retirement services - nfp
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Retirement Services
Riding the Retirement Pipeline
Jefferson D. CheshierPresented By:
401(k) World Pre-2000
Successful Retirement Practice Model: Connect Prospect and Mutual Fund or Annuity Wholesaler
2011 NFP SCHOOL OF EXCELLENCEINTERNAL USE ONLY. Not for public distribution.
Tornado of Market Forces Since 2000
� Internet Bubble
� Terror Attacks
� War� Corporate
Fraud
� EGTRRA� PPA� Increased
Regulation� LaRue� Fiduciary
Liability
2011 NFP SCHOOL OF EXCELLENCEINTERNAL USE ONLY. Not for public distribution.
Fraud� Housing
Bubble� Too Big to
Fail� Recession� TARP� Stimulus
Liability� Fee
Disclosure� Asset
Allocation Scrutiny
� “Autos”� Fee
Compression
Current 401(k) World
2011 NFP SCHOOL OF EXCELLENCEINTERNAL USE ONLY. Not for public distribution.
More people are “less confident” about having enough in retirement
15
20
25
30 ConfidentNot confident
(%)
CONFIDENCE IN HAVING ENOUGH MONEY TO LIVE COMFORTABLY THROUGH RETIREMENT, 1993–2010 (%)
2011 NFP SCHOOL OF EXCELLENCEINTERNAL USE ONLY. Not for public distribution.
0
5
10
15
1993
1995
1997
1999
2001
2003
2005
2007
2009
Sources: Employee Benefit Research Institute and Mathew Greenwald & Associates, Inc., 2011 Employee Benefit Research Institute Retirement Confidence Survey.
Many Americans aren’t saving enough
REPORTED TOTAL SAVINGS AND INVESTMENTS FOR ALL WORK ERS (%)
$50,000 to $99,000 9%
$100,000 to $249,999 14%$250,000 or more 10%
2011 NFP SCHOOL OF EXCELLENCEINTERNAL USE ONLY. Not for public distribution.
Source: The 2011 Retirement Confidence Survey; EBRI, April 2011. Findings among those providing response (does not include value of primary residence or defined benefit plans).
Less than $50,000 67%
� 38% of 401(k) plans have automatic enrollment� Up from 23.6% in 2006
� 83.8% use Auto enrollment for new hires only� 75% of plans have a default savings deferral rate of 3% or
less
Pension Protection Act of 2006 hasn’t provided broa d structural improvement
2011 NFP SCHOOL OF EXCELLENCEINTERNAL USE ONLY. Not for public distribution.
lessDefault %
% of Plans
� 60.3% have no auto escalation or voluntary escalation only
Source: Profit Sharing Council of America 53rd Annual Survey, 2010
1% 2% 3% 4% 5% >5%
3% 13.1% 58.0% 8.2% 8.9% 8.9%
Bottom Line
As an industry, we are not helping enough Americans adequately prepare for their
retirement.
2011 NFP SCHOOL OF EXCELLENCEINTERNAL USE ONLY. Not for public distribution.
� What if this trend continues?
Bottom Line
We’ll get “help”
2011 NFP SCHOOL OF EXCELLENCEINTERNAL USE ONLY. Not for public distribution.
Bottom Line
So what can we do?
� Provide value to business owners� Provide positive retirement plan experiences to business owners
and employees alike
� Business owners want more by wanting less – GIVE IT TO THEM!
2011 NFP SCHOOL OF EXCELLENCEINTERNAL USE ONLY. Not for public distribution.
� Own the issues, then call in the cavalry
� Regulatory developments
� Industry and product developments
� Legal developments
� Investment developments
� Work with partners, but divorce yourself from provi ders
Advisor Alpha
What is ‘Alpha’?
� The abnormal rate of return in excess of what would be predicted by an equilibrium model
� How does an advisor provide alpha to business owners?� 10+ years ago: Fund Picking
2011 NFP SCHOOL OF EXCELLENCEINTERNAL USE ONLY. Not for public distribution.
� 10+ years ago: Fund Picking
� 5 years ago: Asset Allocation Funds
� Now: The Advisor. Those who can create good outcomes by demonstrating knowledge, active participation in al l plan matters with the employer and high general involvem ent.
Change in the 401(k) landscape has accelerated
A growing emphasis on plan
performance and business owner satisfaction
2011 NFP SCHOOL OF EXCELLENCEINTERNAL USE ONLY. Not for public distribution.
A focus on fiduciary responsibilities
An intense scrutiny of fees
Demonstrating value is even more important now
BENEFIT PRICE
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Value
Help business owners understand and appreciate value
Business owners turning to advisors, now more than ever
20102008
69%plans sold using
an advisor
82%plans sold using
an advisor
2011 NFP SCHOOL OF EXCELLENCEINTERNAL USE ONLY. Not for public distribution.
an advisor an advisor
401(k) Exchange, May 2010.
Business owners have begun using advisors for these reasons
27%
34%
22%
Fiduciary concerns doubled since ’08
2011 NFP SCHOOL OF EXCELLENCEINTERNAL USE ONLY. Not for public distribution.
Less time to
manage the plan
Concerns
surrounding fiduciary
responsibilities
Plan investments
assistance
12%
Improvement of
plan performance
Business owners want more from their advisors now
A more knowledgeable advisor
35%4%Other
$2.5M to $10M plan size
2011 NFP SCHOOL OF EXCELLENCEINTERNAL USE ONLY. Not for public distribution.
Better advisor support
of employee education
Advisor to take
on formal fiduciary
responsibility
4%
4%
12%
12%
8%
27% Better provider
service
Advisor too expensive
To replace
a retired advisor
Percentages don't add
up to 100 due to
rounding.
Business owners want more from their advisors now
$10M to $50M plan size
21%
Advisor too
expensive
21%
More employee
education support
More value for advisor fees
2011 NFP SCHOOL OF EXCELLENCEINTERNAL USE ONLY. Not for public distribution.
7%
11%
14%
11%
14%
Better advisor support for
servicing requirements
Advisor to take on
formal fiduciary
responsibility
Better provider
service
A more
knowledgeable
advisor
To replace
a retired advisor
Percentages don't add
up to 100 due to
rounding.
Understanding key factors of business owner satisfaction is today’s opportunity
Plan sponsor
Plan performance
2011 NFP SCHOOL OF EXCELLENCEINTERNAL USE ONLY. Not for public distribution.
Plan sponsor
satisfactionComprehensive fiduciary assistance
Demonstrating value
Many business owners don’t fully understand all the ir fiduciary obligations
16%Somewhat
confident
Neutral
Not confident
Degree of confidence surrounding fiduciary obligations
2011 NFP SCHOOL OF EXCELLENCEINTERNAL USE ONLY. Not for public distribution.
19%
34%
Very confident
Confident
23%9%
confidentNot confident
Many business owners want advisors to take on a formal fiduciary role
Very important
28%
Degree of importance that an advisor is willing to take on
formal fiduciary responsibility for the plan
63%
2011 NFP SCHOOL OF EXCELLENCEINTERNAL USE ONLY. Not for public distribution.
35%
Important
28%
16%
2%
19% Somewhat important
Neutral
Not important
Advisors don’t take credit for the work they do
Plan sponsors say advisors….
Don’t document
activities performed
Don’t track
and report
time spent
Don’t point out
reduced risk due
to help with
sponsor’s
2011 NFP SCHOOL OF EXCELLENCEINTERNAL USE ONLY. Not for public distribution.
activities performed
66% 71%
time spent
on the plan
sponsor’s
fiduciary role
71%
This is a missed opportunity to discuss services and activities that they provide
when underscoring value to plan sponsors
Business owners need help to better understand fees
53% 63%
2011 NFP SCHOOL OF EXCELLENCEINTERNAL USE ONLY. Not for public distribution.
53%don’t fully understand
provider fees billed
to their company
63%don’t fully understand
fees charged
on plan assets
Advisors explain fees, but only half-demonstrate value for fees
How well an advisor proves his/her value
according to plan sponsors
Well 35% 17% Very well
2011 NFP SCHOOL OF EXCELLENCEINTERNAL USE ONLY. Not for public distribution.
Well 35%
Not well6%
Neutral18%Somewhat well 24%
17% Very well
Plan sponsors need, and expect, more from advisors
They’re looking hard at plan performance and
considering their satisfaction levels
2011 NFP SCHOOL OF EXCELLENCEINTERNAL USE ONLY. Not for public distribution.25
They’re facing increased scrutiny over fees
They want comprehensive fiduciary assistance
Summary
� Inflection point in evolution of retirement planning business� Consolidation + compression = consternation?� Opportunity!
� 408(b)(2)
� 3(21) vs. 3(38) fiduciary status
� Continually shifting political, regulatory and oversight environments
2011 NFP SCHOOL OF EXCELLENCEINTERNAL USE ONLY. Not for public distribution.
� Continually shifting political, regulatory and oversight environments
� OWN IT!
� Plan sponsors need dedicated professionals to help them manage their fiduciary responsibilities in the same way they need:� Attorneys for legal matters
� CPA’s for tax matters
� Consultants for resource optimization and strategic planning
NFP Retirement’s Mission
To help Advisors build and manage theModel 401(k) Practice, it must be:
Scalableand Profitable
2011 NFP SCHOOL OF EXCELLENCEINTERNAL USE ONLY. Not for public distribution.
Scalableand Profitable
How do we help you do that?
By providing you with the tools and resources to create efficient and repeatable processes
Process Powerhouse: Retirement Plan Advisory Group (RPAG)
� Complete Back-office Sales, Marketing and Service Solution for Committed Retirement Plan Consultants
Proprietary, CFA-led investment analysis process
RFP/vendor benchmarking
Plan review
2011 NFP SCHOOL OF EXCELLENCEINTERNAL USE ONLY. Not for public distribution.
Plan review
Marketing materialsEmployee education
� Saves: Hours of ‘In-house’ Preparation and Analysis
RPAG membership: $12,000 / year
Revenue Diversification
Maximize
Proprietary NFP Tools
and Resources
• NFP Executive Benefits• Rollover Blueprint
Model (Asset Retention)• Plan Benchmarking
2011 NFP SCHOOL OF EXCELLENCEINTERNAL USE ONLY. Not for public distribution.
Diversify Revenue
Maximize Participant Outcomes
Proprietary Tools
� Marketing brochures
� Plan diagnostic
� Employee survey
� Plan-level fee analyzer
2011 NFP SCHOOL OF EXCELLENCEINTERNAL USE ONLY. Not for public distribution.
� White papers
� Retirement Services Update
� Legal & Compliance Update
� PensionOnline
NFP Leverage
� National Relationships with Vendors� $55 billion in retirement assets under management
� Our leverage, your independence
2011 NFP SCHOOL OF EXCELLENCEINTERNAL USE ONLY. Not for public distribution.
Contact Information
Jeff CheshierDirector, Retirement Services(512) 697-6158jcheshier@nfp.com
2011 NFP SCHOOL OF EXCELLENCEINTERNAL USE ONLY. Not for public distribution.
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