2016 RPAY – Graystone – Cleveland/Pittsburgh

PLANADVISER: Tell us about your practice and how you and your team members got into advising retirement plans?
Graystone – Cleveland/Pittsburgh:
We a comprehensive investment consulting team that advises retirement plans, non-profit entities and other board-driven funds. We have been providing these services since 1987 but formally came together in 2012. Our team was formed as a way to harness decades of experience and provide this to our client base. We felt too often we were focusing on one side of the equation i.e. Defined Contribution while not discussing the defined benefit plan. By combining our talents, we now can provide a comprehensive solution to our end client advising the plan sponsor on their complete retirement package. We feel that our solution fills a void that is present in the marketplace because not many teams have experience advising defined benefit and defined contribution. This has helped us become the comprehensive advisor to plan sponsors.

PA: What is your mission statement?
GCP:
 We are tenured professionals dedicated to providing plan sponsors a high-touch, high-service approach which focuses on results while easing their administrative burden and increasing understanding. Our bespoke solutions are rooted in decades of fiduciary processes that advance retirement plan knowledge, increase legislative awareness, create lasting value and enhance the true benefits of retirement plans. Our dedication to retirement plans forces us to educate, to be educated and to seek further education.

PA: How is your team/process/structure unique? How has it evolved?
GCP:
 Our team is unique because of the breadth of our retirement plan expertise. Our Pittsburgh office has decades of experience in defined benefit plan risk management services. This includes a large Taft-Hartley practice as well as corporate and cash balance plans. Our Cleveland office manages the majority of our defined contribution plans. This team includes several credentialed former plan administrators that have worked in the recordkeeping industry.

This experience allows our consultants to support our clients as they work through complicated areas such as plan mergers, conversions, compliance and document issues.

PA: What have you done in the past year to improve participants’ retirement readiness?
GCP:
 In the past year, our team has worked to design/re-design retirement plans that will by default increase the likelihood of a secure retirement. We know that 96% of participants will not change auto-enroll/auto-escalate elections. We also know that target-date funds used as qualified default investment alternatives (QDIAs) assist with proper diversification. We call this type of default design “helmet laws”, meaning that if a participant takes no action on their own, there are guardrails to help prevent as many bad outcomes as possible.

Additionally, the rapid development of gap analysis by providers, both at the plan and participant level, allows a much better success measurement than just an ending account balance.

PA: Describe any particularly noteworthy initiatives you have led with your customer base in the past 12 months (investment, education, plan design or communication).
GCP:
 In the past year, we have actively recommended to our existing client base that auto enrollment and auto escalation be considered in connection with TDF default elections. We believe that this type of design is now a generally accepted “best practice” in 401(k) design. Other initiatives we have implemented have been independent plan benchmarking studies every two years and requests for proposal (RFP’s) every five years. Additionally, we have implemented pre-retirement education seminars for participants who are within five years of retirement.

In the defined benefit space, we have worked hard with plan sponsors to de-risk their plans, when possible. In most instances this has led to implementation of longer duration private investments and shorter duration liquid liabilities. This has been in contrast to the conventional thinking of adding traditional longer-dated corporate bonds.

PA: As a retirement plan adviser, what do you take the most pride in?
GCP:
 Because our team of consultants have been advising some clients for many years, we have been fortunate enough to become familiar with several client executives and plan participants. We take great pride is witnessing a participant, we have come to know, retire in a secure financial position. Also, providing solutions to ease the executive team’s administrative burden of maintaining a retirement plan (we call it “taking bad stuff off their desks”) gives our team a sense of accomplishment.

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PA: What are the most important issues that your plan sponsors face with their company retirement plan, and what specific actions do you take to assist them in overcoming those issues?
GCP:
Without a doubt, it is the increase in the regulatory environment and increased litigation.

Regarding increased regulations, we advise our clients to “outsource” as much of the disclosure, distribution and eligibility determinations to a qualified record keeper as possible.

We prefer to have these responsibilities formalized in a 3(16) representation or at a minimum an indemnification of the plan sponsor. Although we do not provide legal advice, we attempt to mitigate our client’s legal exposure assisting in the documentation and implementation of best practices at the investment committee level. This includes formal committee meetings, appointment/acceptance of committee members, independent benchmarking studies and consistent investment reviews.

For defined benefit plans, it is the mismatch that funding status rules have placed on short-term performance and long-term goals. To address these concerns we spend considerable more time focusing on asset allocation expectations and actuarial assumptions. To combine these items, we often present risk-based studies that focus on stress –tests and Monte Carlo simulations. In a world of lower expected returns, plan sponsors need to focus on not being complacent and should always be looking forward.

PA: How do you grow your business? What changes to your practice or service model are you planning for 2016?
GCP:
 We grow our business through referrals, requests for proposals and active networking. We are selective in the clients that we want to work with and approach because our approach is customized and requires a large amount of work and commitment from the plan sponsors. We are focused on certain voids we see in the current marketplace and attempting to provide solutions to these plans sponsors. For example, many single-employer plans are searching for de-risking strategies using LDI and ultimately get to a buy-out strategy. We work with these plan sponsors on a road-map and help them focus beyond the most recent quarter.

Our service model for 2016 is attempting to increase our use of technology for the betterment of our clients. This may be through more frequent communication, increased transparency or a way to lower costs.

BUSINESS AT A GLANCE

LOCATION: Hudson, Ohio
TOTAL ASSETS UNDER ADVISEMENT: $4.3 billion
MEDIAN PLAN SIZE (IN ASSETS): $48.2 million
TOTAL PLANS UNDER ADMINISTRATION: 57

2016 RPAY – Francis Investment Counsel LLC

PLANADVISER: Tell us about your practice and how you and your team members got into advising retirement plans.
Francis Investment Counsel:
 The team at Francis Investment Counsel LLC has been providing investment advisory and employee education services to qualified retirement plans since 1988. We are proud to say we continue to serve our first client to this day. Our team was initially developed while affiliated with a national brokerage firm and over a 15-year period was recognized as the firm’s top 401(k) advisory team.

In March 2004, in order to eliminate numerous conflicts of interest (e.g. shelf-space payments by mutual fund companies, the strong incentives to gather assets from retail investors, etc.), we formally severed ties with the national firm and established Francis Investment Counsel as an independent Registered Investment Advisor (RIA) focused solely on serving the qualified retirement plan marketplace. With no conflicts, clearly fixed fees, and decades of experience, Francis Investment Counsel continues to provide investment consulting and employee financial education and advice to plan sponsors and their participants.

PA: How is your team/process/structure unique? How has it evolved?
FIC:
Most advisers invent something unique about the way they run their businesses, yet when compared side by side, actual differences in services and process may be difficult to discern. Francis Investment Counsel breaks this mold. Our firm is unapologetically different in what we do.

We are truly unique in our exclusive focus on qualified plan consulting and plan participants, while not accepting individuals as clients for retail or wealth management purposes. We intentionally structured our firm in this manner to provide exceptionally objective advice to participants, while collecting a tremendous amount of valuable information that can help plan sponsors maximize the utilization of their retirement plans.

Our exclusive focus and conflict-free approach makes our client experience not only different, but also definably better. Plan sponsors and participants who have partnered with Francis Investment Counsel have the peace of mind that comes from working with a conflict-free advocate. They enjoy the certainty of expert Employee Retirement Income Security Act (ERISA) fiduciary advice from people they trust. This relational transparency shapes all parts of our service model, integrating the participant perspective into our proprietary research, plan governance process, investment menu construction, and overall cost management strategies. With the knowledge and experience gained from thousands of participant interactions each year, we effectively counsel our clients’ oversight groups, assisting them in designing a retirement benefit that truly meets the needs of their participants.

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While the financial services industry continues to evolve, Francis Investment Counsel stands out in the marketplace as a voice that has remained steadfast. We are unapologetically straightforward, continuing to deliver ERISA fiduciary advice that makes plan sponsors better employers and plan participants better family finance managers. While our services have modified to incorporate increased technology to reach out to greater populations, we remain committed to building relationships with people, through our people. The trust we build with our clients and their participants supports the advice we provide and the actions we facilitate.

Francis Investment Counsel is definably different in what we do: We connect the people we serve to the ERISA fiduciary advice they need. And we are truly unique because that is all we do.

PA: Describe a difficult client relationship issue, and how it was resolved.
FIC:
 Francis Investment Counsel was retained by a client for investment consulting and employee education. At the time of hiring, our client maintained a provider relationship with the same company for both lending and recordkeeping services. While the banking relationship was strong, our client experienced consistent problems and mistakes with the recordkeeping services. Our client initiated a vendor search in order to evaluate and potentially replace the current recordkeeper.

While our client was determined to run the vendor search internally, Francis Investment Counsel participated in a consultative role throughout the process. Per our recommendations, the client’s committee of finance and human resources professionals narrowed the search to five different providers. Upon completing the finalist presentations, the incumbent provider and one other remained in the final decision process.

It became evident during the decision-making process that a divide existed within the committee. Those members on the financial side of the business favored staying with the incumbent provider. They had greater exposure to the banking and lending relationship. Being a family-run company, they desired to remain loyal to a relationship that had remained steadfast for better or worse over the years. The human resources professionals on the committee were prepared to make a change. With frequent exposure to the headaches produced by the recordkeeping mistakes, they were ready to move on with a new provider who would meet the service standards they expected.

As the decision-making process came near a close, the CEO spoke to the committee as well, emphasizing there must be a compelling reason to implement a relationship change. The ensuing decision led to the retainment of the incumbent provider, with specific performance expectations outlined. The relationship was to be reassigned to the large market service model, and a new service team was to be put in place. Additionally, the committee established a one-year probationary period, where the recordkeeping services would be closely monitored. Within three months of installing the new service team, the mistakes at the recordkeeping level continued.

Concurrent with the recordkeeping search, our client was in the process of renegotiating its entire lending relationship. During these talks, it became clear to Francis Investment Counsel that the terms of this provider’s lending relationship were contingent upon the inclusion of recordkeeping services. Based on the vendor search process, this provider was more expensive than other options in the marketplace and had a well-documented history of service shortfalls. When the committee acknowledged that the service and price of the lending relationship was inclusive and dependent upon retention of the recordkeeping relationship, Francis Investment Counsel felt the need for a dramatic course of action.

The overt act of linking the terms of the client’s lending relationship to the decision of terminating or retaining the recordkeeping assignment put our client at risk of engaging in a prohibited transaction. Maintaining a plan service provider because of the further benefits this provider brings to other areas of the organization breaches the duty of loyalty to plan participants outlined in ERISA. While Francis Investment Counsel understood the value of a long and strong relationship between our client and the provider in question, we could not endorse retention of a recordkeeping relationship that was not motivated purely by the plan participants’ best interests.

In a final meeting with the committee and their CEO, we discussed the service issues experienced during the probationary period. We further discussed the potential of a prohibited transaction resulting from the dual relationship with this provider. We therefore advised our client to move forward in retaining the alternative provider identified in the vendor search process. In recognition of the situation and our role as an ERISA fiduciary to the plan, we further requested a letter of indemnification acknowledging our recommendation should our client choose to maintain the current provider relationship. Our client pushed back, refusing to sign the letter of indemnification. Confident in our recommendation, we informed our client that our ability to remain as their ERISA 3(21) fiduciary was dependent on their decision regarding the recordkeeping service provider. Francis Investment Counsel’s continued engagement was clearly at risk.

Ultimately, this organization decided to fire their banker and retain a new recordkeeper for the plan, preserving our partnership with them. Afterward, one of the committee members commended the “managerial courage” of Francis Investment Counsel’s relationship manager in leading these difficult discussions of fiduciary responsibility versus corporate interests with the committee and CEO throughout the recordkeeping evaluation process.

This difficult client relationship issue demonstrates Francis Investment Counsel’s commitment to the fundamental tenants of ERISA and willingness to put participants’ interests before its own.

PA: As a retirement plan adviser, what do you take the most pride in?
FIC:
 The “ah-ha moment” occurred in 1988, while helping a small manufacturer design and roll out its new 401(k) benefit to its employees. The financial services industry is really good at helping rich people get richer, but not set up to help average American workers ensure their financial security in retirement.

In this moment, the dream of Francis Investment Counsel was born: A firm solely dedicated to getting the necessary tools, training, and advice into the hands of the workers desiring to plan for a financially secure retirement.

We are most proud of how much progress, over the last 27 years, we have made fulfilling this dream. We created a Firm devoid of the common industry conflicts that make it so hard for workers to get good advice and have a well-designed benefit into which they can deposit their hard-earned savings. Each day, our advisers’ pride comes from the “lightbulb” moments in the eyes of plan participants, when they learn they CAN achieve their financial goals. Daily we are thankful for the opportunity to help Americans’ retirement readiness, one participant at a time.

With decades of experience, advisors with a missionary zeal to help the common worker, and complete objectivity that comes from the elimination of industry conflicts, we strongly believe Francis Investment Counsel is the best firm on the planet to help a retirement plan sponsor fulfill its fiduciary duties.

BUSINESS AT A GLANCE

LOCATION: Brookfield, Wisconsin
TOTAL ASSETS UNDER ADVISEMENT: $5.8 billion
MEDIAN PLAN SIZE (IN ASSETS): $27.5 million
TOTAL PLANS UNDER ADMINISTRATION: 72

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