Executives from three retirement industry leading firms, Chip Castille, Managing Director at BlackRock; Elaine Sarsynski, Executive Vice President at MassMutual Retirement Services Division and Chairman of MassMutual International; and Tim Walsh, Managing Director of Institutional Products and Portfolio Management at TIAA-CREF, took time at the recent PLANADVISER National Conference to discuss asset management and retirement plan industry trends and forecasts with Alison Cooke Mintzer, editor-in-chief of PLANADVISER.
PA: What is the role of the financial adviser in improving the plan design?
Walsh: There are many things advisers can do. At TIAA-CREF, we think there are four drivers to achieving retirement readiness: plan design, plan management, investment solutions and employee engagement, and advisers can get involved in all four.
Employee engagement leads to higher contributions. The adviser can create effective plan design recommendations, auto-enroll, auto-escalate; there’s a lot of things the plan adviser can do.
But the plan adviser can also change the game, change the way people think about the success of the plan. The fact is the industry as a whole is changing the conversation, and it’s no longer just about savings and accumulation and how many five-star funds you have on the menu. Advisers can change the way fiduciaries think about designing their plan, constructing their investment menu and engaging with all employee groups.
But again, employee engagement is the imperative; the more you can get employees engaged, the more they save. We have an advice statistic that we give out: 25% of our participants who took advice increased their savings by 10% or more. Ten percent, think about that. Advice made them comfortable with the plan as a whole, made them comfortable around investment decisions, which, in turn, made them comfortable about contributing to the plan. So, advisers can play a key role.
Sarsynski: From our perspective, about two-thirds of the success of a retirement program is the plan design, and advisers in the room play a critical role in that plan design, whether that includes “auto” features or stretching the match to overcome inertia in the plan.
But the other one-third of the success of a plan is how we interact with our employees, our participants in the plan. What we’ve learned is that we’re not sure what’s going to motivate all of them, but we know that you need to have a variety of ways to influence behavior with a participant. For example, the way that you would interact with a Generation Yer is very different than an Xer, which is very different than a pre-retiree. We also know that about 80% of participants’ success, particularly at the beginning, is the saving pattern throughout their career. Then, when they get to be pre-retirees, you have to start, for obvious reasons, protecting the accumulated balance.
“We have about 96 different ways to reach out to a participant based upon the demographics, culture and diversity of the plan. Targeting the participant and including that with the plan design is critical.” —Elaine Sarsynski, MassMutual Retirement Services
We really try to market the individuals in a plan. We have about 96 different ways to reach out to a participant based upon the demographics, culture and diversity of the plan. Targeting the participant and including that with the plan design is critical.
Castille: What constitutes good plan design is likely to change going forward. We not only need to talk about retirement readiness, we need to talk about retirement income. We’ll likely see a recasting of the investment options that make up the core line up in DC plans to make them more understandable to participants. It would be something like an income building option and a protect portfolio or a growth portfolio. This is where an adviser can really bring an incredible amount of insight and value in constructing what the menu options looks like.