Savers’ Confidence

During a media call about the Employee Benefit Research Institute's latest Retirement Confidence Survey, sources shared ways retirement plan sponsors and advisers can help retirement savers feel more confident.

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The 2018 Retirement Confidence Survey (RCS) from the Employee Benefit Research Institute (EBRI) revealed retirees’ confidence in their ability to live comfortably in retirement remains higher than employees’ confidence, with 32% of retirees very confident and 44% somewhat confident.

However, retirees are less likely than last year to feel confident in their ability to handle basic expenses and feel less confident in their ability to handle medical expenses.

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In addition, as fewer employees plan to rely on defined benefit (DB) plans for retirement income and fewer trust that Social Security will be there for them, the RCS found many employees are showing interest in guaranteed income products.

During a media call about the RCS, Lisa Greenwald of Greenwald & Associates said, “While overall confidence is statistically unchanged over last year, confidence in specific factors are lower.”

Craig Copeland, EBRI senior research associate, pointed out that defined contribution (DC) plan ownership is an important factor in Americans’ confidence in the ability to live comfortably in retirement. The RCS found 76% with a DC plan are confident versus 46% without a DC plan. However, four in ten survey respondents say debt affects their ability to save for retirement.

Asked what plan sponsors and advisers can do to improve Americans’ retirement confidence, Copeland said helping them calculate how much overall will be needed to cover expenses in retirement is important. Plan sponsors should offer participants access to financial advisers.

In addition, financial wellbeing programs—including debt counseling—can improve retirement confidence, Copeland said.

He pointed out that plan sponsors are still not embracing in-plan guaranteed lifetime income products due to fiduciary fears; they are not sure what fiduciary due diligence is needed. He also noted that annuities have gotten a bad rap in the media. However, Copeland feels adoption of in-plan products may increase as participant balances grow higher.

Greenwald added that estimating and planning for health care costs is a critical element in retirement planning. The RCS found that, even among near retirees, fewer than half have done this calculation. Seven in 10 employed workers and six in 10 employed retirees say workplace education on health care planning for retirement would be helpful. Greenwald said employers and advisers need to help participants plan for health care costs.

She also said the findings speak to a growing role for health savings accounts (HSAs) in saving for retirement and employees investing their HSA dollars.

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