The Flexible 401k Fiduciary
“The only reason we’re in this business is to make sure people can actually eat when they’re 80. That’s our entire goal.”
Ask a straight-talkin’ Texan about the importance of positive participant outcomes and you get a straight answer.
More specifically, LeafHouse Financial president Todd Kading counts deep dives into data, demographics and therefore customization as keys to success in the retirement plan space.
The Austin-based LeafHouse, which Kading founded with CEO Neal Weaver, recently had a large hospital with roughly $200 million in assets, but nonetheless relatively low participation, and it was a plan “that was not doing great.”
“We’re flexible and don’t have a cookie cutter approach, so we looked at their demographics, and saw they were retiring at 55 years old, not 65 or 70,” he explains. “As a result, we needed a different glide path, and a different system to communicate the changes to them.”
The firm’s size afforded institutional-level pricing and customized glide paths. That, plus and one-on-one communication, “moved the needle” from 40% participation rate to a 64% participation rate in the firm’s first year of involvement with the plan.
“And 99% of the assets stayed within the model structure. The benefits manager was worried about the amount of calls they would receive from concerned employees. Out of thousands of participants in the plan, they maybe got a handful, if that.”
Kading and his team communicated in a way that took the overall education level of the employees into account, and they made sure they understood this was a specific retirement investment system built for their demographic and the ages at which they were retiring.
“We took their retirement readiness score from somewhere around 25% and moved it up close to 60%, and that was just in the first year. Our goal is to get every plan to the 85%-plus range, which is typically what happens, it just takes about five years to get there. You can’t just take somebody at 3% and shove them into the 10% range in a year. You’ve got to work them up to it.”
But going from a 25% retirement readiness score to 85% over a five-year period is still pretty remarkable, we prompt.
“Ultimately, we want everybody to 100%,” he counters (again, straight-talking).
“I don’t really know how some of the fiduciary groups out there can just continually use off-the-shelf products without really looking at the demographics,” he adds. “I think that’s part of what we bring to the table. The flexibility inherent in the technology we built has allowed us to be able to really tailor each lineup to the specific participant population.”
Texas tech
That technology, Kading claims, is the result of 10 years and millions of dollars “that other folks don’t have.”
“If you think about what’s involved in that process is aggregating data that is from dissimilar sources that don’t agree on format, having to build a technology that allows you to dissect the data outright, or develop workarounds with record keepers that don’t have the bandwidth to send the needed information. We have 50 platforms and we work with 33 record keepers. Unless you’re doing manual pulls, you have to leverage technology.”
What they do, therefore, “drives participant outcomes and higher volume than an average advisor, especially someone that’s doing one plan at a time, and because of that, we’re growing like gangbusters.”
Todd Kading is president of Austin, Texas-based LeafHouse Financial.
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.
