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NAPA 401(k) Summit
NAPA 401(k) summit

What Plan Sponsors Like About Advisors, And What They Don’t

A trio of benefit directors tell plan advisors at NAPA’s 401(k) Summit what they like about retirement plan advisors and what they can live without.

Three corporate executives in charge of their company’s retirement plans told 401(k) advisors at the industry’s largest conference this week that though they take different approaches to retirement plans, they all see their plan advisors as a vital extension of the retirement plan committee. They expect them to act not as vendors, but as corporate consultants, bringing to the table not just information but solutions to problems the committee may not even know it has.

“As an executive with limited time, I look for reassurance, expertise and confidence. I expect someone who is going to be provocative, either in the questions they ask or the questions they get me to ask,” said Matthew Gertzog, the Deputy Executive Director of the American Society of Hematology.

All agreed that it is important advisors understand what is going on with a company’s entire benefit package, and not just the retirement piece. But most importantly, they all agreed the consultative approach is crucial particularly when dealing with plan providers. Advisors should view the provider as a partner, not a fellow vendor, they said.

“We expect the advisor to be an advocate. You’re representing our interests, even when we are not at the table,” said Gertzog. “We see the advisor as an extension of the executive team. And if you as advisors don’t feel the same way, you should really ask why not.”

Katie Drayo, who oversees plans for 8,000 employees as the Director of Benefits with the manufacturer Cott Corporation, said advisors need to be smart when deciding when to impose on her time, and when to make decisions proactively.

When the advisors and providers are largely in agreement on certain issues, “I don’t want to be in the middle of that conversation. If they both come to me and show that they’ve talked to each other, they agree on it, and [explain] why, I’m okay. It’s the trust in the relationship part that matters.”

Keeping the sponsor updated on changes that impact participants, no matter how small, is crucial. “If there is a change on the website, I expect the advisor to let me know about that.” said Gloria McCamley, Director of Human Resources for the Association of periOperative Registered Nurses.

“Retirement plans are one-fiftieth of what I do on a weekly basis,” said McCamley. When setting up an auto-enrollment plan recently, one of the primary concerns was how administratively burdensome it was going to be; she was able to sell the plan to the plan committee by showing how the plan advisor would absorb a lot of that burden.

Drayo said when her committee recently decided to remove a stock fund from the plan, and provide a lump-sum pension window, it was the plan advisor that helped her get all those things done. “It’s a big deal to know that they are going to run that project and yell if something goes wrong.”

What are plan sponsors’ top concerns?

“Compliance,” said Drayo. “There is a lot going on there. ERISA compliance plan requirements, making sure we are meeting deadlines, that’s what keeps me up at night.”

“But the company’s concern is different,” she said. “We’re going to ask you a lot about what it costs. How you can find savings. We play that game all the time. The costs conversation happens every day.”

When it comes to those fees, “the same answer applies to all business partners. They should be reasonable and market driven,” said Gertzog. “People who are outliers, too high or too low, that’s a flag. I hope people are competing on value, not on cost. It’s important to set the fees to deliver the best possible service you can.”

Once the fees are set, however, don’t skimp on service. “It’s very disappointing to hear 'we could have done this, but it’s not in the scope of work.' Revisit the fees later if you have to, but don’t tell me you could only do something if we were paying you more.”

For McCamley, keeping fees low is not the top concern if the extra cost helps her propel the company’s mission forward.

She said she happily accepted higher advisory fees when they gave the advisor discretion over the investment lineup in the plan. “We don’t want to spend the time hashing over funds. That’s not our expertise. We can now have more efficient meetings focused on how to increase deferrals and plan participation. We want to spend more time talking about those strategies and less time talking about the investments.”

Drayo said for her company, a manufacturer with tight margins, costs were always a concern, but even so, it was also important for her to be involved in the investment management. “When a fund changes and an associate asks why, I want to be able to defend the process.” Programs like coordinating education sessions for employees, however, “that is something we choose to pay for. If it’s in the fee at the beginning, it’s going to get done.”

As for retirement plan committee meetings, most met quarterly and there was an expectation that the advisor would prepare them beforehand.

“We get materials ahead of every meeting on an iPad,” said McCamley. “The days of getting big three-ring binders of paper that would sit on your credenza, that was a waste to me.”

“We don’t spend a lot of time on investment reviews. We get a high-level review of the markets, which we appreciate, because a lot of what happens in the economy affects our industry in other ways,” she said.

And to what degree should advisors be held accountable for performance?

“In the real world, it’s difficult to measure everything with meaningful subjective measures. At the end, did we do what we set out to do,” said Gertzog. He did say that they ask in exit interviews to what degree the retirement plan was a reason for the employee leaving and happily find it’s not a factor in an employee’s decision.

“The first year, we did have a measurable goal with auto-enroll,” said McCamley. “The change to auto-enroll was a good thing. We do have these measures. But if for some reason, we don’t reach them, I’m not firing the investment advisor. As long as they are coming with strategies, some will fail. Let’s see what sticks. But I expect them to bring challenges. They should challenge us.”

“In many ways advisors are like therapists,” said Gertzog. “Understand our past and present context, but have a future focus. Keep confidences, stay current of the trends, push back on assumptions one might make and be there to celebrate when you have achievements.”

“Don’t be afraid to push back and say that’s not the way to go. But never cut corners on service delivery. You can always go back and revisit fees, but don’t tell us that something is not in scope,” he said.

“Don’t assume size doesn’t matter,” said McCamley. “We’re a small plan. We still expect a high level of service and we want to be on the cutting edge. We want to be the employer of choice. Don’t assume that just because we’re small we’re not going to make you work just as hard.”

“If you are the advisor, work with the provider,” said Droya. “If you’re the provider, work with the advisor. And go to committee meetings in person. I know it’s a pain to travel, but it’s not a conference call.”

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