401(k) Day!

Each September, the entire nation eagerly awaits its merriest of holidays – 401(k) Day!

You won’t need this for 401(k) day.

It’s possible I overstated that enthusiasm. But 401(k) day is a real thing – brought to you by the Plan Sponsor Council of America, who has designated the Friday following Labor Day as the big day.

Some of you might not think 401(k) needs a whole day. I’m sure some of you might wonder if a 401(k) moment of silence would do. But 2015 has actually been another busy year when it comes to all the changes and news surrounding 401(k) plans. You’re going to need more than a day to take it all in.

Tug o’ War – And Plan Sponsors Are The Rope

On one end, you’ve got the latest proposed fiduciary rules ; on the other, the increased focus on Financial Wellness. Plan sponsors are being pulled in seemingly two directions. On one hand,

sponsors feel the need to engage fiduciary advisers to protect sponsors from all of the regulatory pitfalls associated with sponsoring a plan. On the other hand, sponsor are being compelled to engage advisers who can provide adequate resources to their participants.

Here are a few observations on how sponsors are handling their tug o’ war:

Beware Salesmen Selling Magic Bullets

Pulling sponsors in one direction: it’s becoming more and more clear through 2015 that plan sponsors need to make sure the investment lineup is structured such that it does not compensate anyone in a manner that could be construed as inappropriate. Some are accomplishing this by assembling a zero rev-share lineup; others are ensuring that all internal mutual fund revenue sharing is rebated back at the participant level.

We’re seeing there are several options available to plan sponsors depending on the size and scale of their plan, and we recommend that which route you choose should be determined on a case by case basis. Beware the one-size-fits-all magic bullet proposed by some advisers. Your plan is unique and should be treated as such. Hiring an adviser who can act in a 3(21) or 3(38) fiduciary capacity is certainly a good place to start.

In Your Spare Time…With Your Extra Money…

Another trend we’ve noticed involves a 3(16) fiduciary adviser. When it comes to proper administration, plan sponsors can consider engaging a 3(16) fiduciary but the cost associated with those services is often beyond the reach of smaller plans and conducting proper due diligence on the entity providing the service is challenging due to the relatively recent entrance into the market of such firms. Hiring an adviser who is dedicated exclusively to the qualified plan market usually affords plan sponsors the resource they need to receive adequate guidance on best practices and selection of providers who will assist the plan sponsor with the execution of their duties.

Breaking News: This Isn’t All Paperwork, Ratios And Regulations

On the other side of the rope, there’s the participant engagement aspect of the plan. In the 15 years I’ve been working in the qualified plan market I’ve come across more than my fair share of slick advisers who can speak authoritatively about the Beta, Sharpe Ratio and all that other plan investment stuff. In those same 15 years I have come across far fewer plan participants who actually care to listen to those impressive dissertations. If you’d like to hear mine, give me a call.

It’s more likely you’ll be calling me for something simpler. Most people just want someone who can identify with the fact that they have lots of competing financial responsibilities and then help them sort it all out. Everyone knows that they need to save a bunch of money for retirement, college for the kids, unexpected emergencies and so on.

They’re just tired of  “dudes in suits” yelling at them for not doing enough to save. They want to to do the right thing, but experience a sense of hopelessness at accomplishing any of their goals (much less all of them) given their income and expenses.

According to a survey conducted by PlanVision, 88% of plan participants want one-on-one training for retirement. In order for participants to engage someone on the topic of financial wellness they first have to believe that the person has a clue about their situation and cares enough to help.

I was once told that God gave us two ears and only one mouth for a reason. Does your current advisor listen to your participants or do they primarily focus on your plan sponsor needs in an effort to make sure that the decision makers who butter their bread stay happy? Find an advisory team that will listen to your people. They really do want the help.