Closing the Coverage Gap

Steven Scott, Retirement Solution Group

Portsmouth, New Hampshire

Steven Scott, Retirement Solution GroupSteven Scott, Retirement Solution Group

Business at a Glance as of 12/31/21

  • Median plan size (in assets): $6.4 million
  • Plans under administration: 550
  • Total participants served: 12,073

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

Scott: In the mid-90’s I graduated from college in Boston and started working at State Street Global Advisors (SSGA) in the qualified plan division. At that time SSGA was growing substantially, and in particular the 401(k) group. We were targeting the large $1 bb + market. That growth helped to offer me promotions and opportunities to present and participate in sales support with some of the largest plans in America (Boeing, Chevron, 3Com, State of Michigan, Kodak…). This experience would become a critical factor in my decision to later open RSG 10 years into my career.

After a brief period consulting, in 2002 I began wholesaling in Chicago in the small plans marketspace. I found there was either a fragmented business model and/or a hands-off 800 number service model, often with poor participant engagement and outcomes. There was little understanding or concern for concepts like fiduciary best practices, that were standardized years earlier in the large marketspace. In addition, I often heard advisors refer to the 401(k) business as “mailbox money.” You sell a plan and don’t have to really do anything, yet small checks just show up for years to come.

I found this both frustrating and disturbing. This “problem” became the driver behind RSG. Can I/we bring the approach and best practices that I witnessed in board rooms like Boeing down to the small to mid-market? If I did we had to be a fiduciary at a time when that was not trendy. We also needed to be able to talk administration, compliance and design in a way that most advisors were both unable and unwilling to address. That was where the problems and greatest opportunities to support the client existed. Finally, I set a standard early on that we would serve the participant first and foremost and in a manner that would be more personal. Our first large client was a union in Chicago with members spread across hundreds of locations. The key to success here, and I believe this became a cultural tenant, was not to be achieved in a board room but rather by making the extra effort to visit every one of these locations.

 

PLANADVISER: How is your team/process/structure unique? How has it evolved? Where will you be in five years?

Scott: While many strides have been made, there is still a strong reality in our business that qualified plans are feeders for more profitable business lines like wealth management. Because our focus is exclusively on qualified plans and our people are not chasing commissions, they focus on the needs of all participants equally. In fact a recent client interaction with a CFO had him commenting that we seemed almost more focused on the line workers versus the management team; my response was good. The line workers likely have less resources and need the individual consultation the most.

The cultural belief throughout the organization that we are here to help all staff obtain a retirement with dignity is proven by the sometimes insane schedules (see below client roadshow from a week ago), multiple shift coverages, and endless individual meetings we perform at all levels of the organization. This is done by myself, and a team of licensed relationship managers that bring bi-lingual support though a diverse and highly skilled staff.

 

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

Scott: As the founder of RSG, I am proud of what we have built. We did it our way with a core group that has been in place for many years. We did it as a 100% independent organization. RSG has no investors, no debt, no cross sell business feeders and no conflicts of interest. The fact that our two largest clients today were both on-boarded in 2005 (the year the company was founded) speak volumes to our service model and approach to success. This business has a slow sales cycle and we have no inherent referral network. So we must service our clients in a way that fosters growth, to stay with us through this growth and refer opportunities our way based on the merit of our work.

Last year we hired our first “sales person.” But as we are now over $1 bb in retirement plan assets and have received numerous industry recognitions, we did it exclusively through referrals and client growth/success. I do not say this in a way meant to be negative to any other professional, but as Sinatra said, “I did it my way.” My business partner was a good friend and first employee was my wife. The second employee was a friend and co-worker from my wholesaling days… We were friends who shared an idea and belief that has now become a company with a true brand and presence in our industry. Still remaining with all the same core people and still 100% independent/us.

 

PLANADVISER: How do you grow your business? What changes to your practice or service model are you planning for 2022 or 2023?

Scott: I think there will be a lot of change in some ways, and very little change in others. What will not change is our sole focus on the retirement plan space. Our focus on the small to mid – market and the general perspective and belief that being a specialist matters and that we are consultants helping to make the plan a business asset.

What is changing is scaling that message and support model to be a more national presence/voice. Marrying our service abilities and philosophies with some of the technologies available in supporting business lines like financial wellness are natural progressions. But the real scale driver is the MEP/PEP business. Where we can bring our abilities to run and optimize plans to a larger and wider audience thanks to the structural efficiencies and distribution support is a potential game changer. We are currently running one large multi-employer plan and have 3(38) responsibilities on two newly formed national PEPs.

 

PLANADVISER: What challenges do you think the retirement plan industry faces and what role do you have in addressing and confronting those challenges?

Scott: I could write a dissertation on this, but I will focus on a key theme with perhaps a slightly different take. Fee compression is not a new thought or new trend. But I look at things from a slightly different perspective: are these advisors really going to start making less money? In many situations I do not think that is the outcome, I think instead what will and is happening is a reduction in service offerings.

One example is the trend now to say bps pricing is bad and flat fee is good. The driver of this point is the consultant market who defines their value often exclusively in the board room. Just like when I think back to 1995 and my entry into this business, there was real confusion on how to educate and inform participants. Sure there is much more technology, tools and general participant knowledge today, but it is still the same issue. So when we create models and pricing where the only ones getting active consulting support are owners, executives and committee members, we are doubling down on all the inherent problems with retirement savings gap in this country.

Business models will typically drive the outcome they are intended for. If you are incented to grow a plan, you are much more likely to take the steps necessary to make that growth a reality. So even as we have moved (somewhat) up market, we have advocated for bps pricing and to not always be the cheapest solution. Rather we aim to be fairly priced, benchmarked and transparent. But to have the model and drivers for success aligned with participant outcomes.

 

PLANADVISER: Why do you feel that retirement plan advisers should get involved in the expansion of the DC retirement plan system to cover more types of employers and employees?

Scott: It is clear to me after 27 years that no one else will drive that effort, so we simply have to. Individual advisors will forever try to find plans to run and then cross sell wealth management, insurance and in general higher revenue products to the C-suite. But there is great risk to a society where the masses have no clarity on a future that includes retirement with dignity.

While one can suggest this is melodramatic, but I believe there are numerous examples in history and around the world that the above issue can be a catalyst for systemic failure of a people. Wealth disparity in this country has been growing for years, and perhaps it stems back from my own upbringing in a very blue-collar town with very modest means and parents who did not attend college. But if we make the average American our focus we will all win in multiple ways, and I personally see it as the only option to avoid a future crisis. A crisis that feels terrifyingly close.

 

PLANADVISER: What are the biggest challenges preventing the broader delivery of tax-advantaged retirement savings opportunities in the workplace, and how might these be solved?

Scott: I think there is a layered cultural savings problem. While we are making progress in participant engagement and general financial wellness basics, we still have a long way to go. It is hard to identify one driver, but it is conceptually to me a priority problem. Is saving for retirement something you should care about even in your early years?

While to those of us in the industry that answer is an obvious yes, there are so many challenges against the “average American” in making this a priority. At the moment there is massive inflationary pressures that go on top of historic levels of college loans and debt in general. Uncertainty on items like Social Security and the cost of health care make budgeting both today and in future years challenging. Wage growth for much of the country, has been modest at best for the last 20 years in working class America. To affect change we need to make savings standardized at a young age, and personally I would support a national default enrollment approach.

But one concern here is our national debt. We need to incent people to save more, and tax deductions and credits are often the best carrot. There are many ways you can do that, and the recent increases in tax credits in things like the Secure Act are a nice start. But many of the larger and more aggressive initiatives are impacted by the need for all legislation here to be “cost neutral.” The desire to get the revenue now creates a short sightedness that is hampering more creative ideas.

At a federal level we need to look at the “cost” of a generation not being financially able to retire with dignity and communicate that with openness and make it a policy driver. But we also need a cultural shift where this is a priority and there is a game plan that makes sense and is obtainable.

  • Provide transparency on the true cost for retirement.
  • Have more dialogue on the success of long-term compounding growth vs. the endless fear mongering on market declines.
  • Lose some tax revenue in early years to push a national savings mandate with credits and deductions.
  • Provide clarity on the role of Social Security past the next 10 to 15 years.
  • Budgeting for retirement should be easier, more transparent and more standardized communications that allows everyone to have “a number.”
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