PSNC 2012: Investment Advice

Dave Gray, vice president of client experience at Charles Schwab & Co. Inc., said during the panel discussion that it is important for plan participants to receive advice from a source outside of friends and family. “The question is how do we fill that need?” He asked.

“Advice comes in many different flavors,” said Mary Hollingsworth, director of product strategy at Wells Fargo Institutional Retirement and Trust. Because of this, plan sponsors may find it difficult to decide which avenue to take.  

Kevin Mahoney, vice president, premier retirement benefits adviser at Merrill Lynch, said it is important to consider the company’s demographics and what type of advice program the employees will actually use. He suggested a multi-tiered advice program with target-date funds (TDF), portfolio rebalancing tools and actual advice. The first step, however, is increasing plan participation rates, he added.

Gray, on the other hand, said he thinks a multi-tiered advice program can give participants too many options. “We put too much choice in front of participants and we wonder why they’re lost,” he said. “When you give too much choice, you create inertia, you create poor choice, you create buyer’s remorse.”

Jason Roberts, founder and chief executive officer of Pension Resource Institute, pointed out that the less choice the advice program offers, the less diligence a plan sponsor has. “The more simplified you can make it for yourself, I think the better,” he said.

Aside from choosing what kind of advice the plan should offer, the sponsor must also determine how the advice will be paid for - whether it is built into the plan cost or participants must pay for it themselves. Roberts thinks if participants are forced to pay for the advice, it will never receive more than 10% utilization.

At the end of the day, the most important thing is whether participants have saved enough for retirement, he concluded.