John Diehl, senior vice president of strategic markets for Hartford Funds, spends a lot of time talking and strategizing with retirement specialist financial advisers; in a sense he is an adviser’s adviser.
Recently, Diehl sat down for a wide ranging conversation with PLANADVISER, following up on a previous interview he offered in February, when U.S. equity market volatility came back onto the scene in a big way. In part one of the follow-up discussion, Diehl addressed the most recent bout of market volatility and how advisers and their clients have responded. After that, the conversation moved to the always timely subject of boosting practice differentiation and client satisfaction.
PLANADVISER: In your position speaking regularly with retirement specialist advisers about their growth and client retention strategies, do you see evidence that advisory services are becoming more “commoditized,” similar to the way some argue that recordkeeping services offered by various providers have become less differentiated over time?
John Diehl: For retirement plan advisers, it is certainly a challenge to differentiate themselves from their competitors, but they are not sitting back and passively allowing their business outlook to deteriorate. One way that I have seen firms have real success building a unique and powerful brand is by providing insights and ideas that are not just specifically attached to the retirement plan. They are plugging into all the other challenges that plan sponsors and HR benefits professionals are facing, and bringing to bear solutions and strategies that go beyond traditional DC or pension plan consulting. They are able to demonstrate how the retirement plan and all the other benefits and HR issues run together—helping to customize and maximize compensation and benefits in a holistic way. Leading retirement plan advisers are playing a role in helping employers to confront their broader workforce challenges.
PA: It is interesting to hear you say that, working as you do with many different advisory firms. How do advisers think about doing this work in terms of compensation and allocating staff resources? This might not be a direct way for an adviser to make a whole bunch of extra money, engaging in these non-investment related conversations, but it is something that can really increase client confidence and loyalty, isn’t that right?
JD: Yes, I do think that is right. Both in the retail investment advice space and in the DC industry, there is an understanding among advisers that strong investment performance has been commoditized. It is not that delivering strong returns is not important—it is just expected. And so advisers cannot simply talk about strong investment returns and expect to win a lot of new DC plan or retail clients.
In the retirement plan space, especially, where the RFP and RFI process continues to become more important, many advisers are trying to find ways to separate their offerings from what their peers are putting forward. They all can help deliver powerful automatic plan features and all the other bells and whistles associated with DC plans these days. Where there is opportunity to break out of this commoditization and to do something unique is to do what we just talked about—to expand your subject matter expertise and your capabilities, either internally or through partnerships, to help employers manage their employees’ broader financial wellness.
In addition to doing the traditional elements well—investment performance and fiduciary oversight—the adviser is now being called on to have broader conversations about education, wellness and workforce management. Advisers may be called on to discuss tax optimization, Social Security, retirement income solutions, you name it.
PA: Speaking of partnerships, I understand your role at Hartford Funds includes overseeing the relationship with the Massachusetts Institute of Technology (MIT) AgeLab. The relationship has existed for a few years now. How has that partnership been going?
JD: I’m glad you asked about that, because the relationship is going great. We are doing a focus project right now in fact that will be of interest to your readers, where we are analyzing the ‘workplace in transition.’
As a sneak peek, I can tell you we are looking closely at labor force participation numbers, and we are seeing evidence to the effect that most of the older age groups in the workforce are growing at a pretty incredible rate. I’m talking about the over-age-65 and over-age-75 worker populations. Relative to the 2004 representation figure, the 65-to-74 group is projected to grow through 2024 by 4.5% per year. The over-age-75 group is projected to grow during that timeframe by over 6.5% per year.
Obviously these numbers are coming off a smaller base of people relative to younger groups of workers, but the evidence is clearly showing a real shift in the workforce dynamics. I think we can tie this to the fact that defined benefit plans have diminished and taken away the finish line that used to exist for a lot of people. Now with DC plans being more important, there is more of an open understanding of what it means to age in the workplace. Employers must take this into account and adjust their compensation, workforce recruiting and retention strategies.