In Practice September 26, 2018

PANC 2018: Practice Efficiencies

The importance of hiring the right people and managing their functions efficiently.

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Speaking at the 2018 PLANADVISER National Conference panel on “Practice Efficiencies,” David Griffin, founder and owner of Atlanta Retirement Partners, LLC, said that hiring the right people is the first step in achieving practice efficiencies. “When I started, I was doing everything myself,” Griffin said. “I realized I needed to supplement my weaknesses with someone who has those strengths in order to make me more efficient.”

Griffin found a candidate from a recordkeeper who was making six figures. He negotiated with them to pay them $65,000 and allow them to work from their house. The following year, he hired another person from Principal. This allowed him to focus on sales, while his staff handled Excel spreadsheets and requests for proposals (RFPs).

“Getting people in the right role improves client service,” he said. It also enabled him to move his profit margin from 30% to 60%, which then allowed him to lower his fees. Griffin also said he uses a Colby screening process to figure out people’s strengths. “This can help organizations be more profitable,” he said.

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Joseph DeNoyior, managing partner with Washington Financial Group, said he also uses Colby screens, not to hire people but to figure out how best to communicate with his staff. “It helps us to better manage human capital in order to best serve clients,” he said.

“Once every six months, we have every team inventory what they do every week,” DeNoyior said. “Our CFO then analyzes these functions to figure out what positions or services we need to fill.”

In addition to this, Washington Financial Group offers three different service tiers to clients. “This allows us to deliver consistent service,” he said.

Another way that the practice ensures that it can deliver consistent service should a team member be on vacation or out of the office is to have team members trade jobs for a day so that they can fulfill those functions. “It also gives them an opportunity to suggest how their peers could be doing their jobs more efficiently,” he said.

Another way to achieve efficiencies is to have multiple retirement plans operating off of the same platform, DeNoyior said. Likewise, Griffin said that “some recordkeeper providers allow us to cascade trades across all plans.”

Griffin also said that many retirement plan specialists are reluctant to use the resources available from recordkeepers. In his experience, these services, such as participant education, are very valuable.

In order to work more efficiently with its 15 recordkeeper partners, Washington Financial Group has created a catalog of the services they offer as well as a calendar of them should they roll them out, DeNoyior said. “We want to offer maximum touchpoints with minimum costs and turn the plan into an experience for participants,” he said.

Yet another way that Atlanta Retirement Partners, LLC and Washington Financial Group have found to be efficient is to outsource marketing. “It has been helpful for me to push that off of our desks,” Griffin said. “They have done a good job of keeping the pipeline filled with opportunities.”

Washington Financial Group’s marketing firm holds educational events, such as fiduciary training, to engage participants, DeNoyior said. The practice has also formed a speaker’s bureau and has been invited to events around the country to speak. This can lead to prospects, he said.

In Practice September 26, 2018

PANC 2018: Financial Wellness

The importance of measuring return on investment and addressing participants’ short-term needs.

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A recent PwC survey found that retirement plan participants’ top three financial concerns are insufficient emergency savings, not being able to retire when they want to and not being able to meet monthly expenses, said Michael Kane, managing director at Plan Sponsor Consultants, and moderator of the 2018 PLANADVISER National Conference panel on “Financial Wellness.” “People are stressed,” Kane said.

John Hancock Retirement Plan Services has conducted a financial stress survey for the past five years to uncover what, exactly, people are concerned about, said Lynda Abend, chief data officer with the firm. “Four out of 10 employees feel less productive at work because of financial worries, and this is costing employers $5,000 a year per employee,” Abend said.

The survey also found that 25% of people have no emergency savings, and 40% could not cover a financial emergency costing $500, she said. Thus, they are leveraging their credit cards and taking out loans. They are reluctant to tell their employers about their financial dilemmas because they feel there is a stigma attached to financial difficulties, she said.

“Financial wellness programs offer employers an opportunity to offer guidance to help individuals get on the right path, but they must be personalized solutions,” Abend said. “Advisers need to drill in to understand the needs of a particular company.”

Chad Brown, vice president and managing director of wholesale distribution at Transamerica said that the “conversation around wellness needs to go beyond finances. You need to learn about participants’ health habits, because they make financial decisions related to their health. Sixty-two percent of loans or hardship withdrawals from 401(k) plans are related to health expenses,” Brown said. “Eighty-one percent of people over the age of 65 have chronic health problems. Eighty-one percent of the participants we serve say they appreciate it when an adviser addresses their health issues.

“As a workforce ages, they are 14 times more likely to face higher healthcare expenses,” Brown added.

In order to get an employer’s buy-in into a financial wellness program, you need to demonstrate the measurable benefits to the employer, said Michael Domingos, vice president, national corporate strategy and distribution at Prudential Retirement.

Thus, nine years ago, Prudential started measuring its own financial wellness program and its impact on its employees and organization, Domingos said. In 2009, 35% of employees said they had some level of financial stress and were taking it with them to work. By 2017, Prudential reduced that to only 14% of employees and accomplished this through plan design (automatic enrollment at 4% with annual 1% escalations up to a 15% threshold), plus group and one-on-one meetings, he said.

In addition, for participants with child and elder care needs, Prudential increased benefits for them. The firm also began offering digital financial education.

For clients, Prudential now measures the cost of not offering financial wellness programs, Domingos said. One client, for example had 25% of its employee base, or 25,482 employees, distracted at work because of financial concerns. Of this group, 43% admitted they spent three hours or more a week addressing these financial challenges. Prudential calculated that this comes to 1.8 million hours a year in lost productivity.

“Find such a return on investment (ROI) measure,” he advised the audience. “Take this from an interesting conversation to something measurable.

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Tina Wilson, senior vice president, head of investment solutions innovation at MassMutual U.S., agreed that coming up with that ROI figure is key. “It is the way to align human resources and the chief financial officer around a common goal and getting them in agreement on the value of the financial wellness plan,” Wilson said. “If a participant says beyond their retirement date, they become a liability to the organization, costing $20,000 to $30,000 a year in presenteeism, workmen’s compensation and health care costs.”

But to resonate among participants, a financial wellness program needs to address their concerns. “Long-term savings has been our focus, but participants have short-term goals, such as emergency savings and balancing college savings and retirement savings,” Wilson said. “You cannot ignore them. And, give them guidance at an individual level.”

Because people like to learn in different ways, a financial wellness program also needs to take a “multipronged approach,” she added. “It should be a combination of digital tools, education and one-on-one meetings.”

Abend said that investment management firms have the ability to take financial wellness “to the next level by being predictive about who is most likely to take out a loan and to get in front of them before they make that decision.” Automatic emergency savings accounts would be one solution, Domingos said.

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