Day one of the NAPA 401(k) Summit delved into the trendiest topics surrounding the industry—including managed accounts, retirement income, and financial wellness.
Kicking off the panel, “’Ready’ Eddies: Are You Ready for the Next Big Thing?” Jennifer Doss, defined contribution (DC) practice leader at CAPTRUST, spoke on how her team administrates financial wellness to participants. She explained how CAPTRUST built an in-house program that includes retirement counselors who connect with participants either through the phone or in group settings. “We’ve been doing it for about 10 years,” she said. “One-on-one advice is the way to go, and we wanted to do that ourselves.” Today, the firm operates the program with 50 counselors.
On the other hand, Grant Arends, president of retirement services at intellicents, touched on his issue with the financial wellness drift that’s being trending in the retirement industry for some years now. The problem with the popular trend is that it requires a pull from participants, he disputed. As an example, Arends cited a current large plan that he works with—of the 3,000 participants in the plan, just 2.5% utilize the financial wellness platform. “Financial wellness is the most overused, least successful term in our industry,” he argued.
In its place, Arends prefers implementing accurate, data-driven financial planning. With the help from plan sponsors rather than participants, he can grab a participant’s name, age, gender, wage, and email address, to set up a plan that will drive that financial wellness.
As more conversations of retirement income solutions dominate the industry, Doss and Arends spoke on how they’re seeing sponsors and participants respond to the in-plan or out-of-plan options.
While Doss said she believes the tool must be involved in the plan’s qualified default investment alternative (QDIA)—either through a managed account, a separate retirement income tier, withdrawals flexibility, etc.—Arends prefers out-of-plan solutions. “I have a hard time selling something that I would never purchase,” he said. “I’m sure there are wonderful in-plan solutions, but every time I’ve tried to do this, it doesn’t take off.”
Moving on to managed accounts, both Doss and Arends explained the factors and objectives that turn participants, and plan sponsors, away from the tool. The two noted that if plan sponsors choose to provide managed accounts, they’ll need to promote it as a personalized offering rather than an investment tool.
Since they rival with target-date funds (TDFs), who are likelier to perform better in the short term than managed accounts, many will opt for the former instead. Doss and Arends caution for plan sponsors and advisors to take on a personalized approach, instead, and especially to avoid litigation risk.
“It’s your financial planning tool for tomorrow—it’s that financial planning bridge,” said Arends. “It’s going to give you the full recommendation, it’s going to take into account outside assets. If you just sell it as an investment tool, it’s a litigation issue.”
“At one point will the TDF do better? Yes. But is it better as a whole for the participant? Yes,” added Doss. “Think not in terms of performance, but are you getting utilization of that service? Are people increasing deferral rates? Are they getting the advice they need? Position it correctly from the beginning.”
SEE ALSO:
- TK BRIAN’S ARTICLE HERE
- NAPA 401(k) Summit Takes Over San Diego
Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with over six years of experience and a passion for telling stories and reporting news. Amanda received her degree in journalism and government and politics at St. John’s University. She is originally from Queens, New York, but now resides in Denver, Colorado with her partner. In her free time, Amanda enjoys running, cooking, and watching the latest drama show.
