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PLANADVISER: Tell us about your practice and how you and your team members got into advising retirement plans.
Washington Financial Group: Since 1983, when our firm was founded, businesses and organizations of all sizes and across industry sectors have trusted us with their retirement plan needs. As an independent advisory firm, we are both vendor and investment neutral, helping to ensure transparency across all aspects of our clients’ plans as we strive to help improve desired plan and participant outcomes. We are a member firm of Global Retirement Partners, enabling us to serve as ERISA fiduciary advisers as we seek to improve retirement readiness for employees and enhance the overall effectiveness of our plans.
WFG is a founding member firm of Global Retirement Partners (GRP), a Registered Investment Adviser. GRP brings together experienced retirement plan advisers from across the country to help plan sponsors manage their obligations and provide unbiased advice. WFG and GRP have thoughtfully and strategically chosen an affiliation with LPL Financial as their broker-dealer because of their resources and presence as one of the largest national networks of elite retirement plan-focused advisers.
Our organization has deep roots in the qualified plan business; our founder’s father was involved in the establishment of ERISA as a subject-matter expert during the formation of regulations impacting qualified plans.
Our firm’s passion to increase savings rates of Americans can be traced to 1991, when Joe DeNoyior read an article about the great retirement crisis on the horizon. One statement hit his core and set him on a mission to make an impact: America is the one of the wealthiest nations while working, but too many people retire at near poverty levels. From that day forward, everything WFG does in the retirement plan space is focused toward enhancing the retirement benefits of our clients’ employees.
If those of us in the 401(k) business would start helping our clients look at their retirement plan for what their true purpose is, helping people save in order to replace their paycheck during their longest period of unemployment (otherwise known as retirement), we may have much better results.
We are determined to stay laser focused on the real issue at hand – getting people (participants) to save (more).
PA: What is your mission statement?
WFG: Increase the likelihood of success for each participant we are fortunate enough to serve.
We treat each of our clients’ plans as if it were our own. We work to achieve this mission by utilizing our retirement plan expertise to help plan sponsors meet key goals for themselves and their employees. For plan sponsors, we strive to reduce employer fiduciary liability and reduce overall plan costs. For employees, we seek to increase participation and deferral rates and provide meaningful financial education. We seek to make retirement planning satisfying and even fun for participants, while keeping the process streamlined and problem-free for employers.
PA: What areas of service are customized for each client? What are the same across your book?
WFG: WFG customizes the employee engagement plan for each client. We base the plan on several factors, including current plan demographics and key measurements (participation, savings rates and retirement readiness scores), as well as behavioral finance and plan design. Our goal is to make the retirement plan an experience for our clients’ employees in order to drive higher engagement and therefore higher savings rates. For many of our clients, we leverage one of two financial wellness programs to enhance the experience.
What is the same across our client base: we strive to deliver a consistent unsurpassed level of proactive service.
We have a written annual service plan and fiduciary calendar for each committee we serve. The WFG service model involves a very high-touch team approach that leverages the expertise that each team member provides to the client relationship. We conduct in-person committee meetings and offer group education and one-on-one meetings. Our desire is to partner with our clients and act as a true extension of their team, providing solutions and expertise regarding every aspect of their plan.
PA: What do you need to be successful? From your team? From your clients?
WFG: Our definition of a successful consulting relationship begins with our belief that “We treat your plan as if it were our own.”
The why behind everything we do for our clients is …
• We believe the most valuable asset for each of our clients is their employees
• We believe that when employees have financial stress it impacts the organization
• We know that we can reduce financial stress through innovative education
• We understand the long-term cost to employers of employees that can’t retire
• We know our clients rely on us to provide fiduciary peace of mind.
Success is measured by our effectiveness of delivering value to our clients, earning their trust, and helping participants reach their retirement goals.
Each member of our team owns the client relationship and we share the same passion to create positive outcomes for our clients.
PA: Describe any particularly initiatives you have led with your customer base in the past 12 months (investment or education or plan design or communication).
WFG: Our approach and focus on education results in increased participation and deferral rates for many of our clients.
Here is an example of how WFG positively impacted a client’s plan in this regard:
• By applying behavioral finance concepts and employee education, we were successful in increasing a 360-person firm’s participation rate from 71% to 94% over a two-year period.
• During that time, the plan also experienced an increase in the average deferral rate from 6.00% to 9.41%.
• This resulted in an increase in employees’ retirement readiness/income replacement from 41% to over 58%.
• Plan design techniques incorporated auto features (auto enroll, auto escalate) along with match optimization to drive results.
• The plan also utilized re-enrollment to drive investment selection.
• Education focused on retirement readiness further fueled the increase in deferral rates.
WFG is very diligent and takes a watchdog approach to plan pricing. If we believe fees are excessive or not in line with the services being provided, we will initiate discussions with the service provider for concessions and/or increased services that would add value to the plan and participants.
A few positive outcomes are highlighted below:
• We were hired for a fee benchmarking project for a $36M plan. At that time, we were able to negotiate a decrease in the Stable Value expenses by 25bps which resulted in participant savings of over $13,500 per year in investment expenses.
• We negotiated a reduction in the required revenue allocated towards recordkeeping, which resulted in a move to lower investment expense ratios – saving the participants an additional $54,000 per year.
• We eliminated $8,000 in billed fees that the client was able to allocate towards a comprehensive financial wellness program.
Since it is common practice for plan expenses, such as recordkeeping and advisory, to be included in the overall investment expense, we also examine how investment revenue sharing arrangements can potentially favor participants in certain investments over others in the plan. We educate plan sponsors on the concept of “fee equalization” and assist with implementation, when possible.
PA: As a retirement plan adviser, what do you take the most pride in?
WFG: We believe that getting employees “retirement ready” requires more than just providing a good retirement plan and a range of investments. We believe driving participant’s behavior through plan design and employee education are key deliverables in making a difference. We want to be known for helping people replace their paycheck during their longest period of unemployment (retirement) while delivering an unsurpassed level of proactive service to our clients.
While all qualified advisers will conduct committee meetings, provide education for employees, and monitor investments, a great adviser will take each of these services and make them an experience. WFG prides itself on excellence. We measure each plan’s retirement readiness score and continue to drive results.
PA: What benchmarks do you use to measure plan and client success?
WFG: We utilize the PlanSuccess Audit to score a plan’s behavioral health in three areas: Participation Health, Deferral Health and Investment Menu Health. The scores are based on both process and actual outcomes.
This process allows us to establish goals for the retirement plan committee (and the plan itself). We can then create and implement an employee engagement plan with true measurements on the success of the program. This allows us to make adjustments along the way with participants’ success as a primary driver.
Another key component of our process focuses specifically on plan costs, service, and investment opportunities. In order to properly assess the Plan, we undertake a detailed benchmarking and review process covering six major areas:
- Investment Management
- Recordkeeping
- Total Plan Costs
- Compliance Services
- Technology/Participant Access
- Employee Communications
Our review identifies and evaluates fees, expenses and revenue arrangements affecting the plan as well as a full range of services and offerings including investment opportunities, using a “prudent expert standard.”
Best Practice for plan fiduciaries is generally considered conducting a comprehensive cost, services and investment platform review every three to five years. Our two-stage process begins with a comprehensive benchmarking analysis. Both ERISA and the Department of Labor make clear that plan sponsors must make sure that plan fees are “reasonable.” However, while fees are important, they are not everything.
The fees must be appropriate and reasonable for the quantity and quality of services being provided. WFG provides fee benchmarking on an annual basis to determine fee reasonableness. There are three fee benchmarking tools which we utilize:
• Expense Analyzer – Details a plan’s fee structure so that plan sponsors clearly understand both the expense and the revenue that is often a part of the investment. Transparency and full disclosure is critical to the role of a Fiduciary.
• Fee Comparison & Analysis – Uses current plan data to create a benchmarking of plan fees and how they compare to your peer group. This report benchmarks the following plan fees: investment management fees, recordkeeping fees, adviser/consultant fees and total plan fees. In addition to fee benchmarking, the report also benchmarks plan features such as eligibility requirements, employee and employer contributions, investments, distributions and automatic plan features such as auto enrollment.
• Fiduciary Benchmarks – An independent and comprehensive suite of benchmarking reports that looks at fee reasonableness for a plan. These reports look at the quality of the provider, cost drivers and the value received evaluated against the fees that are being paid.
PA: How do you react to clients or prospects who don’t share your goals for their retirement plan?
WFG: We do not take the prospect on as a client. It would not align with our service model and values.
PA: How do you grow your business? What changes to your practice or service model are you planning for 2017 and beyond?
WFG: First and foremost, our firm grows through referrals and introductions from our clients and center of influences. We have created a network of likeminded professionals that serve the retirement community.
An additional avenue for growing our business is The Plan Sponsor University (TPSU), an affiliate of TRAU, The Retirement Advisor University, which offers the most comprehensive combination of online and in-person workplace retirement plan certification program for business owners, benefits specialists or other employer fiduciaries.
TPSU offers employers who are charged with the responsibility of company retirement plan oversight the opportunity to increase their knowledge base in areas such as retirement plan design, operation, comprehension of fiduciary obligations, and improving outcomes.
In addition to TPSU, we developed our Fiduciary Training Series as we believe it is crucial that plan sponsors who are charged with the responsibility of company retirement plan oversight have the opportunity to increase their knowledge base in areas such as retirement plan design, operation, comprehension of fiduciary obligations, and improving outcomes.
Our Fiduciary Training Series workshops are designed for small groups, which allows for the best environment to promote discussion among the participants and presenters. We conduct the workshops in our new WFG Learning Center that is designed to optimize adult learning.
We have also added a new stand-alone service: retirement plan committee assessment that assists organizations in establishing committee governance and effectiveness. This service is designed for companies that are not current clients of our firm. We market the service as The Retirement Committee of the Future.
BUSINESS AT A GLANCE:
Plan assets under advisement: $1.1 billion
Median plan size (in assets): $9.4 million
Total plans under administration: 116
Total participants served: 30,000