The role of today’s 401(k) specialist is expanding on the heels of a decades’ long evolution:
- 30 years ago, cash- or deferred-arrangement plans were just becoming mainstream;
- 20 years ago, many of us focused only on plan design, operations and a short list of investments; 10 years ago, we began coping with extensive investment research and discussing fiduciary best practices and fees.
Today, we’re about all of those things and improving retirement outcomes. What does that mean for the modern 401(k) expert? Where does the road go from here?
Our role in the next five to 10 years must and will change drastically. For certain, it will mean more requisite expertise in subjects that are foreign to many of us, including:
- health exchanges,
- debt reduction,
- impacts to worker engagement,
- pay-day loan, and
- challenges to the low-income earner.
It will mean more dedicated time and resources allocated to each client, which could translate to read lower profitability, especially as fee compression continues. New oversight of the role could mean more exposure to malpractice and fiduciary liability, as a result of the proposed fiduciary rule. Adding it all up, the 401(k) specialist’s role must expand and lead sweeping change in the way the 401(k) plan is leveraged.
Decades ago, 401(k)s functioned as a supplement to traditional defined benefit plans. However, the retirement landscape has completely changed, and as 401(k) experts, we’ve been going at it all wrong. We’re too focused on the 401(k) itself—selling the plan, selling investments, selling insurance and other products, selling savings, selling fiduciary support—which has led to a myopia of sorts. We have the Internal Revenue Code and ERISA sections so close to our noses, when we try to recall what the purpose of those regulations were, there is a blur. We are so interested in discussing new provisions of the 401(k), optimizing investment menus, or reporting on our own alpha, we have lost sight of the fact that the 401(k)’s purpose today is to help create income safety and security at retirement. It is a direct predictor of how well employees will be when it comes time to retire.
Enter a whole new approach to driving successful outcomes. To help yield success for participants, the 401(k) specialist must build broad, solid foundations of financial wellness, and collaborate with other subject-matter experts on whether physical wellness is fostered, along with a clear sense of purpose, enriching social interactions, and growing pride in community. We must become proponents and practitioners of financial wellness to promote stronger 401(k) participation and overall retirement readiness. Without these components of overall well-being, employees disengage.
This means that we need to teach employers about the value of working wellness in to their businesses, and we need to teach each and every worker how to build their lives upon solidly designed foundations. This means putting people first, making it personal with every training. This means products are ancillary to clear goals, sound decisions, proper documentation, and effective measurement. This means doing more for participants and recognizing the over-arching impact financial wellness can have on the individual.
Kelly Amato is Vice President, Head of Sales at Raymond James.