Commoditization kills. “We have to get out of the mindset that because we have a hammer, every problem is a nail,” Reagan Wagner said in a closing session Friday morning at Fi360’s annual conference in Nashville. “We’re told we’re increasingly commoditized, but I reject things like fee compression. I set the stage and tell my clients I’m the most expensive advisor you’ll have, but not for the level of service I provide.”
The point, according to Wagner, president, CEO and managing principal of San Antonio-based Strategic Financial Concepts, is whether the advisor is “simply a vendor for their clients or a true partner.”
The ideal for many employers is to strive to maintain low employee turnover to keep continuity in a client’s business.
The reality, according to Wagner, is that “too many organizations overlook strategic approaches designed to increase retention and limit turnover.”
Retaining key talent is an ever-increasing problem in the marketplace, with 87% of employers noting that employee retention is a critical priority for their organization.
Factors contributing to a lack of retention include:
Influx of job availability
The economic boom has shifted the way business leaders are retaining talent. More job opportunities mean companies are providing additional compensation and expanding benefits.[1]
Failing to understand factors that retain talent
Fully 45% of hiring decision makers note that salary is the top reason for employees changing jobs, according to Glassdoor; 42% of businesses report that pension provision has a positive impact on employee retention; 75% of executives believe over the next decade, compensation alone will not be enough to recruit and retain talent.
“How many of you are just managing the investments?” Wagner rhetorically asked. “How many of you just handle the pension or the 401K? Are you truly acting as a fiduciary for your clients? Your clients need answers to questions they don’t know to ask. It is your responsibility to show them all of their options to protect them against a business disruption that could place their company in jeopardy.
“What is their fiduciary doing to protect their business client? If you are just managing their money, you are doing your client a disservice. You must provide them with comprehensive advice.”
Lack of well-implemented retention plans
“Programs like nonqualified deferred compensation plans are beneficial solutions often overlooked by companies when designing executive and director retirement programs,” he said.
Solutions
The solutions to these factors overall include utilizing programs such as nonqualified deferred comp, SERP, executive bonuses, defined benefit plans, 401K, ESOP, COLI/BOLIs in order to increase retention and improve the employee experience.
“A 401k is for the masses. What else are you able to effectively offer?”
More specifically, in order to address the influx of job availability and competition for top talent increases, voluntary and employer-paid contributions into nonqualified deferred compensation plans offer valuable savings for top earners and are proven retention devices for employers.[2]
“Understanding financial compensation is not enough. The advisor must weave in financial and non-financial incentives to decrease turnover and increase retention.[3] Couple tax-effective savings tools with other reward programs and place a greater emphasis on incentive compensation, according to Brainworks, and have the right mix of salary, bonus and stock options.”
Salary should be large enough to pique interest, Wagner adds, but total compensation should be skewed toward bonus and stock to ensure executives have invested interest in the success of the organization.
“As far as addressing a lack of well-implemented retention plans, provide valuable tools for savings by offering voluntary and employer-based contributions into NDCPs. Utilize executive and employee benefit programs, supplemental executive retirement plan, a nonqualified retirement plan for key employees, NDCP, a portion of employee’s salary deferred until departure, 401KpPlan with (K)SOP and executive bonus programs.
Additional presentation references:
Carter, B. (2016, March 6). 2018 Employee Engagement & Loyalty Statistics. Retrieved July 5, 2018, from https://blog.accessperks.com/ 2018-employee-engagement-loyalty-statistics#1
Defined Benefit Plans Outperform Defined Contribution Plans Again (2013). Retrieved July 7, 2018 from https://www.towerswatson.com/en- US/Insights/Newsletters/Americas/us-finance-matters/2013/Defined-Benefit-Plans-Outperform-Defined-Contribution-Plans-Again
Hiring Executives for the Long Haul. (2015, January 18). Retrieved July 5, 2018, from https://brainworksinc.com/hiring-executives-for-the-long-haul/
Newport Group 2017 Non-Qualified Deferred Compensation Prevalence of Plans Increases. (2017). Retrieved July 7, 2018 from https://www.newportgroup .com/new portgroup/media/documents/r804c-060117-advisorfacts-2017- nqdc-survey-article-may-2017.pdf
[1] Schawbel, D. (2016, December 28). What Employers Will Worry About in 2017. Retrieved July 5, 2018, from http://fortune.come/2016/12/28/ employers-2017-employee-retention-unemployment/
[2] Gagnon, J. (n.d.). Why do Banks Underutilize Deferred Compensation Plans for their Key Executive Retention? Retrieved July 5, 2018, from https://bolicoli.com/
[3] Rogers, R and Findley, D. (2015, February 26). Retention Compensation Plans – Please Stay! Retrieved July 5, 2018, from https://www.shrm. org/resourcesandtools/hr-topics/compensation/pages/retention- compensation-plans-please-stay/
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
