The discussion, which took place at the PLANADVISER National Conference in Orlando, Florida, began with Elaine Sarsynski, executive vice president of MassMutual Retirement Services Division and chairman at MassMutual International LLC, commenting on the roles an adviser must fulfill. While the typical adviser is expected to earn new sales while retaining current clients, many advisers must offer more varied services, such as those of a plan health expert. Plan health experts work with sponsors and employers to “help the participants take action so that they do end up with a relatively strong replacement income in retirement,” said Sarsynski. In providing this service, advisers can add value to their services.
Going into further discussion on an adviser’s value proposition, Tom Skrobe, managing director and head of BlackRock Defined Contribution (DC) Distribution at BlackRock DC, noted that it is important to go beyond the “Three F’s” of funds, fees and fiduciary to look at plan goals. “You bring so much more to the table when you partner with the plan sponsor and help set the objective for the plan,” said Skrobe. “The best thing about this business is each company, regardless if it’s large or small, has unique cultures, unique participant demographics, and your role is not to be a cookie-cutter provider, but actually you have to tease all that out to develop crisp objectives so participants can have successful outcomes.”
A focus on participant outcomes is critical for plan health, and this focus can be aided by proper benchmarking, according to John Galateria, managing director and head of defined contribution investment solutions at J.P. Morgan Asset Management. “When you see the opportunity out there to drive plan design and innovation around outcomes … versus pure benchmarking, it’s very significant,” he said, adding that good dialogue is key to successful outcomes. Galateria noted, “The best advisers in the industry—and certainly all of you that are very focused on the DC marketplace—are going to have to drive sponsors to these innovative solutions that the industry, and you all, are coming up with to produce better outcomes.”
Objectives should be set at the sponsor-level, Sarsynski said, and these objectives will change depending upon the type of company you work with and that company’s participant demographics. Advisers need to be able to analyze their clients to understand what tools they need and if they can afford them. Sarsynski encouraged advisers to ask sponsors what percentage of participants are on track to retire with significant replacement income. She noted that you add value to your services beyond the standard responsibilities of an adviser when you are able to pinpoint that real percentage and offer tools, participant action campaigns and education to help bring that number up.
Regarding target-date funds (TDFs), Galateria noted the importance of understanding and defining risk in the target-date space, along with what a sponsor defines as the best option. Again, communication is key when helping sponsors and participants understand these funds. “How do you engage not only with the sponsor as you’re building out the lineups, but importantly with the participants so they have an understanding of what they’re purchasing?” Sarsynski asked. “Many times they don’t.” She also noted that few advisers offer custom-date funds, where advisers work with providers to help sponsors build their own funds, adding to the value of having an adviser and helping those advisers to differentiate themselves. Skrobe, encouraged by the number of panel attendees who offered TDFs, said, “Target-date funds are not ‘set it and forget it’ plans. They are very complex, and it’s a big role that advisers play to make sure that the appropriate strategy is put in place with the plan sponsor.”
Galateria discussed the importance of helping sponsors trim down their investment menus to have options that make sense to the participants when they try to make a decision. “When you look at participant behavior and what they’re able to grasp, one behaviorist said that the categories have to make sense to the choosers, not to the people who build the categories,” Galateria said. “Getting a core menu down to something that participants can utilize effectively is really part and parcel to being a valued partner in this investment selection area.” Skrobe agreed, noting that being an effective adviser often requires speaking your mind to help sponsors understand why too much choice is often a bad thing.
The panel ended on the topic of saving habits, with Sarsynski noting that it is often more important to look at savings rather than the investment a participant is in, though this often varies through generations. At this point, younger generations like Generation X and Millennials should maintain a focus on saving rather than specific investments. Regarding advice and tools for individuals just starting their careers, Sarsynski said it is most important to encourage saving early and to make sure they know “they will get old.” This is not the case for Baby Boomers who do not have room for risk. Rather than focusing on saving, an adviser should focus on educating Boomers on post-retirement options, such as part-time work and social security benefits.