PANC 2017: Maximizing the Workplace Savings System

Retirement plan advisers are in a unique position to help working Americans build wealth and a sense of security and dignity when it comes to thinking about long-term finances. 

Talking about his new book, “From here to Security – How Workplace Savings Can Keep America’s Promise,” Bob Reynolds, president and CEO of Great-West Financial and Putnam Investments, urged advisers to “fight to create a new sense of a true People’s Capitalism.”

Reynolds spoke on the second day of the PLANADVISER National Conference in Orlando. What he means by advocating for a “true People’s Capitalism” is the idea that not enough Americans have access to the financial markets, particularly in the form of tax-advantaged workplace retirement savings plan—and this needs to change.

“We know that the more savings you have in a society at large, the faster the growth rate of the overall economy,” Reynolds explained. “This seems counterintuitive because the invested retirement dollars are not going straight to consumption, but the growth comes because the money is injected right into the capital markets, and this, in turn, spurs on the economy. Talking about ‘Peoples Capitalism’ means building a direct link from the retirement planning conversation to the growth and stability of the economy. We should all be able to participate and benefit from the markets.”

As described in Reynolds’ new book, there is ample evidence to show that, should providing at least basic access to tax-advantaged workplace retirement savings be mandated for all employers, there would be some $5.5 trillion in additional savings injected into the capital markets over just the next decade.

“I don’t have to explain that such a large amount of additional investing would be a tremendous impetus for boosting growth,” Reynolds said. “This is why I am fully in support of things like open multiple-employer plans, as well as universal access in the workplace to payroll deduction individual retirement accounts.”

Turning to the potential role of the advisers in attendance in promoting Peoples’ Capitalism, Reynolds observed that “every study we’ve done on the subject shows the clear value of advisers in this whole business.”

“When there is a skilled plan adviser in place, we very reliably see participation levels go up, contribution rates go up, and annual returns go up,” Reynolds said. “And so, we know the role of advisers in the business has been greatly successful and we need to continue this.”

He also repeatedly urged advisers to get in constant contact with their elective representatives and stress the crucial importance of protecting tax-advantaged retirement investing. It goes without saying that the less generous the tax benefits associated with workplace retirement savings are, the fewer the number of people who will be attracted into the system in the first place. Sure, there are analyses that show that after-tax retirement investing can still be very powerful for long-term wealth generation, but just as important are the optics and the message being sent by legislators.

“If the government weakens tax incentives to save, I am confident that fewer people would save, it’s that simple. Everyone in this room should be on the phone with their Senator and Congressperson telling them to leave retirement alone, regularly,” Reynolds concluded. “We need to make it clear how our industry works and that our savings are enjoying tax deferrals, not credits. I can tell you right now that tax-advantaged savings are being discussed as a source of revenue. We’ve all heard of ‘Rothification’ … I believe this is a real threat. It discourages younger people from participating and lowers how much they contribute. We must be very active.”