As the new year opens, our first podcast of 2024 features a look at what to expect in the workplace retirement market from a high-level leader in John Hancock Retirement CEO Wayne Park.
With oversight over all aspects of John Hancock Retirement’s business, Park is an ideal person to shed insight on topics that will impact the workplace retirement business this year, particularly as they relate to emerging opportunities in the small plan marketplace.
He talks about impacts of SECURE 2.0 and state-mandated IRAs, why advisors should be attracted to the small plan market, and what retirement savers should be focused on in the year ahead.
Click to read the audio transcript here.
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Brian Anderson: This is 401k Specialist Editor in Chief Brian Anderson, and this is the 401k Specialist Podcast. As we enter a new year, we’re happy to kick off our first podcast of 2024 by peering into what’s on the horizon for the upcoming year in the workplace retirement plan market with an industry leader in Wayne Park, who is the CEO of John Hancock Retirement.
Wayne assumed the CEO role at Boston based John Hancock Retirement early in 2023. And has more than 29 years in the industry, including senior roles at American Century Investments, T. Rowe Price, Vanguard, and T. D. Waterhouse. As the CEO at John Hancock Retirement, Wayne has oversight over all aspects of the business, including sales, relationship management, Marketing, product development, technology, and operations.
That makes him an ideal person to talk to for a high-level look at what’s happening in the workplace retirement plan market. And we’re very happy to have him on the 401k specialist podcast. Welcome Wayne.
Wayne Park: Thank you so much, Brian. Excited to be here. [00:01:00] Appreciate having the opportunity to, address what’s happening and look forward to 2024.
Brian Anderson: All right. Well, I’d like to start out by asking you about some of the changes that are occurring as a result of the Secure 2. 0 Act and how they’re impacting the retirement plan business. When it comes to Secure 2. 0, are there any particular aspects that you really have your eye on right now, particularly as it pertains to the small business market?
Wayne Park: Yes, I mean, secure Act 2. 0, such a massive piece of legislature and there’s so many provisions, but when we focus on the small business market and maybe more specifically than things that our key partners, the advisor community maybe wanted to think about, I think There’s four things. I won’t go too much into detail any one, but the first one is just the commercial aspects, right?
There’s a extension of tax credits for the small businesses that I think advisors can help small business owners with two components being just a doubling of the startup expense credit. And of course, the [00:02:00] second credit now being available to eligible employer contributions for participants with income limit.
But I think those are two important ways that small business owners can alleviate the cost of starting up a retirement plan. And then once it’s set up, the auto enrollment requirements and the auto increase now being a standard part of new plans, I think are really important aspects for the business owners to consider and for advisors to talk about.
The other few, it’s a bit more wonky to be honest, but I think, it required more guidance from IRS and other, uh, regulators is one is around the long term part time workers. That’s a mouthful, but this is one that our, even our existing clients, seem highly interested in. So, for a long time, especially for small business owners, right?
You may have part time workers that has been with you for some years. And in the past, there was a limit on how much or the, they can [00:03:00] make salary deferrals into the retirement plan. So I think that opportunity being opened up for, those employees is an opportunity to engage in and what that may mean for the small business, I think will depend.
And this is again, another reason why the advisor could play a really important role helping the employer and the small business owner. The other one also that we recently got credit for is getting a lot of attention from our existing clients that I think advisors can also help for is the catch-up Roth plant provisions.
Initially there was some confusion about, well, which would apply. And if there’s some catch up contributions that the provisions were confusing for a lot of the people in the industry, but I think we have a two-year window, thankfully, to sort all that out. But this is an area, that I think has garnered interest from our existing clients.
Wayne Park: So those four, the tax credits that the employers are now eligible for an expanded, amount, the auto enrollment features is two and [00:04:00] then provisions for the part, long-term part-time employees and, and the. Roth plan provisions, I think, are four areas that we’ve seen garner a lot of interest and we think the advisors can help the small business owners with.
Brian Anderson: Right. You know, I know the industry breathed a big sigh of relief when that extension came out. Yeah. It seems like there’s a confluence of factors such as all the secure 2.0 tax breaks and all the state IRA mandates that are creating a lot of excitement for the small business market in particular. Can you highlight some of the opportunities you’re seeing in that small and startup retirement plan market right now and maybe talk about why an advisor might or should be attracted to this market?
Wayne Park: Yeah. And this is one I think, John Hancock retirement, we can talk from a lot of experience and a position of strength because we transition and onboard over 5,000 plans every year with really high, satisfaction and net promoter score. So, first of all, it’s always a good idea to be, pursuing something that is large and [00:05:00] growing from an opportunity perspective.
Right. And this space, our estimates and things that we’ve heard from different analysts and looking at the opportunity is that there could be anywhere between 700 to 900, 000 new plans created, right? And 5 to 6 million companies. So, number one, it’s a big pool of opportunity. Just that’s being created by all the things that you just mentioned.
State plans and secure act and so on. And we also know that, you know, small businesses represent a large part of our wealth creation for the country. So, when you take those two, for an advisor. It is an inflection point, I think, that a big piece of legislation like this and other things have coming together, and people talk about perfect storms, but really creates a large pool of opportunity for the advisor to help small business owners stand up retirement plans and frankly help the owner and their employees have better retirement.
So, I think it’s just the sheer size and magnitude and confluence of events that’s [00:06:00] created in terms of the size of the opportunity for both the employer and the, advisor.
And I guess adding on maybe one more would be what a great way, right? If you already have a client and you’re handling a portion of their portfolio, or maybe it’s just a wealth side, or maybe it’s the mechanic of the business, retirement is an important aspect of. Not just an employee, but also for the business owner and to be able to help a business owner with this aspect, I think, creates openings for new business for the advisors, right?
Deepens the relationship and, frankly, establishes, I think, a long-term relationship for the financial advisor.
Brian Anderson: I’m curious what kind of an impact do you think that the recent mandated IRAs for small businesses is having when it comes to spurring more of the small businesses to start their own retirement plans as opposed to opting into the state run plans?
Wayne Park: Yeah. So first, I think, anything that helps. More people, [00:07:00] be part of a tax deferred, right? And whether it’s IRA or 401k or state plan is a good thing, right? Because power of tax deferred contributions compounding over time is great. Two is a positive is that it’s not, it shouldn’t be considered as an or I think, when you look at the overall market, there’s certainly a lot of coverage, certainly from the 401k and other retirement plans.
The state plans help supplement, not replace, supplement the part of the market that maybe the 401k is too complex, or maybe it’s too costly. But with the creation of these plans and all the press it’s getting, I think it’s number one, raising awareness for the small business owner that, hey, maybe this is something I should look at and get some help from the advisor.
So, two is just general awareness that this is important and it could supplement, retirement plan coverage for many people in the U. S. I think is a great thing. And then. I guess third, when you get into the details, they are different state [00:08:00] plans by design. It’s intended to cover a lot of people smaller, so it’s fairly standardized.
Some would say cookie cutter, and it’s great for a lot of people, but depending on your business and the specific circumstance and unique needs that you may have as a business owner, it’s not a all or none. You should look at the state plan, but then compare that against, the benefits that, tailoring and more customization that 401k may provide to your business is worthwhile.
And we, we have comparisons and a lot of great content that, we have on our website, quick plug that advisors or, small businesses can come and look at from our website as well, just as a starting point for the discussion.
Brian Anderson: Okay. So now looking ahead to the coming year. Are there any other big trends or headwinds you expect that are going to impact the workplace retirement plan market?
For example, do you expect to see, what do you expect to see as far as growth for maybe guaranteed in plan income solutions? Or are there any other key issues you’re [00:09:00] watching out for?
Wayne Park: Yeah, I mean, the, the marketplace is moving fast and the industry in the last few years has been dominated by Secure Act 2.0, but I think continuation of, of a few things that’s been in the market space, one is the discussion on auto features, we just talked about the fact that that allows more people to contribute, right. It’s getting participants to be part of the plan and grow it. It’s been positive, but there’s also been some discussion about, well, does that make it out of mind, out of sight for participants and does that take away from engagement?
So, I think that debate continues and there’s no one right answer there, obviously so more behavioral finance and understanding, how participants use the auto features and what’s the right combination of personal engagement, I think is definitely a topic that’ll continue, advice. Access to advice to what degree for most, I think out there target dates been a great innovation in the past 10, 20 years now we have managed [00:10:00] accounts.
Certainly advisors play a role depending on how complex your situation is and what form would that take, including in plan advice and guaranteed income. It because depending on where you are in your life stage, about to retire and in retirement is probably the most complex. I think we can all agree.
And that’s where we find, getting access to advice, whether you have one through your financial advisor, and if you don’t, should your employer allow access through a record keeper like John Hancock or a third party, I think is one that will continue to take traction and then, there’s also been a lot of discussion about how far should we go because, you know, wealth and health goes hand in hand, a lot of employers, certainly the bigger employers think a lot about financial wellness and personal wellness. So, how wide that goes, I think, is worth watching, certainly down market because of the major large employers have already gone there. But how much of that play an influence on the smaller end?
And should that be [00:11:00] a responsibility that a smaller employer should think about, I think will continue to be discussed in 2024.
Brian Anderson: So, when it, when it comes to 401k plan participants, do you have any thoughts about what they should be focused on in the coming year?
Wayne Park: Yeah, it’s been choppy, right?
2023 2022. I guess even going back to the pandemic participants is that they had to endure so much with the markets, the inflation, but I think depends on who we’re talking about. I think 2024. I just saw the stat. We’ll have people that were born in year 2000 in the workspace, which it blows my mind, although my son was born in 23, and it’s kind of scary to think about to say, Oh, he’s gonna be working and making a living.
But depending on who you are, we’ll have four generations now in the workplace, right? So, if you’re in the younger, Millennials is not young anymore, but certainly earlier than that for that group. I think don’t get distracted by all the headlines, but [00:12:00] save as much as you can and put them into long term investments and really leverage the power of tax deferred compounding is the wealth driver. So, I would say that would be the thing if you’re in the younger generation. And then for those that are, again, closer to retirement or in retirement, those decisions matter a lot more and certainly impactful and have a short-term time horizon. So, typically we say, well, set it, forget it, it’s retirement.
But for those two, I think, especially when things are choppy, maybe be more engaged, look at your plan a little bit more, not every single day, but certainly, more frequently, and then have some help, because I think a lot of decision making, when you talk about retirement, it’s not actually about the investments or financials, but it’s just the emotional aspects.
And so can you get help from a professional financial advisor or your employer or, retirement plan provider? So, I think the advice would vary depending on where you’re sitting, but those two are two big buckets of things that I think participants should be thinking about. [00:13:00]
Brian Anderson: All right. Well, this has been great. Wayne Park, CEO of John Hancock Retirement. Happy New Year to you. And thank you so much for joining us today and sharing your insights on the 401k Specialist Podcast.
Wayne Park: Thank you so much for having us and, happy New Year to you and everybody that may be listening. Thank you so much.