2017 RPAY – Washington Financial Group

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.

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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

2017 RPAY – Josh Ulmer

PLANADVISER: What is your mission statement?

Josh Ulmer: The SeaPort Group at Morgan Stanley has a simple mission: to be the leading provider of diligent personalized service and innovative investment and planning strategies for the retirement plan marketplace. We work closely with each client, taking the time to thoroughly understand their unique objectives, while never losing sight of the need to continually deliver results.

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PA: What do you consider the most significant challenge facing retirement plan participants? Facing retirement plan sponsors? Facing retirement plan advisers?

JU:
America’s retirement system seems to be continually scrutinized around its effectiveness in getting workers to a dignified retirement, and while I do not see the system as perfect, I do believe the current challenges are addressable and present significant opportunities for qualified advisers and creative thinkers.

The greatest challenges advisers are:

  • Plan Participants: The biggest challenge in aggregate for plan participants is coverage – not having access to a tax-advantaged retirement plan at their place of employment. Immediately following coverage, I would rank financial literacy as an additional leading challenge; it is simply not realistic to assume that plan participants can focus on long-term goals, like retirement planning, until they have their financial house in order, so to speak (i.e., have been educated in savings, budgeting, credit and debt management). Additionally, I would suggest a third leading challenge for plan participants to be their behavioral approach, more specifically,  rewarding their future self with a sufficient savings rate today, staying invested in the face of capital market volatility and media noise, avoiding the temptation of accessing retirement savings via loans to satisfy short-term lifestyle needs, and finally, motivating them to create a personalized plan so as to assure the greatest likelihood of retirement success.
  • Plan Sponsors: One of the biggest challenges facing Plan sponsors is the overall competitiveness of their plan arrangement, and the need to attract and retain talented employees. A corollary of this would be designing, administering and governing the retirement plan in such fashion so as to avoid the litigation crosshairs. I believe that by assuring the plan is in line with industry best practices and focused entirely on improving outcomes for employees; a Plan sponsor can effectively meet both of these challenges (competitiveness and risk). Finally, I would say the committee decision-making process, and the need to substantiate all decisions made. Interestingly, I have observed that it is often easier for many committees to make investment- and platform-related decisions than the heavy-handed and progressive plan design changes necessary to materially improve plan health.
  • Plan Advisers: I approach my role as a retirement plan adviser with a clear focus on outcome, which is aiding participants in obtaining a secure retirement, while maintaining a sound fiduciary governance structure for plan sponsors. It is my belief that the biggest challenges facing the advisory industry as a whole are specific to demonstrating value and delivering results in the face of intense competition, fee compression, automation, and increased reliance on indexed/passive investments.

PA: How do you react to clients or prospects who don’t share your goals for their retirement plan?

JU: A passion for innovation and a willingness to disrupt the status quo, along with a service standard that commits us to being proactive, has accustomed us to differences of opinion on how to best address the objective at hand. I find that during such moments, it is important to communicate; revisit goals and objectives; educate with facts and data vs. opinion and ideology; keep an open mind, so as to understand multiple viewpoints; and finally, collaborate with the client/prospect to find the most mutually acceptable solution. Lastly, I would say that persistence and patience certainly help.

 

PA: Describe any particular initiatives you have led with your customer base in the past 12 months (investment or education or plan design or communication).

JU:
In this last year alone, I have directed my team in implementing many plan enhancements to widen the breadth of plan features and ensure participants have access to the savings vehicles they need for a secure retirement. Such plan enhancements include, but are not limited to, In-Plan Roth 401(k) Conversion, After-Tax 401(k) Contributions, After-Tax 401(k) Conversion to Roth 401(k), and an overhaul to match formulas designed to increase employee contribution rates. I have found that both plan sponsors and participants alike enjoy having a variety of savings options within their plans, and strive to optimize this on their behalf.

After-Tax 401(k) Contributions have been an important and beneficial plan feature for a number of our clients. Educating plan sponsors and participants around the concept, intricacies, and process, and how to best leverage the After-Tax 401(k), along with Roth 401(k) Conversion, has been a major design initiative undertaken by my group. The addition of these plan features have afforded many employees the ability to save much more for retirement in a tax-advantaged manner, as well as allowing plan sponsors to offer a leading retirement plan to attract and retain employees.

Another major plan design initiative I have undertaken is implementing a “stretch the match” company match program. My group works with plan sponsors in understanding their budgetary needs and plan demographics to create a plan-specific match formula that is designed to incentivize an employee contribution rate that will enable employees to obtain a secure retirement.

An example of optimizing a match formula is moving away from the typical 50% of 6% match to a 30% of 10% match; this small tweak in formulation galvanizes employees to save at a higher rate. For one client, the improved match formula, along with targeted participant education, has improved plan participation (going from 56% to 80%) and deferral rates (going from 2.8% to 5.2%).

I have also started shifting the focus to designing retirement plans for both stages of the planning horizon, accumulation and distribution. Historically, much of the focus has been on the accumulation phase, said differently, getting participants to the point where they can retire.

I would argue that the distribution phase is equally, if not more, important, as it presents many more obstacles (spending/distribution policy, market risk, sequence risk, taxes, longevity risk, shortfall risk, inflation risk, health care costs, and family responsibilities). In order to prepare for these challenges, my group has started working with vendor partners and plan sponsors to make plan design changes, introduce distribution planning tools, review guaranteed lifetime income strategies, and educated employees within five years of retirement of their options come retirement.

Finally, on the education front, I believe that plan participants cannot truly focus on long-terms goals like retirement planning until feeling they have a firmer grasp on their overall financial health. Therefore my team and I have developed a Financial Wellness participant education series to deliver to clients in the coming months. Focusing on 12 key areas of personal financial wellness – ranging from early stage employment topics to retirement and beyond – we have invited plan participants to attend the full discussion series, beyond just the subject matter(s) that may be most pertinent to their current circumstances.

Understanding that participants may find certain topics do not seem as timely as others based on their current situation, we intend to present to them throughout the series the value each of these topics hold in developing a more well-rounded understanding of personal financial health. We have structured this education series to progress through an entire model working career and into retirement; from beginning with a discussion on the basics of credit to ending with an overview of estate planning and charitable giving.

Please see below for the full subject list within our Financial Wellness series:

  • Credit & Debt Management
  • Budgeting & Saving
  • Investments & Homeownership
  • Planning for Retirement
  • Education Savings / 529 Plans
  • Income & Asset Protection Planning
  • Tax Planning
  • Social Security
  • Health Care
  • Planning Through Retirement
  • Lifetime Income / Distribution Planning
  • Estate Planning & Charitable Giving

 

PA: As a retirement plan adviser, what do you take the most pride in?

JU: I take the most pride in the service experience we deliver to each of our clients and the positive impact we have on thousands of participant lives. My team and I are passionate about client service; it is central to all that we do and is deeply ingrained in our team’s culture. We look to the long term, and as such, we are focused on the development of strong professional and personal relationships.

We strive to provide more services of a higher quality than our competition. My group actively engages with our clients to understand their service needs and where our efforts are most effectively applied, staying abreast to industry and regulatory trends, as well as innovating on what we believe the forces shaping the industry of tomorrow will be. I have designed our service infrastructure to enable us to serve the client in the most informed, proactive and responsive possible manner.

Client to service professional ratio. We currently work with 37 clients and with four service personnel (one adviser and three analyst planning associates); this results in a client-to-service personnel ratio of ~nine, which we believe is very low relative to other advisers in the marketplace. This means each client receives more proactive advice, a greater level of responsiveness, and inevitably better results. Moreover, this gives the team the bandwidth to consistently innovate, as well as expand the depth and quality of the services offered. Lastly, this contributes to more meaningful relationships with each client.

It is this service experience, coupled with our unwavering commitment to drive measurable and lasting results, that has led to our 98% client retention rate.

 

PA: What benchmarks do you use to measure plan and client success?

JU: It is my belief that a successful retirement plan arrangement consists of: (1) a robust governance structure; (2) qualified service providers; (3) tailored plan design; (4) quality investment options, but more specifically a quality participant investing experience; (5) access to leading technology (tools and features); (6) customized employee education and outreach, and more importantly, retirement-ready employees; (7) a cost-effective plan arrangement.

To steer our clients toward a more effective plan arrangement, we have established a number of metrics to evaluate, measure and track plan success. Most notable amongst these metrics are that we provide annual fiduciary education and assure meticulous documentation is in place to support the fiduciary decision-making process to keep plan fiduciaries informed and to manage risk; benchmark plan design using industry reports and competitors form 5500s to keep the plan competitive, so as to attract and retain talented employees; conduct periodic vendor RFIs/RFPs to assure costs and services are inline; benchmark plan costs with independent tools to assure costs are reasonable given services rendered; evaluate investments relative to the criteria outlined in the Investment Policy Statement to assure ongoing suitability and strong performance; evaluate the quality of participant investing per age-specific benchmarks; perform retirement income gap analysis to gauge retirement readiness; track trends in key plan health metrics (participation rates, deferral rates, percentage of participants maximizing the match, and diversification trends) to inform education and communication initiatives, as well as gauge how the plan is working for covered personnel.

 

BUSINESS AT A GLANCE:

Plan assets under advisement: $935 million

Median plan size (in assets): $16 million

Total plans under administration: 37

Total participants served: 13,500

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