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Business at a Glance as of 12/31/23
- Location: Rockville, Maryland
- How many plan assets do you have under advisement? $450M
- What is your median plan size (in assets)? $1.7M
- How many plans do you have under administration? 65
- How many participants in total do you serve? 4,000
- Parent firm: HUB International
PLANADVISER: Tell us about your practice and how you got into advising retirement plans.
Cochrane: I started my career at a bank in the trust department, reconciling contribution files and performing plan testing by hand. After 25 years in that side of the business at a few different recordkeepers, I decided to pivot to investment advisory. I saw a large need for adviser teams to provide more consultative solutions to clients. Recordkeepers were having to struggle to provide these services for all plan sizes, but I realized that clients needed this service more than ever. I joined a practice that I had worked with for over 15 years as director of client services in February 2020, right before COVID shut down the world. The practice had some strong advisers but needed additional direction into practice management and assistance to build a scalable practice while refining their white glove service model. I could not have made a better decision.
PLANADVISER: Are you connected to a wealth management division? If so, please explain how you work for them and your goals for coordination. If not, please explain whether you plan to be in the future, or not, and why.
Cochrane: My former firm joined HUB International in January 2022.Prior to that, we did not have a mature wealth management practice, but rather a few advisers who split their time between plan advisory and wealth management. Since joining HUB, we have a strong wealth management arm that provides us with a seamless solution. All of us on our team, including our financial wellness strategists, meet with employees one-on-one. When we find a participant who has a need for personal financial planning, we have a formal process for who the lead gets assigned to and a way for the adviser to track the progress. We also share in the revenue. Our goal is to make wealth management available to all employees of the plans we manage, regardless of how large or small their account balance.
PLANADVISER: What challenges do you think the retirement plan industry faces, and what role do you have in addressing and confronting those challenges?
Cochrane: Our industry is constantly faced with detractors, including Congress and media outlets that paint the 401(k) or 403(b) plan as inherently broken. The claims are that the retirement plans only benefit the wealthy and the only solution is a governmental program. The problem with that thinking is these comments ignore the fact that employees have access to a competitively priced program that is heavily regulated by the government, and if they save a small portion of their income every pay period, they may actually accumulate a sizable sum at retirement. Now, for that to work for our lowest-paid employees, this takes some education. Employees who may only make $15 per hour and save 5% of their pay will feel less than $0.75 per hour coming out of their paycheck. Sometimes the messaging is overwhelming to an employee, and they don’t take action because they don’t understand how it works. By utilizing plan provisions like automatic enrollment, we are finally seeing average account balances grow to the highest amount ever (per Fidelity Investments surveying). Providing education that breaks it down into pennies on the dollar may bridge that gap of understanding.
When it comes to closing the coverage gap, that is even more important. There are hundreds of thousands of employees without access to a retirement plan. SECURE 2.0 made it financially easier for employers to sponsor a retirement plan by providing tax credits, but these tax credits do not apply to nonprofit entities. That is a disservice. At HUB, we have solutions for all size plans, including startup plans. I regularly meet with my senators and congresspeople to discuss pressing issues and take every opportunity I can to point out that the tax credits have left some behind. I am hopeful that a program will be finalized that will provide a financial offset to the cost to administer a retirement plan in the next year.
PLANADVISER: Please tell us about an important issue that your 403(b) plan sponsor clients face and what actions you have taken to assist them in overcoming those issues.
Cochrane: One of the greatest issues I have seen my nonprofit clients face is a result of very high employer contributions. Many nonprofits in the DC area offer a very high 10% nonelective contribution. Many of the employees see this 10% being contributed and do not contribute their own money. Participation rates will hover around 30%. I think many feel like 10% is enough to allow them to retire comfortably. I explain to the employees that unless they will work for that company their entire careers, it is better to save additional money and build a habit. Another company may not have such a generous benefit. I have also worked with employers to redesign their nonelective to be partly a percentage of pay and partly a match. They can use the same 10% contribution, but build it so that an employee will receive 5% of pay plus a 100% match up to 5% deferral. This encourages participation from the employer, but also provides the same benefit to employees if they save their own money.
PLANADVISER: How did you get started advising 403(b) plan sponsors? What advice would you give other advisers wanting to enter this market?
Cochrane: I have been primarily working with nonprofits since the 2007 403(b) law changes. These new regulations were a driving force into modernizing the 403(b) plans, shrinking the vendors that employers were sending employee contributions to, and requiring a form 5500 filing. What I learned is that these employers were looking for “partners” not vendors. With all the changes, companies had no idea what was being expected of them. Consulting with employers on what it means to be a fiduciary was crucial as well as helping them navigate individual contracts versus group contracts and the responsibilities that are present even when the employer has no control over the investments or administration. The industry has grown, and many employers are now operating their 403(b) just like their 401(k) counterparts, so the market is easier to get involved in. My advice would be to understand that culture plays a bigger role with nonprofits, and their vision and values drive many of their decisions. Listen and understand how the company treats their employees. When it comes to complex contracts you may encounter, seek assistance with the vendor or others in the business. We are always happy to share our insights.