Expert Insight

An adviser and recordkeeper confront challenges in the retirement plan industry.
PAND15-Article-Portrait-CEORT.jpgFrom left: Randy Long, Joe Ready

At the PLANADVISER National Conference, two retirement industry leading executives discussed advisory and retirement plan industry trends. During the CEO Roundtable session, Randy Long, Managing Principal at SageView Advisory Group, and Joe Ready, Executive Vice President of Wells Fargo Institutional Retirement and Trust, took part in a discussion with Alison Cooke Mintzer, editor-in-chief of PLANADVISER.

PA: When you look at the number of relationships that retirement plan advisers are managing, how can recordkeepers and advisers best work together?

Joe Ready: Communicate and coordinate. First, at a firm level, what are we trying to accomplish collectively when we’re working together with clients in terms of day-to-day services and value-added ideas? What are the strategies that each of us believe we can deliver and add to the relationships that we service?

Once you establish that baseline, then communicate at an adviser level around the client-specific priorities. What are the priorities and goals of that client, of that plan, and how can you work to optimize delivery on that?

When I say “coordinate,” it’s really about defined roles and responsibilities. How are you going to interact with that client? How are you going to prepare for meetings? What’s the agenda? How are we going to deliver data?

Continue to communicate around the changes that are going on in our industry, and understand each other’s perspectives so that you show up to the client as one team aligned around how you’re going to implement these changes, coordinate them, and deliver them.

PA: How do you manage points of contact at the client and integrating points of contact with the recordkeeper? Do you as an adviser always want to be the point person?

Randy Long: It needs to be a partnership. It’s important for advisers to know the recordkeeper’s communication style so they present a united front.

It’s very important to solidify your value proposition; outline the duties and responsibilities in terms of who’s going to be on the team, who’s going to run point on different activities.

At SageView, we have a three-person service team: a lead consultant, a relationship manager and oftentimes an investment specialist that’s a CFA. Our role as advisers is to be an advocate on behalf of the client and work closely with the recordkeeper in partnership.

PA: What is the role of technology in recordkeeping and the advisory business today, and what are current development needs and priorities?

Ready: We think about technology as a three-pronged approach. First, how do we protect our clients’ assets? With today’s world, protection of assets and protection of data is job one.

Job two is access—how can people access data and what’s the best way to do that. If you’re not focused on mobile today, you’re not in the game. Provide access to plan sponsors through mobile devices, access to advisers and how they want to interface with their clients at a meeting and access that information, and obviously access at a participant level.

The third leg after protection and access is about real-time modeling. This gets to a sponsor level and an adviser level. What if I make these plan changes? What if I add this feature? What does that do to my cost? What might that do to outcomes?

What would those best practices tend to yield in terms of better outcomes, in terms of participation, in terms of deferral rates? This “Know me” component is demonstrating to sponsors that you can benchmark plan innovation to see how it might affect outcomes. 

And for participants, it’s knowing who they are as individuals. Know their preferences, how they want to receive information; allow them to navigate across channels, and give personalized and relevant next best steps on the different phases of their journey.

I think we’re starting to see a real advent of an innovation of how this data can be collected and used. The evolution of technology is obviously continuing to change rapidly. Adding features like a thumbprint or voice biometrics, I think this is just the beginning of how people will use data and technology to interact with their accounts.

Long: On the advisory side, we’ve created a proprietary system, SageWorks, where we upload all the recordkeeper and investment information into a database. It’s an integrated platform, and we work with recordkeepers to feed information into that on a quarterly basis.

We’ve recently gone through an upgrade of our CRM, and have put a lot of effort into customizing some fields and tabs so, if a participant were to call into our call center, we can instantly access that information.  We’ve also created a lot of tools for our clients, to be able to go a portal where they can view all their plan documents, discrimination test, investment reviews, investment policy, etc.

A lot of it is just continuing to reinvent ourselves, invest in technology, and that’s helped us to scale our business and able to assist advisers, to grow their practice and work more efficiently.

PA: As an industry, are we still heavily focused on cost and light on value? Where do you stand on the value/cost equation?

Ready: I would actually say that we’re high on value and low on fees. But, I don’t think we’ve done a good job of conveying the value-to-cost equation. I think that we’ve grown up in this business on a bundled fee, meaning we haven’t been able to do a good job enumerating our value proposition for all of the services provided. And so, the way we do it is we just continue to add on services to differentiate in terms of value.

I think our challenge is to do a better job of enumerating and drawing a straight line between the cost and the value that’s provided.

I’m always amazed when we press this issue. If you take an account balance of $100,000 in a 401(k) plan, with 10 basis points (bps) paid to the recordkeeper or service provider. If you think about the level of service we’re generating for that—access, education, advice, open architecture, regulatory compliance—I always am hard pressed to say where can you find a better deal.

Whether it’s the recordkeeping industry or the adviser industry, I believe we provide really good value. The trick is going to be how we equate that value to an outcome, and a better outcome for the sponsor and participant, in terms of that value-to-cost equation.

PA: How do you see advisers improving that dynamic?

Long: Fees have become a big driver, and transparency of those fees, including what you’re charging, what you’re making, what the recordkeeper and investment management fees are.

Everyone just wants to be competitive. One of the greatest concerns I hear from the adviser community is that race to the bottom. For a new adviser that may only have a dozen plans, you really need to make sure that you’re charging enough to show the value and be able to continue to add back into your practice to grow your staff, grow the investment and technology so you can be competitive and have sustainability long-term.

With transparency and the industry maturing, I think it’s really incumbent upon all of us to break out finders’ fees, 12b-1 fees, sub-transfer agency fees, etc., to assign value to what you’re doing for the different services and breaking out those elements.

We are most at risk in terms of what our fees are as a plan’s grown. If we’ve priced it on basis points and it’s growing dramatically as they’ve hired new employees and the fee has gone up, you may feel that you’ve earned that fee because you’ve helped drive participation in many instances, you’re making sure that the investment costs are competitive across the board, and you’re helping participants secure a safe and comfortable retirement. So, you would think that you would be entitled to make more money.

I keep getting back to transparency. Breaking all those things down, and then continue to review, even on a quarterly basis, the outcomes that you’ve been able to deliver. As advisers, we need to be firm with our pricing, but be articulate in terms of the values and what they’re getting for that particular cost. Our plan sponsor relationships are about laying it all out on the table; everyone just wants a fair deal that is competitive.