What’s Next?

Art by Victo Ngai

The history of participant-directed plans tells us that most participants end up saving too little for retirement and lack a solid understanding of investment options on the plan menu. Automatic enrollment, automatic escalation and qualified default investment alternatives (QDIAs) were developed for employer plans, given this behavior. There’s another behavioral topic gaining attention in the industry, and it’s a natural extension of the emphasis on financial wellness. Advisers are beginning to work with clients to encourage employees to save outside the retirement plan. “Foul Weather Fund,” our cover story by Judy Ward, addresses three types of solutions for payroll deferral into emergency savings that, in the end, will help participants avoid using retirement account funds to pay for unexpected expenses.

Industry experts say developing a succession plan is one of the most important steps registered investment advisers (RIAs) can take. The pace of mergers and acquisitions (M&As) in the retirement plan advisory space keeps this top of mind in many practices. In “Employee-Owned,” an alternative succession plan for advisory firms is discussed: selling the business to the employees in the form of an employee stock ownership plan (ESOP). While some business sectors with relatively high turnover may not make great ESOP candidates, financial services firms such as RIAs can, says the National Center for Employee Ownership (NCEO). John Manganaro profiles Ellwood Associates, a Chicago advisory firm that has leveraged the ESOP structure.

Another topic in the succession-planning discussion is internal succession, plus having financial advisers better reflect the participants they serve. In “To Surmount the Gender Gap,” we focus on strategies for bringing more women into the financial advisory business and for breaking old school rules that women in this field fit best in operations.

Administration and compliance for nonqualified deferred compensation (NQDC) plans are very different than for qualified retirement plans. Plan sponsors new to these plans typically don’t understand, for instance, that benefits payable under an NQDC are a liability on their balance sheet; further, if they informally finance their NQDC plan by purchasing some kind of asset, this needs to be recorded on the balance sheet, as well. In Regulatory Radar, Rebecca Moore reports on how plan advisers can help NQDC plan sponsors administer these plans properly and stay in compliance.

Also of note in this issue is David Kaleda’s timely column on “Cyberfraud.” Two recent cases alleging breach of fiduciary duty under the Employee Retirement Income Security Act (ERISA) in connection with the distribution of participant account balances in defined contribution (DC) plans highlight the compliance and litigation risks associated with plan losses. The question is: Must a plan’s security policies meet the duty of prudence?

Lastly, the much anticipated 2019 PLANADVISER Practice Benchmarking Survey, introduced by the story “Built From the Ground Up,” is the second part of our annual research on adviser attitudes and preferences. Retirement plan advisers weigh in on the foundations of good practice management.

We always look forward to receiving feedback. Write us at Editors@issmediasolutions.com.

The staff of PLANADVISER wish you, our readers, a joyful holiday season!