Defined Contribution Contrarian
Steven Glasgow isn’t afraid to contradict conventional wisdom in the service of successful outcomes. His “it is what it is” attitude might ruffle industry feathers, but it’s appreciated by his clients and the results they achieve, which is all that really matters.
“It’s hard for me to trust retirement readiness metrics,” Glasgow, Executive Vice President with Tower Circle Partners of Janney Montgomery Scott, admits. “If the average participant has been with five employers, most haven’t gone through the rigmarole of moving accounts or consolidating assets, so we don’t really know what they have.”
But he pushes back when described as a disbeliever and notes that the problem (as always) is scale when determining how to effectively engage participants to influence behavior and truly make an impact.
“As a practitioner, I wrestle with offering one-on-one meetings in a way that doesn’t dig deeply into profitability,” he says. “I have several plans that are fairly large, one of which has 75,000 employees scattered around the country. If somebody sits across the table from you and says, ‘Here’s my situation,’ and you say, ‘I think this is what you need to do.’ Most of the time, they will do it. It’s just tough for me to promise one on one meetings to a very large employer.”
What can be done, Glasgow emphasizes, is to get the plan design right.
“Everybody’s tired of hearing auto-enrollment and escalation, but the reality is that it has moved the needle.”
A longtime client initially engaged Glasgow and his team because they were concerned about their fund lineup. While it only needed a “‘nip and tuck,” the company’s participation rate lagged, as did its average deferral rate. It was creating testing issues for senior executives.
“We were able to sit down with them, and for a little increase in cost, we found them a new recordkeeper, we did a complete refresh of the target-date funds with an automatic 6% enrollment and an auto-escalation,” he says.
The biggest hurdle was convincing committee members, something with which presentation material from behavioral economist Shlomo Benartzi was able to assist.
“As we went through the behavioral finance statistics, we saw the light bulb go off. We finally told them we had other clients that did this, and we could show not only anecdotal but actual evidence from other plan sponsors in industries, and we’re a whole heck of a lot skinnier than theirs in terms of average earnings. At that point, there was zero pushback, and frankly, they were thrilled with the outcome.”
That outcome was 90% participation, a doubling of deferral rates, and a significant cut in recordkeeping and investment costs.
“That’s not all that heroic,” Glasgow modestly concludes. “We didn’t drag every single participant through snow and ice to achieve a huge increase in participation, but it reinforces the power of what we’ve been saying for a while. You can do things from an auto perspective that absolutely work, but you must be cognizant of the CFO sitting on the other side of the table. They have their pressures, so you have to be therefore creative about the way you implement these initiatives and not always default to the simple answer.”
Steven W. Glasgow is Executive Vice President/Wealth Management with Tower Circle Partners of Janney Montgomery Scott in Franklin, Tenn.
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.
