PANC 2012: Participant Education and Advice

Sponsors and participants may be ready for the concept of “financial wellness,” speakers told the 2012 PLANADVISER National Conference.

At a time when people have become so conscious of managing their budgets and reducing their debt, now may be the perfect time to offer 401(k) plan participants education and access to advice—all in the name of “financial wellness,” said William Chetney, executive vice president, LPL Retirement Partners. “Just as health wellness began to catch on with plan sponsors in recent years, financial wellness is beginning to create a lot of resonance,” Chetney said.

“The 401(k) plan is the best available vehicle for the accumulation of wealth,” Chetney said. “Remaking the industry to help our children to be financially literate is an opportunity and a responsibility. We should be talking about debt reduction along with 401(k) savings.”

The best way to convince a plan sponsor to agree to offer participants advice is to let them know it is available, said Richard Schwamb, premier retirement benefits adviser, Merrill Lynch. “We don’t charge anything for advice access. You really need to talk to the plan sponsor. Some of them don’t want you prospecting their participants for other financial issues. So, we do a soft sell and ask the plan sponsor what they want.”

Otto G. Feddern, president and CCO, Feddern Financial Consulting Group, takes a more dogmatic approach. “We tell the plan sponsor that this is what we do—we offer individual advice that every participant has access to through our website on a daily basis.”

Education and advice have failed to prompt participants to make the right investment choices and save enough, but auto enrollment, auto escalation, scaled-down investment platforms and target-date funds have done a tremendous job at picking up the slack, Schwamb and Chetney agreed.

Making participants realize the seriousness of saving for a dignified retirement outcome is another successful approach to education, Schwamb said. “I am honest with clients about what they are going to face in retirement,” he said. “I started doing that five or six years ago, and at the end of the story, you tell them what they have to do.”

At the end of the day, higher savings rates trumps all, Chetney said. “If I can get people to put in 10% rather than 6%, that is the win,” he said. “That kind of relationship develops over time, over personal relationships.”