In Practice February 19, 2014

Building True Relationships with Participants

Some retirement plan advisers strive to offer complete, holistic advice.
Reported by

Group participant meetings continue to be a critical way for most retirement plan advisers to communicate with participants, but some advisers go above and beyond, and use one-on-one meetings to delve deeper into individual participants’ interests, gleaning more than just their retirement goals and 401(k) balances.

For Marilyn Timbers, a financial adviser and retirement coach with ING Financial Partners in Stamford, Connecticut, the objective is to get to know each participant’s “personality and experiences [in order to] be more attuned to their risk tolerance and find solutions that fit them personally. My clients and I discuss more than financial goals,” Timbers says. “I want to know about their dreams, passions, purpose and values.”

Kelly Campbell, CEO of Campbell Wealth Management in Alexandria, Virginia, has an 80/20 rule. At his initial one-on-one meetings with participants, he uses 20% of the time to discuss finances. “The other 80% is spent identifying what’s really important to these folks,” Campbell says. “Is it their children and grandchildren, travel, entrepreneurship or a second or third career? The true beauty about starting a retirement planning discussion with the non-financial aspects is that it creates a partnership and helps establish trust in the client/adviser relationship. It also leads to a responsible financial plan, which will achieve those important things in their retirement lives.”

Want the latest retirement plan adviser news and insights? Sign up for PLANADVISER newsletters.

Jeff Gitterman, CEO of Gitterman & Associates Wealth Management of Iselin, New Jersey, and New York, starts conversations with retirement plan participants by identifying which of 16 core desires—power, status, curiosity, charity and saving, to name a few—best defines their personality. “In the financial planning process, we want to start off with what someone’s core desires are and what they would like their life to look like,” Gitterman says. “When we center around their desires, we can get a clear picture of what they want their life to look like, and then we give financial advice. Most advisers start with financial advice, rather than their client’s drive.”

More and more plan sponsors seek “top-tier advice,” says Brian Brice, managing director of The Brice Group, a member of the Merrill Lynch Financial Advisory Team based in Bloomfield Hills, Michigan. “In a lot of the mandates we are winning of late, plan sponsors are not only interested in our practice, but in giving their employees access to top-tier advice, in our treating each person individually. We find there is a tremendous amount of value in serving people personally. That extension has really driven our business and given us an opportunity to differentiate ourselves.”

So what areas of participants’ lives beyond their retirement goals do retirement plan advisers discuss? “Their concerns, needs and passions, be it their children and parents, their extended family, mortgages and philanthropic activity,” Brice says. 

Michael Chadwick, CEO of Chadwick Financial Advisors in Unionville, Connecticut, often finds himself helping participants make decisions about where to move, or whether to buy a new or used car.

Advisers who take a holistic approach cover a range of other topics, too: refinancing a mortgage, health care, insurance, long-term care, funding a child’s education, investment opportunities, taxes and estate planning, divorce settlements, volunteering, budgeting and managing debt. For his pension plan clients, often small business owners, Chadwick consults on how to expand their business. “I think sometimes these conversations we have are the most valuable part of the client relationship, because we really help them,” Chadwick says.

The goal, Brice says, is to “exceed expectations. Group meetings are definitely part of the business, but if you roll up your sleeves and do the work, you can achieve more in one-on-one meetings and truly build a relationship.” Not only is the result fulfilling for the participant and for the adviser, but it often leads to private wealth management clients outside the retirement plan, Brice says.

Indeed, a Bank of America Merrill Lynch Workplace Benefits survey of plan participants conducted last June found that many participants would like such guidance; 51% said they would like access to a financial professional, 46% want online tools, and 39% want to be offered financial seminars relevant to their life stage and personal situation. Plan sponsors, too, increasingly value financial advice. Bank of America Merrill Lynch surveyed plan sponsors in December and found that 81% of human resources professionals believe they are at least somewhat responsible for their employees’ financial wellness, and 70% of employers offer employees access to one-on-one advice, up from 56% in 2012.

The bottom line, Brice says, is “when you do the right thing by people, yes, it can lead to opportunities. But those opportunities should be a byproduct of doing the right thing.”

In Practice February 19, 2014

Who Will Pursue myRA Contracts?

Low balance limits and initial investment hurdles in the President’s “myRA” proposal will likely restrict the number of service providers bidding on related contracts with the Treasury.
Reported by

There should still be enough interest to make the process of deciding which private firm will run President Obama’s myRA program competitive, says William Sweetnam, policy and legislation co-chair at Groom Law Group. He tells PLANADVISER that the bidding process will likely favor niche service providers that already specialize in low-balance individual retirement accounts (IRAs), such as those providing automatic rollover and cash out services for terminating pension plans, among others.

Sweetnam served as Benefits Tax Counsel in the Office of Tax Policy at the U.S. Department of the Treasury during the Bush Administration, and he closely tracks happenings in the department in his work at Groom.

Never miss a story — sign up for PLANADVISER newsletters to keep up on the latest retirement plan adviser news.

He says larger service providers tend to have business models that rely on clients building larger and larger account balances to offset administration costs and provide more attractive profit margins. The myRA proposal, in contrast, would limit account balances to a relatively scant $15,000. Once a worker reaches the limit, the balance will be rolled into a privately run Roth IRA.

According to explanatory materials published on the White House’s website, initial investment into a myRA account could be as low as $25, and contributions could be set as low as $5 per paycheck. Such small balances could make profitability difficult for many firms.  

Sweetnam is quick to add that concrete details about the myRA, which Obama proposed in his fifth State of the Union address, are still scarce and largely unfinished. He says the Treasury seems to be in listening mode and is actively soliciting meetings with interested parties across the business and regulatory landscape.

“I’m not sure whether they even have much of the real detail ironed out yet,” Sweetnam says. “They’re talking to the relevant financial organizations, the payroll service providers, the regulatory agencies, and they’re going to be working to develop the initial RFPs that will get the bidding process started.”

The administration has made it clear that it wants to start with a workplace myRA pilot program before year’s end, Sweetnam says, which means requests for proposals (RFPs) should be expected soon—probably in early Spring. He expects the pilot program to focus on establishing a system for funneling workplace payroll deductions into myRA accounts, with wider rollouts to the self-employed and other categories of workers coming later.

Sweetnam says his expectations for the myRA rollout are largely shaped by his experience leading the teams that provided they Treasury’s initial guidance for Health Savings Accounts (HSAs) and Health Reimbursement Arrangements (HRAs), which are both structured similarly to the Roth IRA.

“When we were introducing the HSA products, which are really built on the chassis of the Roth IRA, we had a lot of the small and mid-sized banks expressing the most interest,” he says. “I think you can expect to see more competition come up from there this time around.”

David Levine, also a principal at Groom Law Group, echoed Sweetnam’s predictions, both in terms of the program’s challenges and what firms are likely to join the bidding process. Levine tells PLANADVISER that there are still important questions to be answered in terms of how much financial support the Treasury is willing to put on the table to ensure workers contributing to a myRA face the lowest possible fees and expenses.

The smaller niche service providers that Levine and Sweetnam say are likely to throw a hat in the ring, for their part, are not especially well known for providing the lowest expenses to their clients. Still, Levine says the Treasury’s effort should be helped by the fact that a myRA’s chief investment vehicle will be the Government Securities Investment Fund, meaning it can ensure fees for the investment are minimal.

Levine says the Treasury and the administration have another reason to get the myRA program running by the end of the year.

“Next year is 2015, so if they’re going to run the data for the test project and then roll it out more widely, we’re going to be approaching the end of an administration by that point,” Levine says. “So you want to try and have something running sooner rather than later, so you’re not sitting there in 2016 rushing to get it out the door before the next administration comes in. Depending on the election, it could be someone with a different view on the program that takes over.”

Sweetnam agrees, adding that the issue is particularly pressing because the program is being launched not by an act of Congress, but on the President’s executive authority.

“What you want to do, if you’re the president, is get the program off and running and make sure it’s successful, so that the next administration can’t really come in and shut it down without an uproar,” he says.

«