2015 RPAY – The Ratay Group at Morgan Stanley

PA: What is your mission statement?

The Ratay Group: To bring peace of mind and confidence to retirement plan sponsors and participants. 

PA: How is your team/process/structure unique?

RG: We are a big believer in uncomplicating the complicated. Both plan sponsors and participants appreciate the detail we go into with our investment due diligence, and they really appreciate how we communicate that performance with pictures. We focus on teaching the participant what really matters: saving money. We also ensure that participants understand how investments such as target-date funds (TDFs) work and that they are comfortable with the decisions they make. 

PA: What have you done in the past year to improve participants’ retirement readiness?

RG: We feel improving retirement readiness is a three-step process. First, we want to get participants into the plan by implementing automatic enrollment at a 6% deferral rate. Second, we want to get all participants into a fully diversified portfolio. Through Morgan Stanley’s vast resources, our global investment committee creates a customized target-date glide path that fits the unique needs of the client’s employee base. We not only believe we can achieve better returns than off-the-shelf target-date funds, we are also able to help our plan sponsors fulfill their fiduciary duty to properly select and monitor an appropriate TDF.

The final and arguably most important step to truly being able to have a successful retirement is to get participants to increase savings to 10% and even 15%. Using an auto-increase that coincides with the company’s annual raises and dedicating entire days on-site for group and one-on-one education meetings are the main drivers of increasing contributions. During our one-on-one meetings, when we go through the retirement tools on the provider website, participants almost always walk away increasing their contributions. 

PA: Describe any particularly noteworthy investment initiatives you have led with your customer base in the past 12 months.

RG: Through the Morgan Stanley Global Investment committee, we are able to provide eight risk-based models as well as three TDF glide paths. Each of our models is constructed to minimize the risk of having insufficient means to support income in retirement, due to poor asset allocation. Each is built to hedge risks that may be largely mitigated, such as the risk of an unfavorable sequence of market returns, and to strike efficient trade-offs between the risks that cannot be mitigated, such as market and longevity risk. 

In addition, Morgan Stanley will sign on as either a 3(21) or 3(38) fiduciary. By delegating investment management to our group and Morgan Stanley, plan sponsors are no longer responsible or liable for individual investment decisions related to their plans.

PA: What are the most important issues your plan sponsors face with their company retirement plan, and what specific actions do you take to assist them in overcoming those issues?

RG: We think they are the same as in the past: getting employees to save, invest and spend their retirement money wisely. In the past, companies did everything for participants, through defined benefit (DB) plans. They saved, invested and provided a monthly check. All that participants had to focus on was doing their jobs. Today, employees need to decide what is the appropriate savings rate, choose their investments and allocations, and determine how much to withdraw in retirement. Most people lack the knowledge, expertise, resources or time to make those decisions. 

Our goal is to make the 401(k) more like a defined benefit plan, by using automatic enrollment, auto-escalation, a customized TDF as the qualified default investment alternative (QDIA) and, eventually, a lifetime income option. The participants invest in a professionally managed and diversified portfolio, continue to increase their savings and, when retirement comes, have a guaranteed monthly income amount, all without the complexity of the typical 401(k).