PLANADVISER: Tell us about your practice and how you and your team members got into advising retirement plans.
Steven Glasgow: My career in the investment industry started in 1989 as basically a cold caller with Capital Analysts Inc.; an insurance brokerage that focused on “business succession planning” – calling on successful closely held business owners with the idea of helping with buy sell, estate tax and other insurance needs. At the time, there was some discussion of the fledgling 401(k) market being a business we should look at; 401(k) plan administration was largely being done by insurance companies and I personally viewed it as a way to talk about something that was much more interesting to me at that time than insurance.
My tenure with Capital Analysts Inc. was short lived as I took a position in the Municipal Investment Banking group of PaineWebber, which had a trading operation in Orlando. I spent five years in the municipal bond business, and after receiving an MBA and starting the CFA curriculum, I was recruited to Nashville to join what was then the highest-commission-producing broker in the country for PaineWebber, to focus on institutional fixed income sales trading. The business model included middle-market coverage of some very large institutional accounts, including banks, insurance companies, and asset management firms. The business was fueled in part by “directed brokerage”; the Nashville practice had some very large defined benefit plans as clients for which our team did investment consulting, and the asset managers were asked by the plan clients to transact business with us as a compensation offset to hard dollar advisory fees.
One client for which we had done exceptional work on their Defined Benefit plan (Service Merchandise) asked us to review their 401(k) plan, and I decided that it was probably worth the foray into the DC plan business.
Ultimately, we moved the plan to a new recordkeeping platform which was “open architecture”, but because the company had a very detail-oriented outside ERISA counsel, I had to learn a lot of things about the recordkeeping industry, like prospectus delivery requirements and the arguments about what qualified. In the process, we also created the first advisory contract within Morgan Stanley (the team had moved in 2000), where we rebated 12b-1 fees back to the plan for administrative cost offsets. That involved even deeper discussions about ERISA, fiduciary liability, and a host of other topics.
Once that project was complete, it only seemed natural that we being to actively pursue other opportunities in the Defined Contribution space. I left Morgan Stanley in 2004 to join Wachovia Securities with a new team and expanded greatly my 401(k) advisory practice. Wachovia went through some substantial changes with the AG Edwards Merger in 2007, and for a number of other reasons decided that I (with several staff people) had to leave.
Desiring to work as a fiduciary limited the number of firms that we could work at, and ultimately I and another adviser founded the investment consulting platform for Avondale Partners, which had been a successful local investment banking boutique in Nashville for years prior to our arrival.
PA: What is your mission statement?
SG: We work with all the constituents of a plan to ensure a “successful plan experience”; provide more clarity and certainty of outcomes for both participants and the fiduciaries that bear the responsibility for providing those plan benefits.
PA: How is your team/process/structure unique? How has it evolved?
SG: As my practice has matured, I have made a concerted effort to move away from the traditional “silo” approach used by many of my competitors by embracing a more collaborative structure that encourages each team member to have ownership in all aspects of a client relationship. Historically, I found the traditional dynamic, which is driven by a “mine is mine and yours is yours” philosophy, leads to a less successful client experience by encouraging my support staff to focus only on their specific role or client assignment.
While assigning specific roles based on individual skillsets and expertise remains important, I have found that the key to a successful practice is to make sure everyone has ownership of the client experience. To foster this, I have found it necessary to not only invest in the development of others, but to create an incentive structure that ensures everyone shares in successes and failures, regardless of their role.
The main conduit for these incentives was to eliminate the subjective nature of bonuses and compensation based on metrics and/or subjective evaluations like performance reviews. Rather, a portion of all compensation is a negotiated percentage of total revenue that will change as the business grows. By eliminating the subjectivity and uncertainty associated with a periodic bonus, our internal culture has become less focused on individual accomplishments, which was historically an issue, and more centered on successful client experiences.
Also of note, the new compensation structure has led to increased retention of support staff, which has greatly contributed to increase client satisfaction and overall growth.
PA: What do you need to be successful? From your team? From your clients?
SG: The single word is accountability. The team needs to take ownership of our clients and their issues; the reason we are hired is because we help solve issues. Those issues can be with third-party vendors, with investments, with plan designs, etc. In order for this to work, our clients need delivery of our services as if we were part of their company.
Plan success also requires our clients to respond to our work appropriately and to take ownership of that plan success just the way we do. Ultimately, both the team and our clients need for me to take accountability for ensuring that I am leading effectively.
PA: What do you consider the most significant challenge facing retirement plan participants? Facing retirement plan sponsors? Facing retirement plan advisers?
SG: Participants– Engagement. As an industry we have done much to “automate” the savings and investing process, however, most participants are still woefully under-engaged and clearly don’t understand the implications of their savings (or lack thereof).
Retirement Sponsors – Understanding the role they play in the bigger picture of the public policy question about retirement readiness for their participants. Many sponsors view the retirement plans from the perspective of the attraction and retention competitiveness paradigm. That focus ignores the bigger picture of how better structures, more attention to fiduciary issues, and more generous match structures actually benefit their own shareholders, and more importantly stake holders.
Advisers – I view the most significant challenge facing advisers coming from the political and regulatory sectors. The push under the last administration to socialize private retirement plans may have abated somewhat, but it hasn’t gone away completely. In an effort to promote that message, advisers are often characterized by agencies such as the DOL as being unnecessary and expensive.
On the other side of the political spectrum, the push for significant tax reform could have significant implications for the attractiveness of these plans and, by extension, have a very negative impact on the opportunity to service this market profitably.
PA: How do you react to clients or prospects who don’t share your goals for their retirement plan?
SG: First, it’s important NOT to react. We believe that our job is first (as we say in our mission statement) to promote “plan success” as it is defined by the sponsor of the plan.
Often what seems obvious to the adviser is not necessarily so; we don’t always see the other moving parts that motivate a sponsor to be more or less generous, to be willing to change plan structures, etc. We need to first make sure we are clear in the objectives as defined by the client.
Once we have established a relationship of trust and competence, we can try to encourage change where we think it would be beneficial for all the parties involved – especially plan participants.
PA: How do you grow your business? What changes to your practice or service model are you planning for 2017 and beyond?
SG: Growth has come through a number of channels, but none as effective as referrals from former clients as well as centers of influence. such as attorneys and CPA firms. We will continue to cultivate those channels aggressively in addition to expanding our direct outreach programs, including more seminar/symposium type of events locally.
Our initial thoughts regarding changes include the need to add another service person to the team; as our business grows we are constantly challenged to keep up with maintaining our standards for client service.
We probably will decline any future unsolicited RFP requests. Our experience here is that when we receive these, if we aren’t already engaged in some way with the prospective client, we are simply being “used” because it will look good to have us in the mix at the end.
Our focus as we go later into 2017 will include a much more robust discussion with our clients and prospective clients around the idea of financial wellness.
BUSINESS AT A GLANCE:
Plan assets under advisement: $1.85 billion
Median plan size (in assets): $5.6 million
Total plans under administration: 27
Total participants served: 60,000