Big Picture Thinking

Panelists in the CEO Roundtable session discuss retirement plan industry trends and direction

At the recent PLANADVISER National Conference, Alison Cooke Mintzer, editor-in-chief of PLANADVISER, hosted a roundtable conversation with Elaine Sarsynski, executive vice president, MassMutual’s Retirement Services Division, and chairman, MassMutual International LLC; Tom Skrobe, the head of BlackRock Defined Contribution (DC) Distribution at BlackRock DC; and John Galateria, managing director and head of Defined Contribution Investment Solutions at J.P. Morgan Asset Management. These retirement industry leaders discussed the retirement plan industry topics that most affect plan advisers and their plan sponsor clients.

Cooke Mintzer: Let’s talk about the role of the adviser to a retirement plan in today’s industry.

Sarsynski: The adviser’s role is really a variety of things. I like to think about two key areas, though, for advisers to focus on: new sales and retention, ensuring that the customers you already have are well-serviced.

So, when thinking about your book of business and ensuring that you have satisfied and loyal customers, it’s important to partner with providers that can support you in relation to all new trends, products, operational excellence and efficiencies that you can possibly get in the industry.

Now, participants need you to help them take action so that they do end up with a relatively strong replacement income in retirement, something around 75% replacement income at age 67. That focus is critical today, and advisers have to focus not only on plan design with the sponsors, but also on participant action plans so that they can retire on their own terms.

If that doesn’t happen, you’re then going to have another conversation with the plan sponsor around whether or not they have the additional funds to support an aging work force. We have done the arithmetic around a work force with a higher percentage of folks age 60-plus, and that can lead to additional expenses: disability insurance, worker’s compensation insurance, those sorts of things.

Cooke Mintzer: How do you see advisers changing their message and their value proposition to go beyond “fees, funds, fiduciary” as they service plans?

Skrobe: Looking at the past 20 years, the role of the adviser has changed and evolved quite dramatically. The value proposition has the core of the three F’s, but you bring so much more to the table when you partner with a plan sponsor and help set the objective for the plan. That’s where it all starts: having a good objective in what you’re trying to accomplish for your plan sponsor clients. Each company has a unique culture, unique participant demographics, and your role is not to be a cookie-cutter provider but to develop a crisp objective so participants can have successful outcomes. Your value proposition is to become a part of that organization and help drive the agenda on behalf of the plan sponsor.

Galateria: When you see the opportunity out there to drive plan design and innovation around outcomes versus pure benchmarking, it’s very significant. We’ve done some research and found that 75% of plan sponsors rate financial health of their participants as highly important, yet just 44% take any kind of action to make sure participants are on track to have an 80% income replacement ratio. That’s a significant disconnect, but a significant opportunity.

The role of the adviser is to drive the dialogue, in some cases to some really uncomfortable places, but the best advisers in the industry are going to have to drive sponsors to these innovative solutions to produce better outcomes.

Sarsynski: It’s very important to set the objectives at the sponsor level. That’s the dialogue you need. At times, people really want to focus on price, a very simplistic design or very serious plan health tools that help to drive the outcome for the participant. It’s important to evaluate that upfront, otherwise you’re really wasting not only your time, but the time of the sponsor as well.

So now what does an adviser do? Now you begin to talk about plan design, auto-enrollment features, deferral increase features, participant action campaigns, and using personas and demographics in the plan to be able to drive behavior. Then, you rerun the outcome tools that are out there in the market to benchmark your progress.

Skrobe: Benchmarking is quite interesting because it means different things to lots of people, and it’s complicated. It all stems from the objective, how you measure that and then what your next step is in helping to solve the problem. How do you get to the root of the issue and then put a plan in place to solve the problem? The key is to define upfront what you’re trying to achieve with your plan sponsor plans.