PA: What are some of the issues that the industry and advisers face going forward?
Sarsynski: In a word, differentiation. Approximately 80% of plan sponsors with up to $500 million in plan assets use advisers, and there are hundreds of thousands of advisers out there. So how can they stand out, and how can a plan provider help?
It comes through using products developed specifically to guide action in the plan. At MassMutual, we have plan health tools that are driven stochastically. It’s actual modeling. It’s very complex, but we remove that complexity so the adviser makes it as easy for the sponsor as possible.
Our tools are populated from data specific to a plan. The analysis tool is key because it begins the conversation around how many of your employees will retire with sufficient replacement income. When an employer can’t answer that question, an adviser can immediately differentiate himself.
Working with our analysis tool, he determines that, say, only 50% of the participants are retirement ready. From there, he can work on plan design changes, as well as participant interactions—targeted interactions, not a pray-and-spray model where you hope people read a pamphlet.
See what that adviser has brought to the table: Suddenly, we’re moving from 50% to, say, 65% readiness; then we can move to 70% readiness in terms of employees who are able to retire. As an adviser, you’ve differentiated yourself meaningfully.
PA: MassMutual was early in pushing the concept of replacement income. Where is the industry in coming to terms with that?
Sarsynski: I was just in Washington working with a group of industry leaders and legislators. Two areas are critical for us to address as advisers, plan sponsors and providers. One, we must ensure that Americans and small businesses can access retirement plans and programs appropriate for them. Two, ensure that Americans don’t simply retire, taking a lump sum, but that they understand the decumulation model and how to make their income last.
If we don’t address these areas quickly, the decisionmaking may be outside our realm. All the tools and capabilities are there, whether through an end plan solution or a rollover platform with products such as IRAs [individual retirement accounts], or group annuities or deferred annuities. All of those, we have on our platform at MassMutual.
The key is how we incorporate that messaging with Washington’s support and get those messages out appropriately.
PA: It sounds like the common theme to these challenges and their solutions is the adviser community.
Sarsynski: It is. And I would encourage advisers to get very detailed about employers’ objectives and participants’ demographics. If we have, say, 100 participants with an average lower-income demographic, most of their replacement income could be provided through Social Security. So, putting a 401(k) plan in place may be incorrect.
But if it’s an emerging market plan, with 20 participants but they’re all higher-income individuals, a 401(k) or 403(b) plan would be the way to go. Then we can talk about auto-enrollment, auto-deferral features, targeted campaigns to ensure the best next step is taken, to put to work personas we’ve evaluated. We have more than 96 ways to interact with our end user and plan participant.