PANC 2014: Executive Roundtable

A poll taken during an executive roundtable panel at the 2014 PLANADVISER National Conference found that 86% of attending advisers look to work force retirement readiness as an important benchmark.

Elaine Sarsynski, executive vice president of MassMutual’s retirement services division and a member of the panel, said this is a huge improvement over even the recent past. Formerly, many retirement specialist advisers viewed their primary job as building a solid investment menu that would benefit those employees who happened to engage with the plan, Sarsynski said. Many advisers in the space also commonly focused on participant education meetings as a primary value-add, despite a preponderance of evidence showing that participants struggle to absorb challenging investment and savings information from infrequent adviser training sessions.

Today, most retirement specialist advisers understand the investment menu is only a piece of their value proposition for sponsors, Sarsynski said. They also grasp that the emergence of ever-more-sophisticated portfolio management technologies will make it harder for advisers to rely solely on investment consulting as the core of their business. The emergence of extremely popular prepackaged investment vehicles, especially target-date funds (TDFs), also call the traditional investment focus into question—though it is likely advisers will still be called on to help sponsors evaluate and monitor such funds.

Chip Castille, another panelist and head of BlackRock’s U.S. retirement group, agreed with that assessment. He suggested that, not only is improving work-force retirement readiness the right thing to do for participants, it will also be a critical component of winning business in the future.

Sponsors increasingly are demanding tools to benchmark retirement readiness, Castille added, pointing to his firm’s CoRI Indexes—short for cost of living in retirement—as an example. He noted that the CoRI Index tools were released last year and have since grown to be the second most popular Web tool or website across the entire BlackRock digital domain. He said advisers can use the tools to help demonstrate how they positively impact plan performance.

Sarsynski pointed to her own firm’s release of a line of “planalytics” technology as yet another move aimed at meeting plan sponsor demand for better insights into the retirement readiness outcomes of participants in their retirement plans.

 Tim Walsh, managing director of institutional product and portfolio management for TIAA-CREF, and a panelist on the executive roundtable, said that advisers can use these types of tools to “change the game on the way people are thinking about successful retirement plans.”

“It’s no longer just about having as many five-star funds on the menu as you can,” Walsh said. “We know that the fund lineup does very little to improve the plan outcomes if participants aren’t saving enough of their annual income. So today it’s about getting participants to save more.”

The panelists agreed that advice given directly to employees will likely always remain an important part of the retirement specialist adviser’s work and that this advice can be extremely helpful for at least the minority of plan participants willing to listen and engage. In fact, Walsh said that among TIAA-CREF participants who sit down for one-on-one meetings with an adviser, a full 25% increase their savings by 10% or more.

But today, sponsors increasingly want strategies to help the other 75% of people who either do not use their plan at all or use it ineffectively. The panelists said sponsors are paying more attention to these unengaged participants for a number of reasons. For example, sponsors appear to realize that, as the defined contribution (DC) system matures, there will likely be a class of employees who fail to use their retirement plan options effectively and so will be completely unable to retire. As a work force ages, the panelists agreed, health care premiums go up and other adverse consequences likely arise.

This is where the new frontier of adviser value-add services comes into play, empowered and enabled by the Pension Protection Act of 2006 (PPA), Sarsynski said. Advisers and sponsors now have much more leeway to take critical retirement planning decisions essentially out of participants’ hands. 

“As an industry, we are starting to realize that probably more than two-thirds of the success of an employer’s retirement program has to do with the plan design,” she observed. “And it’s clearly the auto-enrollment and auto-escalation that are having a monumental impact on things such as participation and average deferrals. And a good QDIA [qualified default investment alternative] is obviously important, as well. The other third absolutely is building participant engagement. But, again, making it easier and more effective to save is key, and that’s accomplished through good design.”

Looking ahead, the panelists all said they expect more and more attention to be paid to the “back end” of the defined contribution system—how participants draw down their accumulated savings. Each said their respective firms are working on innovative annuity-type products and other strategies to help participants spend down assets in a sustainable way. They also urged attending advisers to push regulators for more guidance and safe harbor protections related to in-plan lifetime income products.