Forget simply acting as fiduciaries—for Todd Timmerman and his team at Retirement Plan Analytics, succeeding in the 401k business means supporting plan sponsor clients by encouraging them to act as stewards.
“Fiduciary is a legal requirement to act in the best interest of the participants, and we serve as fiduciaries to all of our clients,” says Timmerman, managing director with the Charlotte, North Carolina-based 401k advisory firm. “A steward understands that a plan has been entrusted to their care, and they need to do everything to make sure employees are in a far better place when they leave than when they arrived.”
It’s an internal moral code, one to which Timmerman says people intuitively respond. RPA is rapidly approaching $10 billion in plan assets on which it consults, while also serving 120, 000 participants (25,000 of whom are engaged in financial wellness), so we’re inclined to agree.
“Clients are very interested in a stewardship relationship, since it also covers all of the fiduciary bases, but then goes above and beyond.”
A fiduciary offers retirement plan processes for investment selection and monitoring, adheres to the plan document and reviews fees to ensure they’re reasonable. A steward (or rather a stewardship mindset) takes it a step further by advocating for programs like financial wellness and actively partnering to incentivize employees to increase engagement.
“We can track how many participants have taken action and how many are actively participating in the service,” Timmerman notes. “A key to success is partnering with our clients to create a budget for employee incentives that encourages active engagement with financial wellness resources.”
Here’s an example of its positive outcome. A financial services organization with whom RPA works has 4,500 employees and “a great culture with an excellent benefits package.”
Their committee realized that a key obstacle to achieving retirement readiness was employee debt, so helping in its reduction became an area of focus.
“Led by our primary consultant on the project, Brandon Helms, we consulted with the plan-sponsor client on best practices, the measures of success that would be needed, and an engagement strategy. Within the first three weeks, 70 percent of their employees utilized the new financial wellness benefit. In the first 90 days, the sponsor (with our assistance) created a $4.2 million ‘financial turnaround’ for participants.”
RPA then helped initiate a campaign focused on retirement readiness, one that illustrated the potential impact to employees’ aggregate retirement balances by maximizing the employer match and saving more for retirement.
“Throughout the first quarter of 2017, our plan sponsor client wanted employees to take two steps; the first was to complete their financial wellness assessment and the second was to participate in a virtual coaching session on retirement preparedness.”
The results speak for themselves:
- A $400 million increase (in aggregate) of estimated balances for employees at retirement,
- 62 percent of employees are saving 6 percent-plus of their own income (up from 25 percent last year),
- 97 percent of employees participate in the retirement plan, and
- 28 percent of employees increased their savings in the retirement plan during the first quarter of 2017.
A second client in the logistics industry with 500 employees also wanted to add a financial wellness benefit, with a goal of helping employees “reduce debt and financial stress, and save more.”
RPA consulted on best practices in implementing incentives, created a customized communication and engagement plan, and also designed specific measures of ROI.
The result was a $250,000 employee financial turnaround in the first year. Within the first two weeks of its launch, 46 percent of employees utilized the financial wellness benefit. RPA implemented an education strategy focused on employees’ top vulnerabilities, the delivery mechanisms of which included online webcasts and a series of one-on-one meetings. Sixty-three employees engaged in these individual sessions, with a call-to-action on debt reduction, retirement saving, emergency savings, insurance benefits and even estate planning.
“We know financial wellness is widely discussed within the 401k industry, but for us, it’s really about financial wellness engagement at the participant level. We get excited when our plan sponsor clients see progress and participants gain financial courage and confidence. It gets to the core of what we do. It’s tangible, it’s measurable and it’s great for helping our clients and their participants create better outcomes.”
Todd Timmerman is managing director of Charlotte, North Carolina-based Retirement Plan Analytics.
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.
