The Meaning of Success
When selecting our annual PLANSPONSOR Plan Sponsors of the Year, many times we find they have an adviser who is instrumental in convincing them to make plan-design changes. In this issue’s cover story, “A Leg Up,” we showcase 10 of those Plan Sponsor of the Year winners and finalists to show how their plan advisers helped them make dramatic improvements. They achieved success through automatic enrollment at rates as high as 6%; automatic escalation at 1% to 2%; re-enrollment; use of custom portfolios, managed accounts and target-date funds (TDFs); a switch to lower-cost funds; a reduction of fund lineups; and customized retirement-preparedness projections that show participants their retirement benefits at age 65. In every case, the sponsors display sincere interest in their participants’ circumstances, and their advisers take an active role in the plan. These stories of success encourage plan advisers to determine how to have tough conversations with their plan sponsor clients when necessary—realizing there are any number of ways to improve plans.
Complementing this idea is the feature “Boosting Results.” It could be “behavioral finance for plan sponsors,” in that advisers share ways to convince sponsors to overcome their hesitations and objections—and thereby improve plan design. Oftentimes, advisers find that, to work harmoniously with their plan sponsor clients, they cannot push too hard for change. However, when they present all the options available, and the costs and benefits of each, sponsors generally are more receptive to making changes that will improve participants’ retirement readiness. Certainly, one way they can grasp the implications of change is when they are shown real-life examples of other sponsors in the same or similar industries that have taken the leap of faith.
Financial wellness has become a new buzzword we are hearing from many providers. In “Healthy, Wealthy and Wise,” we explore how financial wellness programs aim to change financial behavior while addressing the root causes of financial stress and mismanagement. As opposed to general financial education, financial wellness programs give employees specific action steps they can take to develop better financial habits and behaviors, starting with creating a financial plan. Instead of focusing solely on retirement, they address participants’ many financial goals, such as paying down student debt, saving for a mortgage or creating an emergency fund. And, increasingly, companies are pairing the idea of financial wellness with physical wellness—bolstering the message of each and streamlining their communications.
Have you worked with an Employee Retirement Income Security Act (ERISA) attorney lately? Do you have one you can reach out to with questions, or for support? “Leveraging ERISA Attorneys,” lays out numerous ways these professionals can aid you in your practice, starting with protecting your firm and helping you make presentations to prospective clients, to growing your value-add through such measures as offering a managed account or custom target-date fund. Advisers do not need to hire an ERISA attorney in-house or even as a consultant; many recordkeepers provide compliance support and access to them.
We dedicate this issue’s Capitol News column to the Department of Labor (DOL)’s watershed fiduciary proposal. The proposed redefinition would increase the number of advisers and brokers required to act as fiduciaries for plan sponsors and participants, as well as the types of services and product recommendations that fall into the domain of fiduciary advice, and it would supersede and replace ERISA’s current five-part test for determining whether a person or entity is providing fiduciary investment advice.
As always, we welcome your feedback—especially your reactions to this critical proposal.
DCIO Managers
Our research in this issue focuses on defined contribution investment only (DCIO) managers (see “Sizing the Market”). The 37 managers on this year’s list, up from 36 last year, enjoyed a nearly $230 billion (8%) increase in assets from year-end 2013 to year-end 2014—not to mention a $63 billion (2%) increase in just the three months between December 31, 2014, and March 15.
The research also looks at what percentages of DCIO managers’ assets are invested in stocks, bonds, asset-allocation funds, stable value funds and money market funds, as well as the type of vehicle—be it mutual funds, collective investment trusts (CITs) or separate accounts.
Additionally, the research complements our 2014 PLANADVISER Retirement Plan Adviser Survey, which looks at the top three criteria advisers use when selecting funds for a plan, starting with performance vs. benchmarks, followed by five-year and one-year returns.