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THE OFFICIAL MAGAZINE OF THENATIONAL ASSOCIATION OF PLAN ADVISORS

Powered by ASPPAWINTER 2014 • NAPA-NET.ORG

Taking Off

in a New Retirement

Income Direction

Innovative advisors are implementing

new approaches to the decumulation

phase of retirement.

Scale 1” = 1” LastSavedBy: Aaron Swavey

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NAPA Net MagazineDue: 11/3Insertion: December

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A registered investment advisor, member FINRA/SIPC

“I’M NOT AN ADMINISTRATOR. I’M AN ADVISOR.”

#AdvisorVoices We get it. You want to spend more time in front of your clients and less time behind your desk. So lighten your administrative workload with the Retirement Partners Tool Suite. An integrated set of tools to help you streamline the RFP process, recommend and monitor investment lineups, benchmark plan fees, and much more. That way you can focus on growing your business, while we focus on supporting it.

To learn more, download our white paper at Smart117.LPLNow.com, call 1-866-598-7121 or join the conversation on Twitter using #AdvisorVoices.

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PantoneColors:

NAPA Net MagazineDue: 11/3Insertion: December

Publications:

Links:mosaic_background3_fix.psd(CMYK; 263ppi; 113.89%)


“I’M NOT AN ADMINISTRATOR. I’M AN ADVISOR.”

#AdvisorVoices We get it. You want to spend more time in front of your clients and less time behind your desk. So lighten your administrative workload with the Retirement Partners Tool Suite. An integrated set of tools to help you streamline the RFP process, recommend and monitor investment lineups, benchmark plan fees, and much more. That way you can focus on growing your business, while we focus on supporting it.


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n a p a n e t t h e m a g a z i n e2

Taking Off

in a New Retirement

Income Direction

by Bruce ShutanInnovative advisors are implementing new approaches to the decumulation phase of retirement.

Cover Illustration by Robert Meganck

WINTER 2014

28cover

« eLecTIoN WrAP UP: rIdINg The WAve by Nevin E. Adams, JD

What do the midterm elections mean for plan advisors?

20

« The PrAcTIce of The fUTUre by Fred Barstein

DC plan advisors are in the spotlight.

Practice of the

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YOUR VALUE SHINESIN THEIR SUCCESS.

Whether you’re advising a growing business or an established organization, you

need a retirement plan services provider that can help you demonstrate expertise,

prove your value, grow your practice and deliver on the promise to help individuals

retire on their own terms. MassMutual was honored at the 2014 PLANADVISER

Awards for Excellence, scoring well above the industry average1 for value-added

services including “partnering with advisors for success.” To learn how resources

like MassMutual PlanalyticsSM can help you, please contact your MassMutual

representative or MassMutual at 1-866-444-2601, MassMutual.com/Retire

TOTAL RETIREMENT SERVICES + TPA + DEFINED CONTRIBUTION + DEFINED BENEFIT + NONQUALIFIED + NONPROFIT + PUBLIC SECTOR + TAFT-HARTLEY + STABLE VALUE + PEO + IRA

©2014 Massachusetts Mutual Life Insurance Company. All rights reserved. MassMutual Financial Group refers to Massachusetts Mutual Life Insurance Company (MassMutual) [of which Retirement Services is a division] and its affiliated companies and sales representatives. Mutual Fund Industry Awards “Hall of Fame” selection announced 12/2/13 by Fund Industry Intelligence & Fund Director Intelligence (Euromoney Institutional Investor) for MassMutual’s prior awards: Retirement Leader of the Year for industry leadership and excellence in retirement plan services, April 2012; Deal of the Year, April 2013; Ad Campaign of the Year, April 2013. MassMutual is the only firm ever to have earned a Hall of Fame induction in just two years. 1Based on Boston Research Group’s 2013 Defned Contribution Plan (DCP) Retirement Advisor Satisfaction and Loyalty Study. PlanAdviser Choice Awards sponsored by Asset International, April 2014. RS: 34248-00

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EdIToR-IN-ChIEfNevin e. Adams, Jd

PuBlIShERerik vander [email protected]

EdIToRJohn [email protected]

SENIoR WRITERJohn [email protected]

aSSoCIaTE EdIToRTroy [email protected]

aRT dIRECToRTony Julien

advERTISINg CooRdINaToRrenato Macedo [email protected]

NaPa offICERS

PRESIdENTsteven dimitriou, AIf, PrP

PRESIdENT ElECTJoseph f. deNoyior

vICE PRESIdENTsamuel Brandwein, QPA, cfP, cIMA, crPs

ExECuTIvE dIRECToR/CEoBrian h. graff, esq., APM

NAPA Net the Magazine is published quarterly by the National Association of Plan Advisors, 4245 North fairfax dr., suite 750, Arlington, vA 22203. for subscription information, advertising and customer service, please contact NAPA at the above address or call 800-308-6714, or [email protected]. copyright 2014, National Association of Plan Advisors. All rights reserved. This magazine may not be reproduced in whole or in part without written permission of the publisher. opinions expressed in bylined articles are those of the authors and do not necessarily reflect the official policy of NAPA.

Postmaster: Please send change-of-address notices for NAPA Net the Magazine to NAPA, 4245 North fairfax dr., suite 750, Arlington, vA 22203.

stock Images: shutterstock

06 LeTTer froM The edITorby Nevin E. Adams, JDHere's to a bright, if challeng-ing 2014.

08 INsIde NAPAby Steven DimitriouGet off the bench and into the game, NAPA members.

10 INsIde The BeLTWAyby Brian H. GraffWorkers expect to work longer. How will we define retirement?

14 INsIde The PLAN PArTIcIPANT’s MINd

by Warren CormierToo much friction is causing DC assets to leak out of the DC retirement system.

26 INsIde The LAWby David N. LevineStepping carefully: statements, policies and disclosures.

38 INsIde The PLAN sPoNsor’s MINd

by Steff C. ChalkThe three blunders of plan sponsors as fiduciaries

64 INsIde The sTeWArdshIP MoveMeNT

by Donald B. TroneThe Third Wave: Leadership is the new fiduciary.

66 INsIde The MArKeTPLAceby Fred BarsteinSea change coming in the DC advisor market.

coLUMNs

« NAPA PArTNer corNerOur directory of leading record keepers and DCIOs.

PARTNER CORNER

The NAPA Partner Corner connects plan advisors with leading record keepers and DC Investment Only (DCIO) �rms, highlighting their services, resources and positioning in the market, as well as business metrics and contact information for their sales and support people. Currently, only NAPA Firm Partners at a certain membership level have the opportunity to publish a basic (one-third page) or enhanced (full page) listing in the Partner Corner. The sameinformation that is provided in the pages that follow is also available in enhanced online form on NAPA Net, at http://www.napa-net.org/.

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Partner Corner New 5.30.14.pdf 1 5/30/14 11:04 AM

39

16 INsIde INvesTMeNTs by Jerry BramlettInnovation challenges in target-date funds.

68 INsIde The NUMBersby Nevin E. Adams, JDThe gap in covering the unin-sured.


It’s a lot to keep up with, of course. And not just the news about what has happened, but reliable analysis on what to do about it. The editorial team here works hard every day to curate the content we provide in print and online, separating the stuff that matters to you and your business from the clutter.

But as I look back on 2014 and an-ticipate what lies ahead, I can’t help but acknowledge the strength of the NAPA organization. It’s a strength that’s drawn not only from the diversity and involvement of our membership and the support of our Firm Partners, but also from the variety of resources available to you.

Resources like the Government Affairs team, which not only provides insights on the legislative and regulatory outcomes but, working with member committees, helps shape them as well. Resources like the Po-litical Affairs team and the NAPA Political Action Committee (PAC), which develop relationships and garner awareness and attention for the issues that impact your business. Resources like the NAPA Retire-ment Plan Academy, which can help you build on and expand your knowledge. And resources brought together at events like the NAPA 401(k) Summit by our Conferences team and committees.

Thanks to you all for a great 2014 — and here’s to a bright, if challenging, 2015!

ne of my favorite films is “National Lampoon’s Christmas Vacation.” Sure, it’s a holiday movie, but it’s really about family — and the challenges of reconciling our fond images of the

past with the realities of the present, while we foster hope for the future. Indeed, there is a nearly irresistible inclination this time of year to want to look back and take stock (generally wistfully), with a warm and opti-mistic view for the months ahead.

But then, I live and work near our nation’s capital.

Despite numerous silly and sometimes quite hurtful ideas about “fixing” our pri-vate retirement system, we find ourselves at the end of this year with things pretty much as we started it. We do, of course, have some “overhang” from unresolved issues: the fiduciary re-proposal remains un-repro-posed, and we don’t yet know what might lie ahead for self-directed brokerage ac-counts. And as for MEPs — well, it depends on whom you ask.

But the “silly” ideas remain — the notion that capping the amount people can set aside for retirement won’t have an effect on plan formation; the belief that tax in-centives play no role in how much workers save (though they almost certainly influence the sponsorship of the plans in which those workers do save); the insistence that tax incentives are “upside down” (even though data indicates they produce balances that are proportionate with salary); and the bud-get-scoring myopia that refuses to acknowl-edge the difference between a deferral of

taxes and a permanent avoidance. Trust me, we haven’t seen the last of

any of these. Just last month we learned that Yale Law School Prof. Ian Ayres — he of the 6,000 letters to plan sponsors warn-ing of high fees and fiduciary malfeasance based on conclusions concocted from dated Form 5500 information — is now push-ing a “sophistication test” as a condition for 401(k) participants investing in “high cost” or “esoteric” fund options. Not that his earlier foray was forgotten — though his analysis remains unpublished, he was also pressing the Connecticut Retirement Security Board to issue a “scarlet letter” to every major Connecticut employer with an average plan and fund level cost that exceeds 100 basis points.

Apparently bad ideas and assumptions never die, they just get picked up and cited in other academic journals.

Not that there aren’t some good and positive ideas around. Moreover, as amaz-ing as it may seem, some remarkably sound ideas not only seem to be gaining attention, but the political dynamics might even allow those ideas to advance. (See our feature sto-ry on page 34 for the reason(s) why.) Con-cerns — and commitments to do something — about coverage appear to be bipartisan, if not universal, even if ideas about how to address the issue remain “varied.”

Of course, 2014 also brought with it a new and dramatic surge in industry con-solidation, and most anticipate more will follow in 2015. Consider that in 1999 there were more than 100 record keepers; today there are fewer than half that number. Is that a good thing? Depends on whom you ask. Regardless, it is a reality.

l e T T e r f r O m T h e e d i T O r

Out withthe Old...

OApparently bad ideas and assumptions never die, they just get picked up and cited in other academic journals.

NevIN e. AdAMs » [email protected]

Rainy Cloudy Partly Sunny Sunny

clear view of retirement,improving outcomes

We keep participants on course toward a funded retirement.What makes our approach to retirement readiness so effective is that it’s so

personalized. At any time, participants can check their own retirement forecast

to get an idea of whether they’re on course toward a funded retirement and,

if not, what steps they can take to improve it. Think how much more engaged your

clients’ participants would be with this kind of actionable guidance. To learn more,

call 888-401-5826 or visit trsretire.com.

Securities offered through Transamerica Investors Securities Corporation (TISC),440 Mamaroneck Avenue, Harrison, NY 10528. Transamerica and TISC are af� liated companies.14599-FA_AD (01/14)© 2014 Transamerica Retirement Solutions Corporation

l e T T e r f r O m T h e e d i T O r

As amazing as it may seem, some remarkably sound ideas not only seem to be gaining attention, but the political dynamics might even allow those ideas to advance."

Rainy Cloudy Partly Sunny Sunny

clear view of retirement,improving outcomes

We keep participants on course toward a funded retirement.What makes our approach to retirement readiness so effective is that it’s so

personalized. At any time, participants can check their own retirement forecast

to get an idea of whether they’re on course toward a funded retirement and,

if not, what steps they can take to improve it. Think how much more engaged your

clients’ participants would be with this kind of actionable guidance. To learn more,

call 888-401-5826 or visit trsretire.com.

Securities offered through Transamerica Investors Securities Corporation (TISC),440 Mamaroneck Avenue, Harrison, NY 10528. Transamerica and TISC are af� liated companies.14599-FA_AD (01/14)© 2014 Transamerica Retirement Solutions Corporation


i n s i d e n a p a

Taking the OffensiveNow is the perfect time for NAPA members to get off the bench and into the game.

your participants and plan sponsors know what is at stake. Participate in the Govern-ment Affairs calls and webcasts. Donate to the PAC. Go to the Summit and get in-volved. We are on the offense and we want to keep it that way. N

» steven dimitriou, AIf, PrP, is NAPA’s 2014-2015 President. he served as President-elect in 2012 and 2013. dimitriou is a Managing Partner at Mayflower Advisors, LLc, in Boston.

good news is that we are no longer relegat-ed to the sidelines.

In early October we stormed the field on Capitol Hill with the second NAPA DC Fly-In Forum. We met with dozens of key lawmakers’ offices to lay out legitimate facts and plant the seeds of constructive ideas. We lent our support to Sen. Orrin Hatch and the strengths of his proposed legislation — much of which incorporates proposals NAPA and ASPPA have promot-ed for years. Importantly, we also engaged some of those on the other side of the ball who are willing to work with us in areas where we share common ground. We have extended and expanded those discussions since the Fly-In. The promise of creating accord on areas like coverage can only bolster our position and influence on other important issues.

So how do we keep the momentum going? We have additional grassroots ef-forts in the works and continue to get more and more of our members involved in the offense. The NAPA 401(k) Summit in San Diego this coming March is shaping up to be an ideal forum to sharpen our skills and hone our game.

We are still in the opening minutes of what is going to be a long and hard-fought contest, so we absolutely need your help and participation. That support started at the Fly-In Forum, where NAPA members gave a record amount of contributions to the NAPA PAC. It was a promising open-ing drive, but that drive will fizzle quickly without continued support. The PAC gives NAPA access and helps to keep us on the field.

So when your number gets called, don’t just sit on the bench — get in the game! Let

t’s time. We have recruited. We have trained. We have scouted the opposition and we have devised a game plan. Now it is time to emerge from the tunnel, cut through the smoke and haze of Washington, and take the field by storm. In short, it’s time to take the

offensive.In the nearly three years that I have

been involved in NAPA, I have not seen a better time for advisors to make a mark on Capitol Hill and beyond. With the midterm elections and the flux to follow, policies and platforms are going to be decided in the coming months. During that time, the lame duck executive branch will likely battle both sides trying to create its legacy. Beyond that, all sides are gearing up for 2016 by defining legislative and budgetary agendas over the next two years. All this means it is time for us to get into the game.

Even with the persistent rumblings on the fiduciary definition from the DOL, virtually all of the major issues concerning our industry are in play — deductibility, coverage, limits, mandated contributions, government-run options. They are all being discussed, and members of Congress are listening. But despite what you may think, most of their minds are not made up yet when it comes to our issues; and many are looking to be coached up. Therein lies the danger, but also the opportunity.

The danger is that myriad think tanks and lobbyists are trying to influence the system with misguided notions wrapped in misleading statistics. Some of these ideas aim to tear down what is arguably the most successful retirement system on the planet instead of building upon its merits. The

By sTeveN dIMITrIoU

Iearlier this year, NAPA debuted two unique

industry lists: “Wingmen,” our list of top dc

wholesalers; and “young guns,” our list of the top

plan advisors under 40. Published in our spring

and summer issues respectively, both proved to

be big hits among NAPA members and beyond.

The good news is that we’ll do it all over again in

2015. for details on how to nominate your favorite

Wingman or young gun, see page 63 of this issue.

ThEy'RE BaCk!WINgmEN, youNg guNS To RETuRN IN 2015

FIXED INCOMEOPPORTUNITIESspan the globe.so do we.

Investors should carefully consider a fund’s investment goals, risks, charges and expenses before investing. To obtain a Franklin Templeton fund summary prospectus and/or prospectus that contains this and other information, call 1-800-342-5236. Investors should read the prospectus carefully before investing.Advisor Class shares are only offered to certain eligible investors as stated in the prospectus. They are offered without sales charges or Rule 12b-1 fees. Other share classes are subject to different fees and expenses, which will affect their performance.All investments involve risks, including possible loss of principal. Changes in interest rates will affect the value of the fund’s portfolio and its share price and yield. Bond prices generally move in the opposite direction of interest rates. Thus, as the prices of bonds in the fund adjust to a rise in interest rates, the fund’s share price may decline. Currency rates may � uctuate signi� cantly over short periods of time, and can reduce returns. Derivatives, including currency management strategies, involve costs and can create economic leverage in a portfolio which may result in signi� cant volatility and cause the fund to participate in losses (as well as enable gains) on an amount that exceeds the fund’s initial investment. The fund may not achieve the anticipated bene� ts, and may realize losses when a counterparty fails to perform as promised. Foreign securities involve special risks, including currency � uctuations and economic and political uncertainties. Investments in emerging markets involve heightened risks related to the same factors, in addition to those associated with these markets’ smaller size and lesser liquidity. These and other risk considerations are discussed in the fund’s prospectus. Diversi� cation does not guarantee a pro� t or protect against a loss. 1. Source: Morningstar® 9/30/14. For each fund with at least a 3-year history, Morningstar® calculates a risk-adjusted return measure that accounts for variation in a fund’s monthly performance (including the effects of all sales charges), placing more emphasis on downward variations and rewarding consistent performance. The top 10% of funds in each category receive a Morningstar RatingTM of 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars and the bottom 10% receive 1 star. (Each share class is counted as a fraction of one fund and rated separately.) Templeton Global Bond Fund–Advisor Class was rated against 279, 230 and 137 funds and received Morningstar Ratings of 5, 4, and 5 stars for the 3-, 5- and 10-year periods, respectively. Templeton Global Total Return Fund–Advisor Class was rated against 279 and 230 funds and received Morningstar Ratings of 5 and 5 stars for the 3- and 5-year periods, respectively. Morningstar RatingTM is for Advisor Class shares only; other share classes may have different performance characteristics. © 2014 Morningstar, Inc. All rights reserved. The information contained herein is proprietary to Morningstar and/or its content providers; may not be copied or distributed; and is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information.© 2014 Franklin Templeton Distributors, Inc. All rights reserved.

A GLOBAL FIXED INCOME LEADER FOR DC PLANSOur global team of experts searches worldwide for attractive � xed income investments, offering opportunity, added diversi� cation, and the potential for effective plan participant outcomes.

For more information on our global � xed income approach and broad DC fund lineup across multiple share classes, visit franklintempleton.com/DC� xedincome.

Overall Morningstar RatingTM 9/30/2014–Advisor Class1 Out of 279 U.S.-domiciled World Bond Funds

TEMPLETON GLOBAL BOND FUND TEMPLETON GLOBAL TOTAL RETURN FUND

Morningstar Ratings measure risk-adjusted returns. The Overall Morningstar RatingTM for a fund is derived from a weighted average of the performance � gures associated with its 3-, 5- and 10-year (if applicable) rating metrics. Past performance does not guarantee future results.

USEN_SPANTHEGLOBE_FI_DCIO_10x12_NAPA_120114.indd 1 31/10/14 11:06


i n s i d e T h e b e l T w a y

In a future in which workers expect to work longer, how will we define retirement?

We Need to Have a National Conversation on Retirement

40% or even 50% or more of their lives? It certainly does not take a mathematical genius (or an actuary) to determine that at some point it becomes no longer economi-cally sustainable.

Admittedly, the issue of raising the re-tirement age is a challenging problem both practically and politically. There are issues relating to blue-collar versus white-collar workers and whether different retirement ages are fair and appropriate for different types of work. Then there are issues that employers will legitimately need to deal with if workers are expected to work longer to later ages. One would think that if we can have an open an honest dialogue, we should be able to address these issues.

As I write this, yet another election has occurred. Perhaps after this one we can begin this conversation. Or more likely it will need to wait till after yet another Pres-idential election. But, as people to continue to live longer, the issue will have to be dealt with inevitably. Until then, both DB and DC plans will continue to be strained to produce greater retirement benefits in order to satisfy increasingly oversized retirement expectations. N

» Brian h. graff, esq., APM, is the executive director/ceo of AsPPA and NAPA.

t’s become almost a daily occur-rence. Some news media outlet runs a story on “the nation’s retirement crisis,” reporting that a majority of Americans have not saved enough and almost certainly will not have enough to last through retirement.

That’s true, of course — most Ameri-cans are not saving enough for retirement. But what is never discussed is what retire-ment is supposed to mean and whether our expectations continue to be reasonable.

Some are already predicting that that the first person to live to 150 years old has already been born. According to the Stanford Center on Longevity, human life expectancy gains over the past 100 years have surpassed all gains prior since the dawn of humanity. Nonetheless, any meaningful conversation about reconsider-ing the nation’s retirement age of 65 (albeit increasing to age 67 under Social Security for those born after 1959) remains highly controversial.

In 1940, only 54% of men who made it to age 21 could expect to live to age 65; their life expectancy at that point was 13 years, which means they were spend-ing 16.67% of their lives in “retirement.” Today, that number is almost 20 years, meaning that on average, people will be spending 23.5% of their lives retired. Keep in mind that these life expectancy tables are essentially averages, so many people living beyond their tabular life expectancy will be spending even a greater percentage of their lives in retirement. And every year, life expectancy for both men and women continues to increase gradually.

This all leads to a politically loaded question: As a society, does it makes sense to have individuals “retired” for 25%, 30%,

I Welcome to the 30 new firm Partners that joined NAPA in 2014:

(k)ornerstone 401k servicesAlliance Benefit groupAscensusBlue Prairie groupBNy Mellon Asset ManagementBoulevard rBPAscompass financial Partnerscooney financial Advisorscosource financial group, LLceagle Asset Managementenvestnet retirement solutionsgreenspring Wealth Managementhearts & Wallets, LLchutchinson financial, Inc.iJoin solutions, LLcInspirafsMillimanMultnomah group, Inc.Neuberger BermanPAi Penchecks, Inc.Pension consultants, Inc.Plexus financial services, LLcrBf capital Management, Inc.rebalance-IrArPs retirement Plan Advisorssoltis Investment Advisorsvantage Benefits AdministratorsvWise, Inc.WisdomTree Asset Management

NEW NaPa fIRm PaRTNERS IN 2014

As a society, does it makes sense to have individuals ‘retired’ for 25%, 30%, 40% or even 50% or more of their lives?”

By BrIAN h. grAff

Products and services o� ered through the Voya family of companies. © 2014 Voya Services Company. All rights reserved. CN0623-191311-0716

U.S. is now Voya Financial™ – and our new look is just the beginning. We’re a new kind of fi nancial company that’s dedicated to redefi ning what it means to prepare for retirement.

We believe everyone is entitled to a secure fi nancial future and we’re committed to making that possible. We’re here, each and every day, to help you and your clients envision

the future, get organized and take the steps necessary to pursue fi nancial success together.

With 13 million customers, over 220,000 points of distribution and $514 billion in total assets under management and administration, we’re confi dent that we have what it takes to help you and your customers make the best fi nancial decisions.

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So much more

NAPANet_FP_10x12.indd 1 7/16/14 4:01 PM

Fixed Income. INVESTORS PREPARE FOR ThE PROSPEcT OF hIghER RATES

Low yields across most fixed income sectors and the potential for rising interest rates have investors concerned about possible risks to their portfolios.

With more than 40 years of experience, T. Rowe Price is an established leader in fixed income investing. Recently, three seasoned T. Rowe Price fixed income portfolio managers gathered to share their perspectives on the challenges and opportunities presented by the current environment.

Q: What do you see as the biggest challenge in the current fixed income environment?

Huber: The biggest challenge is low rates and being able to find value when the 10-year Treasury yield is 2.5% and German and Japanese 10-year rates are below 1%. High yield even has a yield below 6%; we used to be in an environment where Treasuries were at almost 6%. A second challenge is the low level of volatility. A lot of the opportunities for my strategy have come from volatility. But there hasn’t been a lot of change in sector spreads, and with valuations pretty well compressed, opportunities are much tougher to identify.

Conelius: We are a little uncomfortable investing that incremental dollar knowing that rates will go up and volatility will come at some point. Your choices are cash, earning nothing, or buying an expensive asset. We’re trying to find idiosyncratic stories that may be able to survive the repricing of the “risk free” asset.

See how we can help you and your clients prepare for the prospect of rising rates. Visit troweprice.com/globalinsights.

SPECIAL ADVERTISING SECTION SPECIAL ADVERTISING SECTION

Jim MurphyCFA, manager of the Tax-Free High Yield Fund

steve HuberCFA, FSA, manager of the Strategic Income Fund

Mike ConeliusCFA, manager of the Emerging Markets Bond Fund

Bond rate expectations

need to be reset, with a

focus on diversification

and risk management.

Q: What do you see as the biggest opportunity in fixed income?

MurpHy: If you’re a taxable investor, higher tax rates have made the value of tax-exempt bonds much more interesting. With the unwinding of the Bush tax cuts, the top marginal tax rate went to 39.6%. And with the additional tax for the Affordable Care Act, the highest marginal rate is around 43%.

Huber: We have three drivers of return in our strategy: credit, currencies, and interest rates. Credit has been kind of a layup for the last five or six years. When high yield

spreads got up to 1,900 basis points and investment-grade spreads were 600, you could basically buy anything you wanted to and spreads would keep on coming in. But now, with spreads pretty tight across credit sectors, we’re seeing more opportunities in rates and currencies. We’re taking shorter-duration postures and positioning for weaker currencies across many developed markets, while taking duration and currency exposure across emerging markets.

Q: Conventional wisdom says that expectations for bond performance need to be reset, interest rates should rise at some point, and investors should diversify their core holdings but not reach for too much risk. Do you agree?

Conelius: Return expectations definitely need to be reset. As for reaching for too much risk, I think that’s definitely true. We’re being very mindful of liquidity. Because as rates go higher, one thing that will be tested is how much liquidity the Street provides to investors.

Huber: I think it’s a great environment to be diversified in and not take too much risk. We still think there’s value in some of the higher-risk sectors such as high yield and emerging markets.

Q: Should investors be tilting portfolios toward emerging market debt?

Conelius: It’s too late to make the macro, top-down call that emerging markets are cheap, because they’re not

that cheap anymore. They got hit hard last year but have recovered nicely this year. We’ve had political volatility, a default in an important country, and an invasion of one country by another. U.S. rate policy has been like guardrails around these badly driven bumper cars. If rates were rising, or if there was more uncertainty around Fed policy, I think we would have had a lot more contagion.

We’re already on the back side of a lot of these problems. We’ve had political improvement in a lot of countries, so we may be beyond the worst of where markets would be susceptible to contagion. But we still need to be mindful that as rates rise, there will be a reduction in liquidity, a challenge of risk appetite.

Q: Given the current environment, how are you positioning your funds for the short term, and what changes would you make when rates start to go up?

Huber: We’re taking more of a barbelled approach. We’re seeing some opportunities in high yield and emerging markets and balancing that with liquidity sectors: global Treasuries and some mortgage-backed securities. We’re underweighting investment-grade corporates, which tends to be a longer-duration sector that could get hit more as rates go up.

Conelius: We’re underweight to U.S. dollar sovereign duration (a measure of the sensitivity of the price of a fixed income investment to a change in interest rates) by about two years. We are one year long in emerging corporates duration—some of which will be highly sensitive to U.S. rates and some pretty insensitive.

Fixed income investing is subject to credit risk and interest rate risk. International investing also involves currency risk and political risk, and these risks are higher for emerging markets. Yield and share price will vary with interest rate changes. Investors should note that if interest rates rise significantly from current levels, bond fund total returns will decline and may even turn negative in the short term.Some income from municipal securities may be subject to state and local taxes and the federal alternative minimum tax. In addition to interest rate risk, high-yield bonds carry a significant level of credit risk.Call 1-800-225-5132 to request a prospectus or summary prospectus; each includes investment objectives, risks, fees, expenses, and other information that you should read and consider carefully before investing.This material is provided for informational purposes only and is not intended to be investment advice or a recommendation to take any particular investment action. The views contained herein are as of October 2014 and may have changed since that time. Past performance cannot guarantee future results.T. Rowe Price Investment Services, Inc., Distributor.

FixedIncome_Advertorial_C3.indd All Pages 11/10/14 2:59 PM

Understanding the Factors Leading to Leakage

i n s i d e T h e p l a n p a r T i c i p a n T ’ s m i n d

ers typically do not provide the one-on-one support that employees require to ensure successful decision-making and administra-tive follow-through.

Unfortunately, written materials alone are typically not enough to stop such a tantalizing action as a cashout with large amounts of money attached and no appar-ent downside. Without human intervention that clearly communicates the need for pru-dence, employees can easily succumb to the temptation to use their 401(k)s as ATMs.

To better understand the cashout deci-sion, Boston Research Technologies, with the assistance of Retirement Clearinghouse (RCH), conducted a phone survey of 300 participants who recently left their jobs and were expressing an interest in cashing out their retirement account balances. Partici-pants who made a final decision to cash out were asked why and what they intended to do with the money. The reason cited most often was simply the allure of the availabil-ity of the money (30%), followed by a need for the money to cover household expenses (29%) or to pay off debt (23%). Interest-ingly, very few (10%) said it was due to an emergency.

Arguably, none of these reasons (with the exception of an emergency) make

penalties, paying taxes and experienc-ing other negative consequences? Industry data show that approximately

45% of transitioning workers cashout their DC accounts. Taken collectively, cashouts remove $1 trillion from future retirement income streams. Importantly, industry statistics also show that cashouts are dis-proportionately focused on lower balance accounts, and by implication, lower wage earners.

In addition to the financial toll of cashouts, there is an emotional toll. Data from the annual DCP study of 7,000 par-ticipants indicate that 60% of those who cashed out felt having done so is a “major regret."

Why Do Cashouts Occur?Interestingly, when we ask participants

(while they are still actively employed) what they would hypothetically do with their ac-count balances if they were to change jobs, only 2% say they would take the cash and spend it. So why do 45% actually do it?

According to an AARP/BRT study, job change, loss of a job and retirement are among the most stressful and emotional inflection points one faces in life. When we are placed in emotional situations, our left-brained, logical thinking process is often suppressed. But clear, rational, long-term thinking is what is needed most at this time. Unfortunately, the DC industry does not provide effectively, or at all, advice and guidance when transitioning workers need it most. Despite the fact that they are at a critical and emotional moment in their lives, transitioning workers often get little or no guidance about what to do, or about the potential implications of their decisions.

While employers might think their record keepers dispense such help, provid-

oday we have a remarkably mobile work force. EBRI estimates that over a 40-year career of full-time employment, the average American worker will change jobs 10 times.

While the DC system has be-come very effective in facilitating

the movement of payroll into DC accounts, that is only half the job. Unfortunately, we are significantly less effective in moving assets between DC accounts of different employers, or out of the DC system, while retaining assets in the broader tax-deferred savings retirement system.

Essentially, the job of building a private retirement system is not complete. There is too much friction surrounding the move-ment of money between accounts. Imagine the turmoil if the U.S. banking system suffered from the same conditions. And the subtle but very real problem with too much friction is that it’s creating opportunity for DC assets to leak from the retirement system. The largest leak comes in the form of cashouts.

In America today, more than 50% of our workforce has access to the tax deferral benefit provided by DC plans. Fully 70 million workers participate in a DC plan, and these are highly mobile workers. Each year, 10 million DC participants switch jobs, are laid off, quit or retire. Each time they do, they face a decision: what to do with the thousands — and sometimes tens or hundreds of thousands — of dollars they have saved in their DC plans. That is, should they:

• Roll into their next plan?• Roll over into an IRA? • Keep their savings in the plan of the

employer they are leaving? • Cashout in full or in part, suffering

Too much friction is creating opportunities for dc assets to leak out of the dc retirement system.

WArreN corMIer

T A new form of provider whose mission it is to solve this problem at an industry level is needed.”

N a p a N e t t h e m a g a z I N e14

transition. Upon calling, employees would speak with a live operator who provided advice and/or guidance regarding options, as well as the consequences of cashing out. Callers were also offered IRA rollover assistance.

I had the opportunity to audit the results of the program. The audit showed that from 2007-2013, the ARO program resulted in substantial reduction in the percentage of former participants taking a cashout compared with industry statistics (48% versus 23%).

Furthermore, compared to industry statistics, the incidence of cashouts was lower at all balance ranges due to the general emphasis of the plan sponsor in avoiding cashing out, and attempts to reach (by outbound telephone calls) all ac-counts with balances of $10,000 or more.

While the ARO program dealt with a great deal of cashouts, the friction was not entirely eliminated. Specifically, there is not an effective infrastructure for moving account balances between DC accounts at different employers. To complete the DC system, a simple roll-in program is needed. Essentially, this type of program, with a new or existing employee’s permis-sion, would automatically roll in stranded DC accounts at past employers into the current employer’s DC plan.

ConclusionCompleting the DC system to reduce

friction and reduce leakage will require a collaborative effort by all players in America’s private retirement system. No one player can do it alone. It will require thought leadership to identify best prac-tices and solve the problem. Government, plan sponsors, participants, record keepers and advisors/consultants will need to look at the issue from their own perspectives, and then do their part in changing behav-ior. Additionally, a new form of provider whose mission it is to solve this problem at an industry level is needed. N

» Warren cormier is president and ceo of Boston research group and author of the dcP suite of satisfaction and loyalty studies. he also is cofounder of the rand Behavioral finance forum, along with dr. shlomo Bernartzi.

logical sense to quit one’s job, and pay taxes and heavy penalties to get access to the balances. But again, transitioning workers at this inflection point are thinking less rationally. And in the absence of clear and effectively communicated guidance, the cashout would seem to be the best choice, or at a minimum an attractive choice.

The Participants’ Decision MindsetParticipants are in a highly emotional-

ly charged mindset when they are making DC account decisions. Studies by BRT and AARP have shown that they are making decisions in a suppressed cognitive state. In these times we find that people tend to move away from their reflective, deliberate decision-making processes (what Dr. Daniel Kahneman refers to as System 2 thinking) to a more intuitive, rapid, knee-jerk, unin-formed, decision-making process, referred to as System 1 thinking. (Kahneman, Daniel (2011-10-25), Thinking, Fast and Slow)

Add to this the fact that a job change is almost always treated cognitively as a “loss” in some way. It may be a loss of income, colleagues, familiar routines, etc. But nonetheless, it is perceived as a loss. It is at this time in the job-changer’s life that a large, lump sum of cash is presented to them. Seeking to offset their sense of loss (which is two times as powerful as the celebration of a gain — referred to as “loss aversion”), and hyperbolically discounting the future gains of leaving the money in the system, the participant naturally finds the offer almost irresistible. This is particularly true among lower-income, small balance DC participants who value even a small amount of money in their account much more than high-income colleagues value the same amount. (This is referred to as Prospect Theory, for which Dr. Daniel Kahneman was awarded the Nobel Prize.)

To say the least, the cash is an attractive offer in an emotionally turbulent time where logic is replaced by what “feels good” at the moment, as does deferring the deci-sion indefinitely by doing nothing if that choice exists. Kahneman states, “It is now a well-established proposition that both self-control and cognitive effort are forms of mental work. Several psychological studies have shown that people who are simultane-ously challenged by a demanding cognitive

task and by a temptation are more likely to yield to the temptation.”

There is another, rather insidious force pushing the participant to cashout: the “de-fault effect.” This effect falls into the general category of heuristics — mental shortcuts that allow people to make decisions and solve problems quickly, but often sub-opti-mally. The default option in the small-bal-ance case is the cashout, if no other decision is made (or doing nothing in larger ac-counts). The unfortunate thing about some defaults is that when set by a trusted source (i.e. the employer, who is often seen as pater-nalistic by employees), they can be viewed as the wisest choice. Consequently, the default

increases the probability of choosing that option as opposed to the possibly superior alternatives.

Essentially, the emotional and financial deck is being stacked in favor of a partic-ipant’s simply taking the money (or doing nothing). Messaging that it is not wise to cashout or strand an account is too simplis-tic and obviously ineffective. Subtle nudges to roll the money over to another quali-fied account do not work. It’s akin to the highly unsuccessful “Just Say No to Drugs” campaign. A greater, direct and personalized intervention is required: ARO with Human Intervention.

In 2007, a large corporation launched an automatic rollover (ARO) program for all terminating/terminated employees with less than $5,000 in their 401(k) accounts.

In this ARO program, all terminating employees were invited by letter to call a third-party firm for assistance in making the

15W I N T E R 2 0 1 4 • N a p a - N E T . o R g

completing the dc system to reduce friction and reduce leakage will require a collaborative effort by all players in America’s private retirement system.”

i n s i d e i n v e s T m e n T s

arget-date funds (TDFs), though far from perfect, represent a big step forward from the first couple of decades of the 401(k) market (1982-2002) when, in many (if not most) cases, participants were forced to essentially fend for

themselves. While a few TDFs predate 2002 (Black-

Rock invented the first TDF in 1993), these vehicles did not begin to become main-stream until about 10 years ago. At the end of 2008, TDFs represented $160 billion in assets; currently, the number stands at $1 trillion and is set to double by 2018 (Bar-ron’s, 2014).

In spite of their dramatic growth, TDFs have their critics, as is evident from some of the titles of recent articles: “The False Promise of Target Date Funds” (Journal of Indexes, 2013), “The Trouble with Target

However, among the three largest providers (Vanguard, Fidelity and T. Rowe Price), a heavy weighting toward equities is consis-tent across these money managers. In fact, the trend lately has been to increase equity exposure as, “several major fund companies are increasing the stock allocation of their target-date funds ... employees who are in

Date Mutual Funds” (Forbes, 2013) and “A Popular 401(k) Choice [TDF] is Still Badly Broken” (Fortune, 2014). Finally, there is a recent article, “The Conventional Money Wisdom [investing in TDFs] that Millenni-als Should Ignore” (Money, 2014), which takes the position that younger participants should forgo TDFs altogether. Exploring some of the criticisms of the press helps to create a framework for focusing on future innovations.

High Equity AllocationsThe dominant view of the major TDF

providers is that DC investors should have significant exposure to U.S. equities when they are young, with this weighting being steadily reduced as the participant nears retirement. The slope of this decline in equity exposure — the glide path — dif-fers from TDF provider to TDF provider.

TBy Jerry BrAMLeTT

Target-date Funds: Innovation Challengesexploring some of the criticisms of Tdfs helps to create a framework for focusing on future innovations.

The investment period for a dc participant, however, is not always simply a matter of age-to-retirement.”


W i n t e r 2 0 1 4 • n a p a - n e t . o r g 17

Target-date Funds: Innovation Challenges

their 40s now find themselves in funds that are 94 percent allocated to stocks, up more than 10 percentage points.” (Reuters, 2014)

The rationale for these large equity holdings is being challenged on a couple of fronts:• Given that a large percentage of DC

contributions are withdrawn before re-tirement, the “retirement date” as a time horizon is a poor guide to how much equity risk participants should assume.

• As one historical study has shown, participants can achieve better final outcomes if equity exposure is increased over time (an inverse glide path). This same study also demonstrated that an improvement over the dominant down-ward sloping glide path can also be achieved by maintaining a steady mix of 50/50 equity/bond exposure through-out the entire retirement accumulation phase. (Arnott, Sherrerd, and Wu, 2013)At this stage in the TDF world, a glide

path that tilts heavily towards equity in the early years and decreases over time is the standard practice across all of the major TDF providers. Nonetheless, one can expect that glide paths in general will increasingly come under scrutiny as these constructs con-tinue to be experienced and researched.

Single Risk Factor TDFs require that DC investors essen-

tially answer one question: When do you plan to retire? Or, if the participant is being defaulted, when were you born? There is no doubt that time is the most important risk factor in investing. The investment period for a DC participant, however, is not always simply a matter of age-to-retirement.

A recent study (Fidelity, 2014) found that in the 20-to-30 age group, 44% of all DC participants are cashing out after leaving employment. If financial hardships and subsequent cash outs from rollovers into DC plans and IRA accounts were included in the study, the amount of leakage would be much higher. Unfortunately, the age group with the greatest leakage is also the same group that has the highest allocation to equities in a typical TDF glide path.

While TDFs are often criticized for not taking into consideration outside assets and other risk factors, the bigger issue is cashing out of stocks due to an early withdraw-

al event. These “cashing out” statistics, prompted Money (2014) to take the position that:

Many 401(k) plans automatically default young savers into stock-heavy target date funds, but they could just as easily start with a more traditional bal-anced fund, which holds a steady 60% in stocks and 40% in bonds. Perhaps higher risk strategies should be left as a conscious choice, for people who not only have a lot of time, but also a bit more market knowledge and a stable financial picture outside of their 401(k).

Managing VolatilityOne way to rationalize higher equity

valuations is by reducing volatility through diversification, which, unfortunately, is be-coming increasingly difficult to accomplish when utilizing mostly long-only asset classes. Consider a recent post on CNBC:

The turmoil around the globe currently haunting the markets has raised an-other nasty specter: The days of widely correlated assets that make portfolio diversification a massive headache. (CNBC, 2014)Diversification is a good thing most of

the time. However, it tends to not provide much protection when it is needed the most, such as during the financial crisis when everything was getting hammered all at once — large and small stocks, value and growth and domestic and foreign. As many investors observed during the financial crisis, it felt like all equity investments had a “perfect positive correlation of 1.”

One response to the increasingly higher correlation of long-only equities is to add alternatives. In 2012, Investment News pub-lished an article, “Target Date Funds Lack Alternatives,” expressing a view that is as true today as it is was two years ago.

TDF providers are increasingly add-ing alternatives to their asset mixes. How-ever, many predict that it will not have much of a stabilizing impact during the market’s next fat tail or black swan event. According to one article regarding the use of alternatives: “It’s a matter of diversi-fying rather than dabbling: Adding a few percentage points is not doing anything.” (Investment News, 2014)

In the somewhat benign environment that has characterized the equity markets since the financial crisis, there has been a sense that the Fed would do whatever is necessary to keep asset prices up. Of course, with real rates close to zero for as far as the eye can see and with such a large, growing deficit, the Fed will be much more limited in the future in terms of what it can do to provide a backstop if the market were to, once again, suddenly go south.

TDF providers face two challeng-es as it relates to the extensive use of alternatives. Compared to long-only equity funds, alternatives are expensive and drive up the overall cost of TDFs. Portfolios that are highly defensive (i.e., lots of alternatives) tend to under-perform relative to other TDFs — that is, unless there is a major correction or market crash.

Valuation SensitivityIt is generally the case that, regardless

of whether or not the S&P 500 is trading at 45 times (as in 2000) or seven times (as in 1982) normalized earnings, the partici-pant’s retirement date is matched up with a time-appropriate TDF. That is, more often than not, the end of the process.

In referencing the valuation extremes referred to above, a research paper stated that it “is the height of folly” to assume that both scenarios “can achieve similar return … let alone the expected returns of any reasonable glide path.” (Inker and Tarlie, 2014)

Here is the issue in a nutshell: Should TDF providers make adjustments to their asset allocation based on market valua-tions? It is known that most of the largest TDF providers do not adjust holdings based on market valuations. The challenge is that, although valuations are predictive

No doubt, there is another test out there in the (maybe not so distant) future.”


saved later by a market that snapped back fairly quickly as opposed to staying down for an extended period of time. Thanks mostly to aggressive actions on the part of the Fed, TDFs dodged a bullet and have gone on to be the fastest growing invest-ment vehicle in DC plans. No doubt, there is another test out there in the (maybe not so distant) future. N

» Jerry Bramlett was the founder, president and ceo of The 401(k) company, the ceo of Benefitstreet and the founder/ceo of Nextstep. currently he is engaged in industry consulting.

the implications of utilizing more than one TDF and/or mixing TDFs with other

non-asset allocation funds.

ConclusionIn retrospect, looking back to when the

first 401(k) plans began to emerge in 1982, it seems rather absurd that DC investors were all of a sudden supposed to become expert asset allocators. We now know that participants made their allocation in one of four primary ways: stay safe in a stable val-ue fund, chase the higher returning fund(s) options, copy their neighbor participant or simply guess using a symmetrical allocation (Benartzi and Thaler, 2001). TDFs repre-sented a much-needed innovation.

Target-date glide paths experienced their first stress test in the 2007-2009 Great Recession. Many failed the test only to be

of future returns, it sometimes takes years for the correlation between current valua-tions and future returns to become appar-ent. “The correlation between valuation and subsequent stock market returns [increases] as the time horizon lengthens from 1 to 20 years.” (Inker and Tarlie, 2014)

The fact that it may take one to 20 years to manifest a strong correlation be-tween current valuations and future returns does not provide TDF providers with much incentive to promote “valuation aware” portfolios. It is a safer option to adhere to the dominant trends in glide path manage-ment so as to not get booted from a fund lineup due to poor (mostly recent) relative performance.

Choice ArchitectureGood choice architecture should make

it clear to DC investors that a TDF is an all-inclusive investment program and not just another asset class in the fund lineup. Unfortunately, it is all too often the case that TDFs are experienced by participants as just another investment option. This is why many of them end up with allocations in multiple TDFs, as well as mixing pure asset class funds with asset allocation funds.

Though the TDF provider typically does not drive the structure of the choice architecture, the plan advisor and record keeper often can have a strong bearing as it relates to helping DC investors understand

Arnott, robert, Katrina f. sherrerd and Lillian Wu, fall 2013, “The glidepath Illusion … and Potential solutions,” The Journal of Retirement.

Bary, Andrew, July 5, 2014, “Target-date funds Take over,” Barron’s.

Benartzi, shlomo and richard h. Thaler, March 2001, “Naive diversification strategies in defined contribution saving Plans,” The American Economic Review.

Benjamin, Jeff, october 7, 2014, “goldman sachs strategists say Investors hold Too Much stocks and Bonds and Need to Jack Up Alternatives Allocations,” Investment News.

cox, Jeff, March 15, 2014, “The Next Big Investor challenge: correlation,” CNBC.

esch, david and robert Michaud, dec. 24, 2013, “The false Promise of Target-date funds,” Journal of Indexes.

fidelity, 2014, “cashing out can derail retirement,” Points of Views, Benefits and Policy Insights.

gandel, stephen, feb. 18, 2014, “A Popular 401(k) choice is still Badly Broken,” Fortune.

Inker, Ben and Martin Tarlie, April 2014, “Investing for retirement: The defined contribution challenge,” gMo White Paper.

Jacobs, deborah, Nov. 11, 2013, “The Trouble With Target date Mutual funds,” Forbes.

Mercado, darla and Jason Kephart, April 8, 2012, “Target date funds Lack Alternatives,” Investment News.

regnier, Pat, oct. 16, 2014, “The conventional Money Wisdom That Millennials should Ignore,” Money.

Toonkel, Jessica, october 10, 2014, “Big U.s. firms Boost equity Weightings in 401(k) Target-date funds,” Reuters.

REfERENCES

should Tdf providers make adjustments to their asset allocation based on market valuations?”

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W I N T E R 2 0 1 4 • N a p a - N E T . o R g 21

n physics, a wave is a traveling disturbance that travels through space and matter, trans-ferring energy from one place to another, such as a sound wave, or even an ocean wave. In politics, a “wave” can serve much the same function, and the wave that was the 2014 election could serve as a catalyst for change for retirement plans. Certainly, having regained their Senate majority and deepened their hold on the House, the GOP — with a wary eye on the 2016 elections — may be ready to act on a range of issues affecting the retirement industry.

In a Nov. 6 members-only webcast, NAPA Executive Director/CEO Brian Graff and Political Director Jim Dornan discussed the shifts in power in the nation’s capital and what that might mean for legislative change generally, and retirement plan/tax reform proposals specifically. And while the dust hasn’t yet fully settled on those pros-pects, NAPA’s political insiders say there’s reason to think the dynamics have shifted sufficiently to create some opportunities — and potential threats — to retirement plan-related legislation.

The House of RepresentativesDornan explained that in the House,

the GOP now has its strongest majority in nearly a century — freeing Speaker John Boehner’s hand to pursue his agenda with-out necessarily having to rely on the support of Tea Party Republicans, and to perhaps even pick up some moderate Democrats on certain issues.

The current leadership — Kevin McCarthy (R-Calif.) as Majority Leader and Majority Whip Steve Scalise (R-La.),

will remain in their positions. As for com-mittee chairs, Paul Ryan (R-Wis.) will take over Ways & Means from the retiring Dave Camp (R-Mich.), while John Kline (R-Minn.) will remain as head of the Education and the Workforce Committee. Jeb Hensarling (R-Texas), the current chair of the House Fi-nancial Services committee, is likely to retain that post.

The SenateIn the Senate, the GOP wrested control

of Senate seats from Democrats in Arkansas, Colorado, Iowa, Montana, North Carolina, South Dakota and West Virginia, and nearly two weeks after the polls closed, picked up Alaska as well. Meanwhile the GOP retained seats in Georgia and Kentucky, the latter held by soon-to-be Senate Majority Leader Mitch McConnell.

Virginia reelected incumbent Sen. Mark Warner (D), but his challenger, long-time po-

INAPA’s political insiders say there’s reason to think the dynamics have shifted sufficiently to open some opportunities — and potential threats — to retirement plan-related legislation.”

NEvIN E. adamS, Jd

With both parties eyeing 2016, will Washington ‘work’?

Riding wave?

the


will be a mirror image — with Republicans forced to defend Senate seats in a number of states that voted for President Obama in 2012.

According to Graff, that dynamic will put a lot of pressure on the GOP to govern and show that it can accomplish things, and to do so in a short period of time. Of course, the Democrats (including the president) will be motivated to show that the Republicans can’t get things done. But Graff explained that both McConnell and Boehner are what we might think of as “traditional” politicians who “know how to deal.” One other difference from the past several years: The momentum for negoti-ating any bipartisan “grand bargain” will likely shift from the House to the Senate.

chairmen becoming ranking members and current Republican ranking members be-coming chairmen.

By and large, the Senate follows senior-ity rules for chairmanships. In the Senate, that means that the Health, Education, La-bor and Pensions (HELP) committee (which will have jurisdiction over the Department of Labor’s fiduciary definition reproposal) will be chaired by Sen. Lamar Alexander (R-Tenn.), while the Senate Finance Com-mittee will be headed by Sen. Orrin Hatch (R-Utah) and the Senate Banking Commit-tee by Sen. Mike Crapo (R-Idaho), though there are rumblings that Sen. Richard Shelby (R-Ala.), who has previously chaired that committee, is interested in taking on that role again. Dornan noted that ASPPA would be keeping an eye on movements there.

What’s Different NowThose shifts notwithstanding, Graff ex-

plained that it’s the next election, in 2016, that might provide the real impetus for change on Capitol Hill. While Democrats were forced to defend a number of seats in November in states that went for Mitt Romney in 2012, in 2016 the election map

litical operative Ed Gillespie, transformed what was expected to be a runaway into an election eve nail-biter that wasn’t offi-cially called until the weekend after Elec-tion Day. The contest in Louisiana will be decided in an early December runoff, since neither incumbent Mary Landrieu (D) nor GOP challenger Rep. Bill Cassidy got more than 50% of the vote.

No matter how the Louisiana race shakes out, the GOP will hold the ma-jority. As a result, there will be a major reshuffling of power and legislative agen-das, with current Democratic committee

rep. Paul ryan (r-Wisc.), the next chairman of

the house Ways and Means committee (which has

jurisdiction for federal tax reform) has already

been preparing way for tax reform in 2015 with a

focus on two things:

• Lowering the baseline for tax revenues.

• Implementing dynamic scoring for tax legisla-

tion, which would include the macroeconomic

effects resulting from the new policies. for

instance, a tax plan forecasted to increase

economic growth would be scored as bringing in

more revenue. The congressional Budget office

does not use dynamic scoring.

“Typically tax reform in history has been led

by presidents; 1986 is a perfect example,” ryan

recently said, referring to the 1986 tax overhaul

achieved by President reagan and a democrat-led

house. “That won’t be the case this time if we get

it in the next two years. It will have to be led by

congress, and we’ll see what we can get.”

RyaN'S hoPE?

The momentum for negotiating any bipartisan “grand bargain” will likely shift from the house to the senate.”

“We’re going to want to see what kind of things

we might be able to agree on with the President

… I’ll give you a couple of examples where there

may be areas of agreement: comprehensive tax

reform and trade agreements.”

— Sen. Mitch McConnell, Nov. 3, 2014

“The president has indicated he’s interested in

doing tax reform — we all know that having the

highest corporate tax rate in the industrialized

world is a job killer. he’s interested in that issue

and we are too.”

— Sen. Mitch McConnell, Nov. 5, 2014.

“one of the major goals of comprehensive reform

should be to fundamentally change this system

and anything we do in the interim should move us

further down that path.”

— Sen. Orrin Hatch, September 2014.

“We have this tax code that doesn’t bring stability

and certainty to the economy. historically,

republicans have wanted efficiency. democrats

want fairness. I want both, and we’re getting

neither.”

— Sen. Ron Wyden

“our onerous and outdated tax code continues

to force businesses to leave the U.s., taking

American jobs with them. We can and must

reform our tax code again so that we keep

businesses and jobs here at home and provide

relief to all Americans.”

— Sen. Rob Portman, October 2014

ThE SENaTE SPEakS oN Tax REfoRm


Graff explained that tax reform was high on the GOP congressional agenda, although there is a very limited window of time to pass reform — it would have to be done in early 2015, before presidential cam-paigning begins. He noted that many GOP legislators are calling for it, but cautioned that tax reform means different things to different people.

Prospects for Tax Reform “The tax code is almost as popular as

the U.S. Congress,” quipped Graff, even as he noted that even if the House doesn’t get comprehensive tax reform, they want to do what they think is right — and campaign on it, even if it isn’t enacted into law. In contrast, he said the Senate wants to do something.

State Houses

There were also some significant shifts in executive power in three key states that have considered, or are considering, state-run retirement plans: Illinois, Maryland and Massachusetts. In Illinois, Republican Bruce Rauner ousted Democratic incum-bent Gov. Pat Quinn and that this would likely deter the Illinois state house from considering a bill authored by State Sen. Daniel Biss (D-Evanston) — the Illinois Secure Choice Savings Program Act — in the current legislative session, which ends this year. In Maryland, Republican challenger Larry Hogan upset Lt. Gov. Anthony Brown (D), the hand-picked successor of outgoing Gov. Martin O’Malley (D), who had signed an executive order that created a Maryland Retirement Security Task Force. That task force will now expire at the end of O’Mal-ley’s term early next year. Massachusetts, where Republican Charlie Baker beat Attorney General Mar-tha Coakley (D) to win the governor’s race, had passed legislation in 2012 that creat-ed a state-run defined contribution plan for small non-profit employers. However, that plan is currently awaiting approval from the IRS and is not yet in operation.

Administrative Actions

As for the still-pending fiduciary regulation reproposal, last May the DOL updated its regulatory agenda to postpone the expected release of its fiduciary rule re-proposal from August 2014 to January 2015. He also said that over the past few months, White House staff have led an outreach effort to meet with all the stake-holders the proposal would affect, as Obama administration officials try to figure out what to do in this area — if anything. He noted that during these meetings, officials have indicated that a rule is “not imminent” and that they are working to get more information from industry in order to develop appropriate prohibited transaction exemptions. Concerns about IRA rollover advice loom large, and Graff noted that any re-pro-posal will likely focus on that issue. Should a regulation emerge that the industry opposes, he explained that there would be opportu-nities to prevent the implementation of the rule through the appropriations process in a Republican-controlled Congress. What this means for retirement plans next year is still anybody’s guess. But with the Congress in the hands of a motivated GOP, and the President, as second-term presidents often are at this juncture, thinking legacy, we’ll almost certainly have something to talk about.


Senate Seats up in 2016

Democrat

Republican

Democrat Senate Seats Republican Senate Seats

WashingtonOregonCaliforniaNevadaColoradoNew YorkVermontConnecticutMarylandHawaii

IdahoUtahArizonaNorth DakotaSouth DakotaKansasOklahomaIowaMissouriArkansasKentuckyIndiana

OhioLouisianaWisconsinIllinoisPennsylvaniaNorth CarolinaSouth CarolinaGeorgiaFloridaAlabamaAlaska


from all three. Sen. Tom Harkin (D-Iowa), the

current chair of the HELP committee, is retiring, so he will not be reintroducing his USA Retirement Funds Act (S. 1979), al-though someone else could take it on. One possibility: Sen. Sherrod Brown (D-Ohio) who was a co-sponsor of Harkin’s bill. N

related proposals could provide a good foun-dation for the work of the next Congress. In addition to Sen. Hatch’s SAFE Retirement Act (see “SAFE How’s” sidebar), similar “spread-match” safe harbor proposals, as well as “open” MEP proposals, were included in legislation proposed by Rep. Richard Neal (D-Mass.) in the House (HR. 2117) and Sens. Susan Collins (R-Maine) and Bill Nelson (D-Fla.) in the Senate (S. 1970). Expect retire-ment savings legislation in the new Congress

The Tax Reform Act of 2014, a pro-posal put forth by retiring House Ways & Means Chairman Dave Camp (R-Ohio) earlier this year, purported to reform the current tax structure, but it contained a number of provisions that would be detri-mental to retirement plan formation.

For example, under the bill, small busi-ness owners could pay a new 10% surtax on all contributions made to a qualified retirement plan now, and then would have to pay tax again at the full ordinary income tax rate when they retire.

The proposal also would have frozen contribution limits at the current rate (not even allowing indexing for inflation) until 2023.

Those concerns notwithstanding, Camp’s tax reform proposals is now something of a “marker” for future tax or spending proposals, having been scored by the Joint Committee on Taxation as giving back more than $63 billion to the Treasury if enacted.

As for some specific alternative legisla-tive windows that could open, Graff noted that in the absence of a comprehensive tax reform bill, there will be legislative vehi-cles that could be used to enact pension reform, adding that the expiration of the multi-employer pension funding rules could provide an opportunity to enact broader pension reforms.

Finally, he explained that the process of renewing more than 100 expired provisions in the tax code, dubbed “tax extenders,” could be another opportunity to enact retirement policy changes.

While the 113th Congress may leave office without much in the way of legisla-tive accomplishments, several retirement-

While much of the “buzz” is around the

notion (if not the reality) of comprehensive

tax reform, sen. orrin hatch (r-UT),

the next chair of the senate finance

committee, has already offered a strong

blueprint for building on the successes

of the employer-based retirement system

in the form of the sAfe retirement Act.

Judy Miller, AsPPA’s director of retirement

Policy, offers insights on what that could

mean for retirement plans and advisors.

should we wake up in a world where

the sAfe retirement Act had become

law, top-heavy rules would be eliminated.

employers with nothing else in common

could be part of a multiple employer

defined contribution plan and, if the plan

has a designated service provider, would

not have to worry about the one-bad-ap-

ple rule. Mandatory interim amendments

could be adopted retroactively at the end

of the plan’s regular review cycle, and safe

harbor 401(k) plans could be amended

mid-year as long as there is no reduction

in the amount of matching contributions

for the year. There would also be clarifica-

SafE hoW'S

tion that forfeitures can be used to fund safe

harbor contributions.

for employers who don’t already offer a plan,

Title II of the Act opens with the starter 401(k),

a deferral-only safe harbor for those situations.

The starter 401(k) would provide automatic

enrollment and auto-escalation, an $8,000

elective deferral limit (plus catch-up) with

no non-discrimination testing (or top-heavy

contributions). When the business grows to the

point that the owner can afford to make higher

contributions, it can be easily amended to a

full-blown 401(k) program. Another common

sense change to encourage adoption of new

plans would allow employers to adopt a new

qualified plan up to the due date of tax filings.

Also included in the Act is a new 401(k) safe

harbor that would allow sponsors to spread the

match over up to 10% of pay, rather than the

current 6%, provided participants are auto-

matically enrolled with auto-escalation – and

with a tax credit to help small business owners

defray the cost of the match.

— Judy Miller, AsPPA’s director of retire-

ment Policy

The momentum for negotiating any bipartisan “grand bargain” will likely shift from the house to the senate.”


i n s i d e T h e l a w

Stepping Carefully: Statements, Policies and Disclosures

TPA service providers. However, as margins continue to be squeezed out of the record keeping and TPA businesses, the complexity of record keeping has continued to increase.

To maintain a level of profitability, many service providers have carved out services that might have been provided gratis (although on a non-fiduciary basis) in the past. In many cases, record keepers and TPAs are now offering ancillary services, whether labeled as ERISA 3(16), 3(21) or other services, that are designed to help plan fiduciaries satisfy their statement distribution obligations (even if the record keeper and the TPA manage the actual distribution), policy development and approval of notices. The features of each service are unique, and an advisor will often need to play a key role in helping plan fiduciaries determine whether a particular service should be added to a plan.

Second, in some cases, advisors have stepped in to provide fiduciary advice on necessary statements, policies and disclo-sures. In some cases, these documents are le-gally required (such as fee disclosure notices, QDIA notices and certain automatic enroll-ment notices), and the advisor plays a role in ensuring proper distribution. In other cases, however, the advisor is helping to create doc-uments — such as an IPS, for example.

Lastly, in some cases, advisors are

assisting with other notices that may not be technically required, such as administrative manuals, fee policy structures and other plan communications. Advisors should proceed cautiously when working with these docu-ments because in many cases, errors in them can lead to dramatic financial exposure for plan sponsors and fiduciaries (as was often the exposure of record keepers and TPAs when they assumed responsibility for these activities in the past) — and, by extension, the advisors themselves.

Third, as advisors help prepare invest-ment and administrative materials, they open the door to new claims of conflicts as part of the DOL’s Fiduciary Service Provid-er Compensation Project. So as advisors expand their advice and assist with (or draft) statements, policies and disclosures, if they (or their affiliates) provide multiple services to a plan and its fiduciaries, they should carefully evaluate whether their involvement in developing investment practices or plan management structures will result in extra compensation to them (or an affiliate) that does not fall within an exemption to the ERISA prohibited transaction rules.

While there has been significant discus-sion about simplifying the increasingly com-plex documentation surrounding retirement plans, the likelihood of dramatic simplifica-tion appears unlikely in the near future. As such, advisors will continue to have a key role in assisting their clients with statements, policies and disclosures. The key will be proceeding carefully when helping clients without triggering new risks and exposures for them — and for their own practices as well. N

» david N. Levine is a principal with the groom Law group, chartered, in Washington, dc.

s we look back to the year 2000, the notices, policies and disclosures governing retirement plans seem almost quaint. At that time, automatic enrollment in 401(k) plans was a cutting edge concept. Now we live in

a world of ACAs (automatic contribution arrangements), EACAs (eligible automatic contribution arrangements) and QACAs (qualified automatic contribution arrange-ments) — each of which has its own disclo-sure requirements.

Similarly, while not technically required, investment policy statements are used in more retirement plans than ever. And other documentation processes — from plan ad-ministrative manuals to detailed QDRO pro-cedures and fee disclosure requirements — continue to proliferate because of regulatory requirements, litigation or other reasons.

Why does all this matter to an advisor? For a few reasons:• Many record keeping and TPA relation-

ships place the final responsibility for many statements, policies and disclo-sures on plan fiduciaries rather than the record keeper or the TPA. Advisors are now helping their clients navigate their statement, policy and disclosure obliga-tions.

• Many advisors take on a fiduciary role with their clients. These same clients expect their advisors to be have primary responsibility for at least some of these statements, policies and disclosures.

• Advisors continue to be highly visible on the Department of Labor’s enforcement radar.First, advisers have brought many posi-

tive changes to their clients, often including better pricing with their record keeping and

As advisors assist clients with statements, policies and disclosures, the key is to help them without triggering new risks and exposures for everyone.

By dAvId N. LevINe

A Advisors continue to be highly visible on the department of Labor’s enforcement radar.”


Stepping Carefully: Statements, Policies and Disclosures

ONLEADING the

Registration open:

Reserve your place TODAY!

The 2015 NAPA 401(k) Summit:

Advisor-Led, Advisor-Driven

Specifically designed for and

by advisors who are serious

about retirement plans.

www.napasummit.org


cO

ve

r

sT

Or

y


Taking Off

B Y b r u c e s h u Ta nin a New Retirement

Income Direction

Innovative advisors are implementing

new approaches to the decumulation

phase of retirement.

ost plan advisors have blinders on when it comes to addressing the controlled distribu-tion of assets after participants have retired via a stream of income. But some innovative advisors are shaking up that model, leading a new approach to the decumulation phase of retirement.

Leading academics, such as Boston University’s Zvi Bodie and MIT’s Robert Merton, have long argued that retirement plans should focus less on creating wealth and more on ensuring steady income streams in retirement. But finding the sweet spot for plan participants requires a delicate balancing act.

Steve Utkusis, a principal and director of Vanguard Center for Retirement Research, noted in a recent blog, “It’s not that we have to wholesale switch our mindset from accumulation to income payouts. Rather, participants deserve more of an ‘income orientation’ to their defined contribution plan, without going so far as adopting a liability-driven approach in its entirety, and investing mostly in cautious investments.”

NAPA President Steve Dimitriou reports that a subset of advisors is doing in-plan retirement income cal-culations and

projections for participants, citing indepen-dent broker dealer LPL as one industry leader in this area.

Dimitriou says the industry just doesn’t have a mechanism in place to help people decumulate while they’re still in a retirement plan. Another challenge is that the few prod-ucts currently available aren’t portable and lock clients into vendors. However, the old thinking is starting to change.

So too might the way this phase is described under the retirement planning umbrella. “Decumulation is the wrong word,” says Francois Gadenne, founding chairman of the Retirement Income Industry Associ-ation, calling it a misnomer. Rather, he says decumulation is actually a risk-management period across both the asset and liabilities of a retiree’s household balance sheet. Gadenne suggests that a more appropriate view would M

A recent LIMrA secure retirement Institute survey shows 80% of working Americans believe employers should provide ways to convert their savings into retirement income.”


be to look beyond portfolio optimization. “Language is really important because it can serve to clarify, as well as to obfuscate,” he adds.

Kathleen Kelly, a founding and managing partner with Compass Financial Partners, is seeing much greater interest in decumulation strategies, but no meaningful results … yet. She describes the most dominant issue as a disconnect between plan participants seeking more help in terms of managing the decu-mulation phase of their life and the type of assistance plan sponsors are offering. Possible barriers include operational or administrative challenges, fiduciary concerns and portability problems.

Whatever the case, these issues clearly must be resolved. A recent LIMRA Secure Retirement Institute survey shows 80% of working Americans believe employers should provide ways to convert their savings into retirement income.

“What’s fascinating,” Kelly says, “is 90% of those workers who are 18 to 34 said that they were somewhat or strongly agreeing that employers should provide an avenue to convert savings into an income stream at retirement. It’s really wonderful for Millenni-als to be looking at retirement thorough such a long-term perspective — and to have an appreciation and recognition of establishing predictable retirement income.”

Approaching Participants in TransitionAdvisors would love to provide assis-

tance, but their hands are often tied. Michael Kane, managing director of Plan Sponsor Consultants, says the DOL’s ERISA 408(b)(2) regulation caused issues with regard to rollovers and scared off registered investment advisors from approaching participants when they leave their plan.

“If you’re an RIA and get fees, and you take fiduciary responsibility for the invest-ments in the plan, which we do on all our plans, we have no means of getting com-pensated for that,” explains Kane, a certified behavioral finance analyst who’s helping lead the charge on decumulation.

Apart from recommending that partic-ipants salt away 10% of their income in a diversified portfolio at the earliest possible age, Kane and many of his peers believe investment

advice ultimately will move the needle on help-ing clients transition from work to retirement.

He lauds the work of Adam Sokolic, who created LPL’s Worksite Financial Solutions retirement planning services platform, which enables practitioners to advise clients through-out their careers and after they transition into retirement. “LPL permits us to work with other independent LPL advisors, and we can ar-range with them to provide education on these plans, based on an aggregate financial wellness assessment tool, as well as be there as a source of rollover,” says Kane. This is all coordinated

through employ-er-approved campaigns set up by LPL’s call center.

The effort, which Kane says has a financial-wellness ben-efit component to address both retirement readiness and financial literacy issues, features 350 plan sponsors with about $5 billion in assets. Strategic partners include Morningstar, Financial Finesse and Wealth Management Systems.

Worksite Financial Solutions features several components, depending upon the needs of the plan and record keeper. They include en-gagements, education (with a focus on financial wellness), transitions (i.e., rollovers), advice and plan termination.

“The record keeper, within a week of their

departure, sends a file to LPL just like in the engagements campaign when new work-ers who become eligible for the plan are contacted by the LPL home office,” Kane explains. “This is done through a letter cam-paign that encourages them to join the plan and consider rolling other qualified dollars into the plan. They’re offered an opportu-nity to move money into the plan under a separate agreement between LPL and the plan sponsors.”

On the Right (Glide) PathThe hope is that retirees can live on

a 3% or 4% annual withdrawal rate “based on an asset allocated formula

or portfolio that is now in some sort of a wind down of equity

risk,” says Bud Green, chief investment officer and

principal consultant with MJM401k.

Among the limited

options he de-

Who will guide [retirees] through the decumulation phase and ensure that assets are being properly allocated?”


scribes for people with low- or middle-range net worth who transition from accumulation to decumulation: Take an annual distribution from a target-date fund, pay an advisor 1% to essentially accomplish the same goal, or purchase a variable annuity at a higher cost with no inflation adjustment.

Green says dollar

cost averaging into an infla-

tion-adjusted deferred immediate annuity built

into a 401(k) platform may make the most sense as interest

rates move. The big question then becomes: Who will guide them

through the decumulation phase and ensure that assets are being properly

allocated?There’s also a portability problem. “If

we want to move someone from Fidelity to Schwab or Prudential to Fidelity,” he says, “it becomes very difficult to be fiduciaries to these 401(k) plans if we’ve got products locked into that 401(k) program that can’t be traded elsewhere.”

One possible solution would be a self-directed brokerage account featuring multiple insurance companies offering com-petitive products that could be held within a brokerage account inside a 401(k) plan, according to Green.

“What would be the best at this point,” he suggests, “would be for every plan out there to have either a company or an advisor tied into it that would be paid a fee to provide individual guidance to people in terms of how to make these decisions and structure their portfolio.”

Gadenne would like to see product-based planning. His point is that everyone knows how to shop — even those who aren’t sophis-ticated about finance, which would simplify the process. “If you can basically create finan-cial products that are like buying tomatoes at the grocery store — in other words, buying income by the pound — like what BlackRock is doing, I think that helps the mass of the people.” So why beat participants over the head with behavioral finance, he asks?

In a recent interview with Advisor Perspectives, Financial Engines founder Bill Sharpe addressed the issue of establishing glide paths in the decumulation phase — a phenomenon that academics call “path depen-dency.” His point was that investors shouldn’t have to worry about how the market arrives at a particular destination between the time their money is invested and when it’s with-drawn in retirement. He also warned that “the inefficiency for a target-date strategy could be as much as 8% to 10%” for income streams that are being considered 20 years down the line.

Need for Greater FlexibilityDemographic trends certainly point to

the need for such solutions. “With 10,000 Baby Boomers turning age 65 every day, the ability to provide solutions in managing decumulation from retirement plans is going to become much more front and center,” according to Kelly.

She notes that “the handful of lifetime income products in the marketplace today are vastly different from one another,” but her expectation is that these options will become more accessible with greater flexibility and portability, just as the marketplace for target

date funds has evolved, and especially now in light of newly released IRS and DOL guid-ance.

As a first step, she says advisors need to ensure that plan provisions are structured in a way to allow participants to maintain their account balances post-retirement via flexi-ble distribution options such as systematic withdrawals provisions and partial lump-sum options rather than be confined to only a one-time lump sum distribution.

Kelly believes institutional pricing avail-able within a retirement plan versus what is available to individual participants outside of a plan provides a tremendous opportunity to help elevate the level of retirement security for plan participants.

Despite her earlier comment about a dearth of meaningful results, there are prom-ising signs across the industry. Marc Pester, senior vice president of Prudential Retirement, told attendees at a recent Insured Retirement Institute conference that, “Plan participants with an income guarantee saved 38% more than those without” such a guarantee. He also noted that the latter group’s focus on fixed-income and stable-value investments during the financial crisis caused them to miss the “200% market increase” that started in March 2009.

Improving Regulatory ClimateWhatever direction financial markets

take, observers agree that the regulatory environment is finally ripe for change that could bolster decumulation strategies. Kelly says steps in the right direction include recent rule tweaks and guidance from the IRS and DOL that make it clear to employers they can include annuities within target-date funds. If certain conditions as specified in the notice are satisfied, then lifetime income would be made more accessible in workplace retirement plans. Another noteworthy development she cites is the DOL’s plan to address the annuity purchase safe harbor regulations on their guidance plan for 2015.

The U.S. Treasury is also encouraging longevity insurance within both DC plans and IRAs, though skeptics cite behavioral eco-nomic hurdles — with one industry observer noting how they “require investors to be exceptionally far-sighted.”

The doL’s erIsA 408(b)(2) regulation caused issues with regard to rollovers and scared off registered investment advisors from approaching participants when they leave their plan.”


There’s an expectation that annuity use in retirement plans will skyrocket in a more investor-friendly climate, but Kelly thinks any such trend will be predicated on establishing a regulatory comfort level, and although more guidance is necessary, she says that “additional clarity is exactly what is needed to improve the retirement security of American workers.”

Before there’s any greater movement toward annuities, perceptions will need to change. “The idea of annuitizing and turning it over to the insurance company was problem-atic in the sense that a lot of folks just didn’t like giving up control,” Kelly says. “But many of the in-plan products that we have looked at in the marketplace aren’t anything like that. They are a new age of annuities that is much more flexible and consumer-friendly.

“With many of the current lifetime in-come products in the marketplace, you are not actually annuitizing them to access the guaran-tee,” she continues — “at least some of the in-plan products are structured with the intent to guarantee an income stream without neces-sarily at the same time giving up control.”

Kelly also noted increased interest and awareness from legislators in doing more to secure lifetime income. As an example, she noted the Universal, Secure, and Adapt-able (USA) Retirement Funds Act of 2014 proposed by retiring Sen. Tom Harkin (D-IA), chairman of the Senate Health, Education, Labor, and Pensions Committee through the end of the current session of Congress. Under Harkin’s proposal, if an employer with more than 10 employees does not offer a retirement plan with automatic enrollment and a lifetime income option, the employer would be re-quired to automatically enroll their employees in a USA Retirement Fund.

The Secure Annuities for Employee (SAFE) Act, a bill proposed by Sen. Orrin Hatch (R-UT), likely the next Chairman of the Senate Finance Committee, includes a similar, “Starter 401(k)” idea.

Jeffrey Brown, a finance professor who directs the Center for Business and Public Policy at the University of Illinois, wrote in a blog published by Forbes that the DOL “could do a huge favor to the retirement security of millions of Americans if they would simply clarify that QDIA investments can include lifetime income guarantees.”

From Account Balances to Monthly IncomeOne hot communications trend for partic-

ipants is the emergence of more comprehensive planning. At least half the major vendors no longer show account balances on participant websites, Dimitriou notes. Instead, he says the key metric is estimated monthly income at retirement based on assumptions and that balance.

Green’s firm has been holding pre-retire-ment workshops or webinars for clients who are desperate for education and have no choice but to take action, many of whom are between the ages of 57 and 65. The educational sessions steer clear of old-style thinking, such as long-term averages, and instead focus on examining various routes designed to invest their portfoli-os in a way that lasts the rest of their lives.

“The reality is that 401(k) education is an abysmal failure,” he observes, noting that the chief objective moving forward is to simplify financial planning information that’s targeted to retirees.

Green is hopeful that the changing reg-ulatory environment will help make lifetime- income solutions more consumer-friendly and perhaps lower expenses. But he’s unsure how the government will address “the conflicts of interest inherent in those products” or fix the portability problem.

It’s no secret that participants strug-gle to replace the

rec-ommended 80% income ratio at retirement because they don’t fully understand investment concepts or personal finance. “So unless those underly-ing causes are addressed, then you have some issues,” says Kane, who sees “tremendous parallels between financial wellness and health wellness.” He notes that one survey found 84% of Americans experienc-ing financial stress, noting that it manifests itself both at home and work through anything from migraine headaches to heart palpitations.

Kane’s firm measures these

impacts through a series of nine metrics. Each financial-wellness assessment asks participants whether they spend less than they earn each month; are uncomfortable with the amount of non-mortgage debt they have, have a general knowledge of stocks, bonds and mutual funds; are confident that their investments are allocated properly; know they’re on target to replace at least 80% of their income in retirement; regularly pay off their credit card balances in full; have an emergency fund to pay bills for a few months if they lose their job; pay bills on time each month; and contribute to a retirement plan at work.

Kelly predicts a wave of marketplace innovation with regard to addressing the decumulation phase. “Just as we look at the target-date landscape where all of the assets are flowing and every provider has their own unique spin on what they should look like,” she says. “I think we’re going to need to do the same thing as it relates to annu-ities and retirement plans, and the whole concept of in-plan guarantees and lifetime income.” N

» Bruce shutan is freelance writer in Los Angeles.

Practice of the

FutureThe

fe

aT

ur

e

What will the DC advisory practice of 2019 look like?

By fREd BaRSTEIN


ame on! DC plan advisors, who have toiled away in relative anonymity within their bro-ker dealers and retail investment managers, now find themselves squarely in the spotlight.

With more and more aggregators form-ing and growing, these groups are starting to get a whole lot of attention. The phenom-enal growth of NAPA, which has rocketed to nearly 10,000 members in just over three years, highlights the growing attention that state and federal lawmakers have placed on plan advisors and the concern among these professionals that they need a concerted and thoughtful voice to counter the attacks.

Amid all this change, we set out to try to do what seems to be very difficult in the financial services industry – to envision the future and try to predict what DC advisory practices will look like in three to five years.

As you might expect, we found varying opinions among leading advisors and indus-try experts about the future of plan advisors. But one belief that rang loud and clear for ev-eryone was that change is afoot and advisors have to keep evolving. As Winston Churchill said, “To improve is to change; to be perfect is to change often.”

As plan advisors — and especially aggregators and large practices — grow, they are taking center stage at the expense of record keepers. They are becoming the hub, no longer just a spoke, in the wheel that will propel retirement in the future. As Babu Sivadasan, president of Envestnet Retirement Services, asked rhetorically, “Why would a record keeper create an open architecture which is less profitable?” And Dick Darian of BlackRock’s DCIO group noted that, “Those closest to the customer are the ones with the power.”

Common GroundBefore we get into where the experts

diverged and take a look at what the DC advisory practice of the future might look like, let’s take stock of at seven things almost everyone agrees on.

Growth of Teams and AggregatorsJust as record keepers went through

massive consolidation a decade ago (a trend that continues to this day), advisors will need to go big or go small. Advisors that remain in the middle will surely be squeezed by better capitalized and more efficient larger compet-

itors, as well as nimble smaller ones who can maintain margins in a deflationary market.

‘F’ Stands for FailureAdvisors focused on “fees, funds and

fiduciary” will be outflanked by ones that bring differentiated value in the form of better outcomes for both participants and companies. Meanwhile, almost every ad-visor servicing plans above a start-up will have to be a fiduciary, with many headed toward the pure RIA model.

Smarter Plan SponsorsClients will demand more transpar-

ency, which should cause continued price deflation — but not for those that show value. Everyone is expecting the RFP process, common for record keepers and money managers and promulgated by advisors over the past decade, to migrate to advisor RFPs and due diligence.

Technology & MarketingThe successful practices of the future

will incorporate more technology and have a focused marketing strategy execut-ed by dedicated professionals. That takes capital and scale — which leads back to the growth of teams and aggregators.

Data RulesAs it is with gold, he who owns the

data rules. Record keepers may be reluc-tant to share it with advisors, but that ship has sailed. It’s not about “if” anymore, it’s about when and how.

Cross-sellingRelationships are expensive to devel-

op, so advisors have to either cross-sell corporate services or work with partici-pants on outside assets and rollovers — or both.

Outsourced FiduciaryStarting with 3(21), migrating to

3(38) and ending at 3(16), there will be more demand for outsourced fiduciary services by plan fiduciaries.

Practice ManagementA decade ago, record keepers started

on a massive consolidation track, which

Practice of the

FutureThe

G


continues today. It’s tempting to use that as an analogy for plan advisors, but there are some fundamental differences. Though pricing pressure has affected both sectors, record keepers are more reliant on technol-ogy and therefore are more scalable than advisors, who are basically consultants — an endeavor in which leverage is still important but not as scalable.

“Advisors show up at the office each morning and have so much to do,” observed CAPTRUST’s Rick Shoff, a former advi-sor himself. “They have to determine the highest and best use of their time — which usually means doing what they do best.” Only in a team environment, says Schoff, “can they go deeper, with fewer relation-ships where they have a competitive edge. For many advisors, 20% of their clients generate 80% of their profit.” And when their practices grow, it’s harder to sustain a steady growth rate, which can only be accomplished by marketing constantly, re-fusing to be burdened by low-value admin-istrative duties.

The fundamental question that an ad-visor needs to answer, according to 401(k) Advisors’ Paul Powell, is: “Am I a sales person or a businessman?” Mark Chamber-lain, Tim Rice and Tim VerShure, Lakeside Wealth Management’s brain trust, note that, “It’s becoming increasingly harder to be a CEO and practitioner.” Rarely do the two responsibilities coexist comfortably in one person. And even when they do, the advisor still needs to decide where to focus.

Pensionmark’s Troy Hammond, who

saw his firm grow from 26 offices in 2013 to 40 in 2014, sees consolidation accelerat-ing at a faster pace. In part, Hammond says, this is because, “There’s a growing demand and awareness that advisors need to focus on more revenue-generating activity, such as client-facing and prospecting rather than process.” That is especially important be-cause advisors have to service more plans to maintain profitability as prices drop across the board.

Vince Morris at Bukaty voiced anoth-er key theme: that bigger groups provide shared services, from technology to market-ing to HR. “Even if an advisor can afford to hire a marketing person, for example, the better marketing people will be attract-ed to bigger organizations that have more resources.”

Cross-sellingThough it seems like cross-selling

corporate and individual clients is common, that wave is just building and will only con-tinue to build momentum. Cross-selling and consolidation can be viewed as two sides of the same coin.

Some consolidators, like SageView and, to a certain extent, CAPTRUST, tend to try to be more focused at vertical rather than horizontal growth, adding offices nationally rather than trying to sell more services to the same client.

But others like Bukaty are trying to leverage their “Four Corners” practice cov-ering health care, retirement, wealth man-agement and P&C. Jim Sampson, a New England-based advisor, observes that, “You can’t just do retirement. There’s a demand from clients to provide payroll and HR, something that payroll companies realize early on. There’s a reason that McDonalds sells more chicken than KFC — distribution and access to the customer.” His firm, which includes a TPA and a health care practice, intentionally does not cross-sell wealth management services or try to capture downstream revenue. Sampson believes this is an advantage because he is not harassing employees.

But Hugh O’Toole has a different and unique view. O’Toole led sales at Mass-Mutual and recently left to pursue his en-trepreneurial dream. Rather than providing benefits, O’Toole sees companies allocating

a set amount of money to employees each year and giving them the opportunity to select the benefits that make the most sense for them from an exchange that the company sets up and the advisor manages. The “Four Corners” exchange could include health care, retirement, life insurance or protection and executive deferred comp. It might not make sense for low-income employees, who are barely making ends meet, to contribute to a DC plan. On the other hand, DC plans will barely make a difference for high earners, who should put most of their discretionary dollars into a non-qualified plan. In this scenario, the ad-visor uses payroll and medical data, which is richer, to determine which benefits makes sense for each person.

O’Toole notes that, “Benefits should be applied by socio-economic profiles. Em-ployers are not in the business of supplying benefits. It’s the cost of doing business and they will want to outsource as much as possible. However, the cost of people making a mistake is that they have to work longer — which increases costs in the form of older workers who have higher contin-gent liability.”

Technology and Big DataNo, technology will not solve the retire-

ment crisis, just as it cannot put out fires or stop crime. But advisors that leverage tech-nology will be better positioned to improve outcomes by reaching more participants — as well as run their practices more efficient-ly. There’s a lot of publicity and speculation about robo-advisors and whether they pose a threat to traditional advisors. As financial advisor and blogger Micharl Kitces aptly observed, “If all an advisor does is what a robo-advisor does, then that advisor is in trouble. Providing value on top just makes the advisor more efficient.”

“Technology will allow advisors to create more customized communications,” notes Orlando-based advisor Jason Chep-enik, “which includes personal enrollment videos that leverages data already available as well as texting people to remind them to take action or warn them about opting out.”

Pensionmark’s Hammond, who was trained as a technologist, sees everything being run off of a CRM system, including

dc plan advisors, who have toiled away in relative anonymity within their broker dealers and retail investment managers, now find themselves squarely in the spotlight.”


investment reports. Sheridan Road’s Jim O’Shaunessy looks to his BD or RIA to provide the base technology augmented by custom reports, especially investment mon-itoring for larger plans. “Getting data is the biggest problem because there is no central-ize platform capturing plan and participant data. We are meeting with record keepers to get the same data feed,” he says.

O’Shaunessy sees technology delivered by a sophisticated back office as a way to provide smaller plans with services similar to those that large plans enjoy, as well as outsourced fiduciary services — simplify-ing deliverables like the investment menu. O’Shaunessy notes that, “We’re looking to consolidate the number of record keepers we work with, focusing on the five or six survivors who can span multiple markets. Right now we have 20 to 30 partners, which does not make sense.” BlackRock’s Darian envisions “custom built, unitized managed investments with five different models for people the same age. That means we have to go beyond record keeper data.”

Envestnet is trying to be that data hub for advisors and to provide the tools and services that would allow them to build custom portfolios. As a bridge to advisors and broker dealers, that option may be preferable for record keepers, who want to feed data to one source. Technology will unleash the power of customization, making the system more about the needs of the participant rather than being a slave to the systems, which Envestnet’s Sivadasan claims is “siloed among the various providers who touch the data, like record keepers and cus-todians. Investors would be better served by customized investments than by target date funds — which will also allow advisors to show more value.”

Some record keepers don’t want to share the data because they want to cap-ture the downstream revenue. A major small-market provider was at the one yard line with the industry’s top wire house but walked away because they would not hook into the BD’s rollover capture system. And others are not willing to join LPL’s Worksite Financial program because they want to capture downstream participant revenue themselves.

LPL’s Adam Sokolic agrees that tech-nology and data are the keys to Worksite

Financial. The program allows advisors to work more closely with participants from cradle to grave, providing a “simple instant sign-on branded by the advisor. Technology which will go more mobile can give advi-sors the business intelligence they need to run their business and better serve clients.” Because of LPL’s size and reach, Sokolic won-ders whether smaller firms can catch up. And while he admires the ambitious nature of En-vestnet’s undertaking, he questions whether they can actually accomplish their goals.

Affecting OutcomesThe race is on to improve participant

outcomes. But before advisors and providers get too carried away, let’s be realistic. Before plan sponsors will even begin to focus on outcomes, they need to limit liability, costs and work. Even then, some companies who do not see their DC plan as a differentiator or understand the costs of people working longer will not value improved outcomes. DC plans have basically given plan sponsors a free ride if they have followed the rules and checked the boxes. As Jamie Hayes of Fiduciary First in Orlando notes, “The rules need to catch up with best practices, not penalize them. There should be new types of safe harbor rules for plan sponsors who try to optimize plan outcomes – not penalties.”

Advisors need a way to measure out-comes, or “DC Alpha,” in the form of income replacement ratios in order to show the value of all their increased efforts. Auto plan design features now being employed by many plans have gone a long way toward moving the needle, so advisors have to figure out a way to add value on top of these features.

Hayes, who works closely with UCLA’s

DC befi guru Shlomo Benartzi, incorpo-rates befi into her plans. But Hayes also uses CFPs employed by her firm who “Meet one-on-one with employees to cre-ate a holistic financial plan compared to a simple asset allocation for their DC plan.”

Bill Chetney, who recently left his cor-porate position at LPL to form Global Re-tirement Partners, an OSJ under LPL and an independent RIA, believes that part-nering ERISA experts with armies of retail advisors will build that last mile to the participant. “No one would have believed 20 years ago that advisors could have sold 1 million DC plans, but they did. Now no one believes that advisors can meet one-on-one with 80 million participants, but they can.” Noting that, “retail advisors are a dirty word in our industry,” Chetney plans to match retail advisors with plan advisors, “to fill the void between people who need help and a trained network of retail advisors.” Unfortunately, there’s no training system as there was in the old insurance model that Chetney grew up in.

ConclusionSo what does the future hold? What

will retirement plan practices look like in three to five years?

The big focus will be on three key elements:• Improving outcomes.• Growing teams that can service all

benefits to employers while working with participants to capture down-stream revenue.

• Using technology to manage big data, enabling advisors to be more efficient and to customize benefits and invest-ments. Advisors that do not or cannot be

business managers will either join a team or stay small, leveraging outsourced data aggregators who will provide a dashboard enabling them to see and manage all plans and participants on mobile devices and to make changes instantly.

And there will be more advisors and fewer providers, with many making an “Irish exit” if they cannot service plans of all sizes. N

[Plan advisors] are becoming the hub, no longer just a spoke, in the wheel that will propel retirement in the future.”


i n s i d e T h e p l a n s p O n s O r ’ s m i n d

The 3 Basic Blunders that Remain Obscured for Retirement Plan TrusteesPlan sponsors need to be made aware of how they can improve their performance in the role of plan fiduciary.

lan sponsor trustees are normally thrust into the fiduciary role by vir-tue of job title, job function or turn-over within an organization. While the genesis of most mistakes made by trustees is ignorance or carelessness, the result can be even more damag-

ing than a prohibited transaction. Let’s take a look at three common blunders by trustees.

Blunder #1 The first of these blunders is failure to

properly implement self-directed brokerage (SDB) features within a tax qualified retire-ment plan.

More often than not, committees will add the SDB option with an air of smugness while exhibiting a self-assuredness that the committee has established an impenetra-ble cloak of protection for themselves as trustees. But a knowledgeable retirement plan advisor — even if they function solely as an RIA — is well aware of the suitabil-ity rules which govern transaction-based accounts. There is a chasm of difference between the enforcement of a suitability rule and a committee’s decision to “add the SDB option.” One day plan sponsors may wake up to the fact that “handing a loaded gun” to their entire workforce in the form of SDBs may not be serving the best interest of every eligible employee.

Blunder #2 The second blunder: failure to compre-

hend the executed contracts of all retirement plan service providers.

Plan trustees and fiduciaries are respon-sible for the outcomes that are generated by all service providers. No one is naïve enough to believe that every retirement plan com-mittee member has read and comprehends

every service agreement for every one of the vendors associated with the plan. And con-sistent with that thought, no knowledgeable judge in the land should accept ignorance as a plausible defense for a named or deemed fiduciary of an ERISA plan.

The blunder on the part of the plan fiduciary does not occur when the plan fiduciary fails to read the contract. It occurs when the plan trustee or the plan commit-tee fails to have the terms of the contract explained to them by competent counsel.

There is no rule which requires that a fiduciary be able to read the legalese that most ERISA service contracts contain, but in this case the “ounce of prevention is well worth the pound of cure.” Retirement plan committees which fail to comprehend the terms of their services contract have left the door wide open for uncomfortable question-ing at the next deposition.

At a bare minimum, plan fiduciaries need to understand the terms of any ADVs, brokerage agreements and all plan operating agreements.

Blunder #3 The last blunder: failure of plan trustee

to manage the company match, when one does exist in a cash or deferred arrangement (CODA) plan.

“Dollar-for-dollar” or “50 cents on the dollar” were the battle-cry formulae that converted employees from eligible partici-pants into active participants. The idea of not leaving money on the table has fueled the success and growth of the 401(k) since the early ‘80s. Thirty years ago that was all that was needed to stimulate American workers into augmenting their retirement savings via the 401(k).

Since then the American workforce

has endured offshoring of jobs, the influx of a new labor pool domestically and two economic slowdowns, but for millions of Americans the 401(k) plan has continued to augment their retirement savings. What more could the plan trustee provide?

If one considers the company match to be an asset of the plan, then many plan fiduciaries are guilty of failing to manage the plan assets. Guilty because they are failing — by not analyzing the structure of the match, by not analyzing the participant behavior around the match and by not restructuring the match to stimulate participant savings at a greater savings rate.

Mismanagement of plan assets is a strong accusation. Blunder is a softer word. But the end result is the same. Many 401(k) plans are not using the science behind be-havioral finance to create the best possible outcomes for plan participants.

It is time that plan sponsors be made aware of how they can improve their perfor-mance in the role of plan fiduciary. N

» steff c. chalk is the executive director of The retirement Advisor University and The Plan sponsor University.

By sTeff c. chALK

P Many 401(k) plans are not using the science behind the behavioral finance to create the best possible outcomes for plan participants.”


PARTNER CORNER

The NAPA Partner Corner connects plan advisors with leading record keepers and DC Investment Only (DCIO) �rms, highlighting their services, resources and positioning in the market, as well as business metrics and contact information for their sales and support people. Currently, only NAPA Firm Partners at a certain membership level have the opportunity to publish a basic (one-third page) or enhanced (full page) listing in the Partner Corner. The sameinformation that is provided in the pages that follow is also available in enhanced online form on NAPA Net, at http://www.napa-net.org/.

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Firm Profile American Century Investments® is rooted in building relationships — the kind of long-term relationships that can only happen when there’s trust … when there’s a consistent track record of delivering results … and when the ultimate measure of our perfor-mance is our clients’ success.

At American Century Investments, our com-mitment is rooted in focusing on delivering superior investment performance and developing long-term relationships with our clients. Our track record of performance, our business model and the legacy of our founder set us apart in the industry.

Performance Focus for More than 50 Years• Founded in 1958 by Jim Stowers, Jr., we relent-

lessly focus on delivering superior investment performance and building long-term relation-ships with our clients.

• Our headquarters is in Kansas City, MO, with offices in New York City; Mountain View, CA; and London, England.

• We take an active team-based approach to man-aging equity and fixed income investments.

Pure Play Business Model• Money management is all we do. • No ancillary businesses distract our focus,

stretch our resources or compete with our clients.

Privately Controlled and Independent• Our owners maintain a long-term view when it

comes to investing and our company. We are not beholden to quarterly earnings pressures. This enables us to stay true to the long-term objec-tives of our investment strategies, offer reliable diversification and align with the best interests of our clients.

• We’re from Main Street, not Wall Street. We take an independent view, guided by our commit-ment to do the right thing for our clients. We’re one of the few major asset managers untainted by ethical lapses.

Profits With a Purpose• Through our ownership structure, more than

40% of American Century Investments’ profits support research to help cure genetically-based diseases including cancer, diabetes and dementia.

• With their personal fortune, American Century Investments founder Jim Stowers Jr., and his wife, Virginia, founded and endowed the Stowers Institute for Medical Research, a world class biomedical research organization dedicated to improving quality of life by researching and uncovering the causes, treatment, prevention and cure of genetically-based diseases. Both Jim and Virginia are cancer survivors.

Investment Strategies for Retirement PlansOur management teams are guided by

well-defined, repeatable investment processes and are dedicated to fully invested, active management approaches. American Century Investments offers a full menu of investment options ideal for a variety of retirement plans.• Team-based investment management approach • Proven long-term risk-adjusted performance in

all asset categories• A variety of pricing options and flexibility to

meet your needs• Availability through most major record keeping

platforms

QDIA OptionsProviding broad diversification through asset

allocation options that qualify as QDIAs, American Century Investments has investment options to meet your retirement plan needs:

One ChoiceSM Target Date PortfoliosThe One Choice Target Date Portfolios from

American Century Investments are a series of nine target date funds and one objective-based fund that offer evolving strategic allocations that are optimized for the changing risk profile as an investor nears retirement.

A One ChoiceSM Target Date Portfolio’s target date is the approximate year when investors plan to retire or start withdrawing their money. The principal value of the investment is not guaranteed at any time, including at the target date. Each target-date One ChoiceSM Target Date Portfolio seeks the highest total return consistent with its asset mix. Over time, the asset mix and weightings are adjusted to be more conservative. In general, as the target year approaches, the portfolio’s alloca-tion becomes more conservative by decreasing the allocation to stocks and increasing the allocation to bonds and money market instruments. By the time each fund reaches its target year, its target asset mix will become fixed and will match that of One ChoiceSM In Retirement Portfolio.

One ChoiceSM Target Risk PortfoliosFive static target-risk funds offer instant

diversification. These portfolios are built using up to 15 underlying mutual funds to help balance risk and return. Each target-risk One Choice Portfolio seeks the highest total return consistent with its asset mix.

Balanced FundAmerican Century Balanced offers a consis-

tent, risk-managed approach through a classic 60/40 mix of stocks and bonds.

Strategic Allocation FundsThe Strategic Allocation Funds are designated

Conservative, Moderate and Aggressive so investors can choose a portfolio that is aligned with their risk tolerance.

American Century Global AllocationAmerican Century Global Allocation fund casts

a wide net across regions, countries, currencies and asset classes in search of opportunities to expand return potential while managing volatility. Tactical adjustments take advantage of opportunities and adjust to changing market conditions.

You should consider the fund’s investment objectives, risks, charges and expenses carefully before you invest. The fund’s prospectus or summary prospectus, which can be obtained by visiting americancentury.com, contains this and other informa-tion about the fund, and should be read carefully before investing.

Business Metricswww.americancentury.com

Number of external wholesalers

dC: 14

Retail: 43

dc AUM:

Total: $35.2 Billion

Total AUM:

$139 Billion

Investments:

mutual fund

group annuity: variable portfolios for annuity products

Collective Trusts

Smas

Asset Allocation funds:

Tdf: “To” – one ChoiceSm Target date Portfolios

Target Risk: one Choice Target Risk Portfolios

Passive/Active/Both

active

capital Preservation funds:

money market

fixed Income

fixed income mutual funds

Bonds

Bond mutual funds

Top 5 funds within American century Investments by dc Assets (as of 6/30/2013)

american Century one ChoiceSm Target date Portfolios

american Century Strategic allocation

american Century growth american Century heritage

american Century Equity Income

NAPAPARTNERCORNER NAPAPARTNERCORNER

41w i n t e r 2 0 1 4 • n a p a - n e t . o r g

Firm Profile A Global Investment Management PowerhouseBNY Mellon is a premier global investments company dedicated to helping clients manage and service their financial assets throughout the investment lifecycle. Whether providing financial services for institutions, corporations or individual investors, BNY Mellon deliv-ers informed investment management and investment services in 35 countries and more than 100 markets.

The firm’s insight is backed by a unique perspective that comes from having $27.6 trillion in assets under custody and administration, and $1.6 trillion in assets under management (as of 12/31/13). Whether clients are looking to create, trade, hold, manage, distribute or restructure investments, BNY Mellon can act as a single point of contact for their investment needs. An uncertain market that has affected so many financial institutions, clients have confidence in BNY Mellon because of its size, strength and stability.•#4SuperregionalBank(U.S.)(Fortune “World’s Most Admired Companies, 2013”)•#7SafestBankintheU.S.(Global Finance “World’s Safest Banks,” April 2013)•Stronginvestment-gradecreditratings**CreditratingsarelistedforMoody’s,S&P,FitchandDBRS.

A security rating is not a recommendation to buy, sell, or hold

securities. The rating may be subject to revision or withdrawal

at any time by the assigning rating organization. Each rating

should be evaluated independently of the other ratings.

Current ratings for The Bank of New York Mellon Corporation

and its principal subsidiaries are posted at

www.bnymellon.com/investorrelations/creditratings.com.

BNY Mellon Investment Management

Building World-Class Investment Performance Takes

the Right Architect

BNY Mellon Investment Management is one of the world’s leading investment management organizations, offering:•Financialstrength•Amulti-boutiquemodelthatencompassestheinvestment skills of world class asset managers: — Each has its own unique investment philosophy and proprietary investment process— Each is a leader in its field with depth and breadth of expertise in every major asset class and sector— Specialists focused on generation of returns•Centralizeddistributionandmanufacturingsolutions

We know that specialization and focus are essential to investment management. Each of our independent asset management companies pursues its investment strategy with a passion and commitment that keeps them ahead of changing investment landscapes.

BNY Mellon Investment Management combines the scale of a full service investment manager with the focused expertise of autonomous investment boutiques, each with its own style, strategy and

management team. All together, we have the skill to deliver uncorrelated alpha and the scale to deliver diversified beta.•16independentinstitutionalassetmanagerswith $1.5 trillion in assets under management (as of 9/30/13)•7thlargestglobalassetmanager(Pensions & Investments, October 2012)•7thlargestU.S.moneymanager(Institutional Investor, July 2013)•5thlargestmanagerofendowmentandfoundation assets (Pensions & Investments, May 2013)

BNY Mellon Retirement

Dedicated to Helping Our Clients SucceedBNY Mellon Retirement is a team of experienced

retirement professionals representing all of BNY Mellon’s retirement-oriented investment solutions for DC and insurance VA businesses.

Solutions That Work for YouWe will work with you to develop and deliver

appropriate investment strategies and to provide the ongoing servicing required. We deliver these strategies to you in multiple vehicles:•Retailmutualfunds•Zerorevenueshareinstitutionalmutualfundshare classes•ERISAqualifiedbankcollectivefunds—multiple share classes with and without revenue share•Institutionalseparateaccounts•Customizedapproaches

In a highly competitive environment, growing your business is an increasing challenge — one that is further complicated by the evolving nature of the retirement marketplace. With BNY Mellon Retirement, you benefit from our wide range of investment strategies, our marketplace expertise and support services from a trusted business partner.

BNY Mellon Investment Management is one of the

world’s leading investment management organizations and one

ofthetopU.S.wealthmanagers,encompassingBNYMellon’s

affiliated investment management firms, wealth management

services and global distribution companies. BNY Mellon is the

corporate brand of The Bank of New York Mellon Corporation.

This document is of general nature, does not constitute legal,

tax, accounting or other professional counsel or investment

advice, is not predictive of future performance, and should

not be construed as an offer to sell or a solicitation to buy

any security or make an offer where otherwise unlawful. The

information has been provided without taking into account

the investment objective, financial situation or needs of any

particular person.

For more information, please contact your BNY Mellon

Retirement Consultant or call 1-800-992-5560.

Investors should consider the investment objectives,

risks, charges and expenses of the fund carefully before

investing. Contact your financial advisor and obtain a

prospectus, or a summary prospectus, if available, that

contains this and other information about the fund, and

read it carefully before investing.

Equity funds are subject generally to market, market

sector, market liquidity, issuer and investment style risks,

among other factors, to varying degrees, all of which are

more fully described in the fund’s prospectus.

Bond funds are subject generally to interest rate,

credit, liquidity and market risks, to varying degrees, all of

which are more fully described in the fund’s prospectus.

Generally, all other factors being equal, bond prices

are inversely related to interest-rate changes, and rate

increases can produce price declines.

The funds are not a deposit of, and are not insured or

guaranteed by, any bank, financial institution, the FDIC or

any other governmental agency, and participants may lose

money. Also, a fund unit’s principal value and investment

return will fluctuate, so that when a unit is redeemed, it

may be worth more or less than the original investment.

Key Contacts:margie massaro, 212.922.7610, [email protected]; Caitlin loesch, 212.922.5243, [email protected]

Business Metricswww.bnymellonretirement.com, www.dreyfus.com

Number of external wholesalers:

dC: 5

dc AUM:

$37 Billion

Total firm AUM:

$1.5 Trillion

Investments:

Retail mutual funds

Zero Revenue Share Institutional mutual fund Share Classes

ERISa Qualified Bank Collective funds - multiple share classes with and without revenue share

Institutional Separate accounts

Customized approaches

Top 5 dreyfus/BNy Mellon fund Products by dc Assets

dreyfus Research growth fund

dreyfus appreciation fund

dreyfus opportunistic midCap value fund

BNy mellon Stable value fund*

dreyfus International Bond fund

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Firm Profile ItisthemissionofCUNAMutualRetirement

Solutions to recognize the powerful human story of the service and accomplishments of hard-working Americans, and help them meet their challenge in achievingasecureretirement.Todothis,CUNAMutual Retirement Solutions provides an array of practical retirement solutions that deliver the personal attention, customer-focused resources and guidance needed to help real people save for the future andliveretirementontheirterms.CUNAMutualRetirement Solutions offers record-keeping and plan administration services needed by organizations in order to simplify plan management and help ensure participants’ success.

ServicesprovidedbyCUNAMutualRetirementSolutions include plan design, plan conversion, investment management, compliance testing, reporting, legislative updates, distribution services, audit and fiduciary support, and plan health reports.

CUNAMutualRetirementSolutionshascreateda new focus on participant outcomes, emphasizing the retirement aspirations of hard-working Americans nationwide and reinforcing the value of our expertise.

At the center of its outcome-focused approach is a comprehensive educational platform. When it comes to adequately saving for the future, many plan participants need some form of guidance or other educationalassistance.That’swhyCUNAMutualRetirement Solutions equips them with the right knowledge and tools to help them set and stay on target with their goals.

The company’s tools, products, expertise and resources are geared toward improving retirement outcomes for its target market. This includes new retirement plan offerings that are designed for flexibility for plan sponsors, as well as an online participant tool set, known as RetireOnTarget®.

RetireOnTarget is an online tool that makes it easier for participants to make informed investment decisions and create a targeted plan for a secure retirement.

AtCUNAMutualRetirementSolutions,astrongfinancial foundation is behind every product and service. It means that a relationship with them is one backed by their straightforward service satisfaction guarantees.

In 2009, CPI Qualified Plan Consultants was acquiredbyCUNAMutualGroup,andisnowpartofCUNAMutualRetirementSolutions.PaulChong,senior vice president of retirement plan services for CUNAMutualGroup,theparentcompany,statedina March 2014 news release that the arrangement helps realign the overall purpose of the company to support small-market clients’ retirement outcomes. CUNAMutualGroupcontinuestoservethefinancial

needs of credit unions and their members, including the provision of qualified and non-qualified retirement plans for credit union employees.

CUNAMutualRetirementSolutionsisbuildingon the reputation of its parent company within the small-plan market, focusing on business with plans that have between $500,000 and $7 million in assets. The new focus drives collaboration between CUNAMutualRetirementSolutionsandfinancialadvisers to help small business owners and their employees achieve retirement readiness.

The company is not trying to be all things to all people. Its focus is on helping Main Street, not Wall Street. That means serving small businesses that care about their employees and want to help them build and enjoy a successful retirement.

CUNAMutualRetirementSolutionshasconsistently ranked as a top performer in the annual Boston Research Defined Contribution Plan Sponsor &Loyaltystudy(BostonResearchGroup,2013DCPPlanSponsorSatisfaction&LoyaltyStudyforPlanswith assets up to $5 million). Some of the notable attributes outlined in the study include: offering innovative solutions to difficult problems; easy to do business with; and effective in helping participants reach their financial goals for retirement.

About CUNA Mutual GroupCUNAMutualGrouphasbeenidentifiedasone

of the world’s most ethical companies, according to Ethisphere Institute, an international organization that rates companies’ business ethics and corporate social responsibility. The methodology for the World’s Most Ethical Companies includes reviewing codes of ethics, litigation and regulatory infraction histories, evaluating the investment in innovation and sustainable business practices, looking at activities designed to improve corporate citizenship, and studying nominations from senior executives, industry peers, suppliers and customers.

MoreinformationonCUNAMutualRetirementSolutions is available at http://www.cunamutualrs.com.

Securities distributed by CUNA Brokerage Services, Inc., member FINRA/SIPC, a

registered broker dealer.

CUNA Mutual Retirement Solutions is the marketing name for CPI Qualified Plan

Consultants, Inc. a member company of CUNA Mutual Group. CUNA Mutual Group

is the marketing name for CUNA Mutual Holding Company, a mutual insurance

holding company, its subsidiaries and affiliates. Life, accident, health and annuity

insurance products are issued by CMFG Life Insurance Company. Each insurer is

solely responsible for the financial obligations under the policies and contracts it

issues. Corporate headquarters are located in Madison, Wisconsin.

CMRS-917348.1-0514-0616

Business Metrics

Key Contacts:To talk to a CuNa mutual Retirement Solutions repre-sentative, please call us at 800.491.7859, or email us at [email protected].

Website: www.cunamutualrs.com

www.cpiqpc.com


25

dc AUM:

Total: $13 Billion

retirement AUM:

$17.8 Billion

Total AUM:

$17.8 Billion

dc Plan UM:

6,100

retirement Plans UM:

6,900

dc Participants UM:

307,000

retirement Participants UM:

338,000


Tdf Proprietary/outside: outside

TdRisk Proprietary/outside: outside

Custom glide Path: No

service Model(s): (bundled/unbundled/both):

Both

distribution Model(s): (advisor/direct/both):

advisor

Primary Market(s) served:

micro (<$1 million): yes, but not primary

Small ($1-$10 million): yes, primary

mid ($10-$100 million): yes, but not primary

large ($100-$250 million): yes, but not primary

mega (+$250 million): yes, but not primary

Plan Type(s):

dC

dB

Non-ERISa 403(b)

457

Taft hartley

Non Qualified

IRa

fiduciary services offered:

3(21)

3(38)

3(16) (Same Plan Types)



Business Metricswww.f-squaredretirementsolutions.com


dC: 4

Retail: 15

dc AUM/AUA:

Total: $1 Billion

Total AUM/AUA:

$23.3 Billion*

Investments:

mutual funds: Subadviser through virtus Investment Partners

Collective Trusts

Smas

asset allocation funds

Tdf: Subadviser through Reliance Trust

Target Risk

managed accounts

Passive/active/Both

active

fixed Income

yes

Top funds by dc Assets:

alphaSector uS Equity funds: $481 million

Reliance Trust Risk managed Target date funds: $458 million

alphaSector Target Risk funds: $43 million

* total assets tracking f-squared Indexes

Firm Profile

F-Squared Retirement SolutionsF-Squared Retirement Solutions offers down-side-risk-managed investment solutions to the defined contribution marketplace. We seek to align our invest-ment strategies with the goals of plan sponsors and their participants, targeting relative returns in healthy markets and providing risk controls in down markets. TheproductarrayincludesacoreU.S.equitystrategy,a fixed income option, a series of target risk funds and a tail-risk overlay strategy, all designed to reduce overall portfolio volatility and the risk associated with significant market drawdowns.

Collective Investment Trust Funds Offered Through

Reliance Trust Company

F-Squared AlphaSector® U.S. Equity FundTheF-SquaredAlphaSectorU.S.EquityFund

uses a disciplined quantitative model to make a probabilistic projection of expected returns for each oftheninemajorsectorsoftheU.S.economy.Themodel has the flexibility to allocate to any combination of the nine sectors, and may invest up to 100% in a cash equivalent for defensive positioning. The model’s objective is to remove those sectors that present risk while preserving exposure to the healthier sectors.

F-Squared AlphaSector® Fixed Income FundThe F-Squared AlphaSector Fixed Income Fund

represents an actively managed portfolio that seeks to provide a full-market fixed income solution. It is designed to participate in healthy markets and provide downside risk controls in adverse market conditions, including rising interest rate environments. The AlphaSector Fixed Income Fund may invest up to 100% in cash equivalents when the model indicates the need for defensive positioning.

F-Squared AlphaSector® Target Risk FundsThe F-Squared AlphaSector Target Risk Funds

are designed to achieve long-term capital appreciation by limiting the magnitude of drawdowns in declining market environments while offering participation in rising equity markets. The series consists of five different portfolios constructed to meet various risk and return profiles: Conservative, Moderate Conservative, Moderate, Moderate Aggressive and Aggressive.

To meet the unique needs of our retirement clients, F-Squared products are available as collective trust funds through a partnership with Reliance Trust Company, separately managed accounts and custom tail-risk overlays. F-Squared Retirement Solutions will partner with advisors, plan sponsors and consultants to integrate downside risk management into retirement plans, giving these fiduciaries the ability to construct investment menus that better meet the needs of participants and offer the opportunity for a successful retirement outcome.

The AlphaSector PhilosophyThe AlphaSector investment philosophy is

simple. We believe that severe market drawdowns are the greatest threat to achieving a desired investment outcome. We further believe that there is a “psychological cost” to severe drawdowns and a “psychological benefit” to avoiding them. We depart from the conventional approach of closely tracking a benchmark.

To achieve this goal, the AlphaSector investment strategies are designed to avoid or reduce severe losses in declining markets while participating in rising markets. An AlphaSector investment strategy may closely track a benchmark index portfolio during a rising market, but when our quantitative models indicate an increased risk of loss, the strategy is designed to diverge from the benchmark to achieve defensive positioning.

About F-Squared InvestmentsF-Squared Investments, based in Wellesley,

MA and Princeton, NJ, is a manufacturer of next-generation investment indexes based on the proprietary AlphaSector and PoRT capabilities. F-Squared seeks to provide investment indexes that align with the real needs of the marketplace, delivering on well-defined expectations. The firm serves clients in the advisor, institutional and retirement markets.

By starting with the needs of the investor, F-Squared has developed a fundamentally different approach to risk and return. Every day we challenge ourselves, our industry colleagues and the investors we serve to break from convention and reset expectations. F-Squared is committed to “Rethink Investing” based on the needs of the investor. For more information, please visit www.f-squaredretirementsolutions.com.

F-Squared Investments® Rethink Investing™

NAPAPARTNERCORNER


Firm Profile It’s hard to think about the retirement industry without thinking about Fidelity, which has 60% of its $1.7 trillion of assets under management in retirement-related accounts. But it’s not as easy to associate Fidelity with the investment-only business — since their 20,000-plus qualified plans (with 12 million participants) are on their fully integrated, bundled platform — until recently, that is. With 75% of the marketplace record kept on non-Fidelity platforms, along with the movement toward open ar-chitecture and the increasing reliance on consultants and advisors, Fidelity changed its model to reenergize their DCIO business.

Fidelity Financial Advisor Services (FFAS), as its name implies, concentrates on selling and servicing advisors. In addition to making their funds available, they had been selling their DC record keeping and administrative services to advisors. In 2011, when sales of record keeping services were moved under WI, FFAS shifted their attention to building an inte-grated DCIO group — expanding resources, creating specialized thought leadership and developing a focused product and pricing approach.

That division, under the leadership of Jordan Burgess, a long-time FFAS veteran, employs 10 field wholesalers selling to advisors (under Derek Wallen) and five institutional reps selling to consultants (un-der Matt Gannon, a long-time MFS executive who was instrumental in building their retirement business). Thegroupoverseesnearly$70billionDCAUM—making FFAS a top-tier DCIO provider.

Fidelity enjoys a number of important and unique advantages as a DCIO provider, including:• Industry Leadership — They combine retirement

expertise and knowledge with investment and technical wisdom.

• Comprehensive Investment Menu — With more than 140 advisor funds, multiple share classes includingmanyZshares(likeR6)andinsti-tutional CITs and SMA managed by Pyramis, Fidelity understands the types of investments that appeal to retirement plans and participants.

• UnparalleledResourcesandBrand—With800investment professionals and many more techni-cal experts, Fidelity has money to keep investing in the business as well as a strong retail and institutional brand.

FFAS has always worked with and understood the needs of advisors. The DCIO group is leveraging their expertise and Fidelity’s resources, including their rich database of plans and participants, to help advisors, record keepers and plan sponsors with their goal of ensuring participants achieve better retirement outcomes. They focus a number of resources and research on:• What plan sponsors want from their advisors and

what their major concerns and issues are• Participant behavior patterns when making

investment decisions and attitudes about retire-ment readiness

• Investment trends, especially those affecting retirement plansWhite papers following up on their research cov-

er important topics like how to restore confidence in investors, whose allocations are becoming too conser-vative just as they are increasingly concerned about their ability to retire. FFAS also makes available to advisors a dedicated team of investment professionals to help construct optimal investment fund lineups and perform customized mapping with supporting investment analytics.

Fidelity funds, which have some of the greatest depth as well as sensitivity to the retirement market, include:• Fidelity Advisor New Insights, covering large cap

growth• Fidelity Advisor Growth Opportunity Fund• Bond funds such as Fidelity Advisor Strategic

Income and Fidelity Advisor Total Bond • Large value with their Fidelity Advisor Equity

Income fund• Fidelity Diversified Stock, a large cap blend fund• Fidelity’s popular Fidelity Advisor Freedom

Funds, which is the market leader in target date fundsFidelity’s DCIO group works with all major record

keepers, so advisors have access to their broad array of funds. Now, with the recently formed, dedicated DCIO team and resources, plan advisors using Fidelity funds will have access to their people, research and brand from the retirement industry’s clear leader.

Business Metricswww.advisor.fidelity.com/dcio


Retail: 15

dc AUM:


Total AUM:

$1.7 Trillion

Investments:

mutual fund

Collective Trusts

Smas


Tdf (To/Through/Both): Through

Target Risk

Passive/Active/Both:

active


Stable value

money market

gICs

fixed Income

yes

Top 5 funds by dc Assets

fa freedom funds (12 Target date funds) fa Small Cap

fa New Insights fa Balanced

fa leveraged Co Stock

Key Contacts:Sales: derek Wallen, SvP, division manager, 401.292.5615, [email protected]

Service: Tom Restivo, SvP, operations and Services group, 401.292.5596, [email protected]

(DCIO)



Firm Profile Invesco is and has been a leader in the DCIO market with a long history in retail and institutional money management and an emphasis on working with DC plan advisors to help create value for their clients. Having exited the DC record keeping market in the mid-2000s, Invesco’s focus on investment manage-ment makes them a popular choice for plan advisors and leading broker dealers, with many of their funds available on all major platforms.

Led by industry veteran Terry Kelly, the DCIO group includes 10 external and 10 internal whole-salers as well as six senior account executives as of 10/31/2013. The group flowed more than $10 billion in 2010 from plan advisors. Once a prominent player in the DC record keeping market through outsourced solutions as well as a proprietary system, the company decided to exit that side of the business in 2003. In-vesco sold their proprietary platform to Merrill Lynch, which eventually flipped it to The Hartford. The expe-rience helped Invesco develop a good understanding of the market and the needs of plan advisors, making their transition seamless as more platforms were forced to offer outside investments. Their sales people who had sold record keeping services developed a solutions-based approach that attracted plan advisors.

Providing impactful and unique value-adds has become a real challenge for DCIOs. Many firms seem to make available off-the-shelf third-party tools that are also offered by various competitors. Invesco has always developed their own tools and services, howev-er. Those capabilities were augmented in 2010 when the company purchased the retail asset management business of Morgan Stanley, including Van Kampen Investments — a leader in value added materials for plan advisors.

Invesco employs a dedicated internal group of 12 practice management and marketing consultants that also serves retail advisors. This group has helped develop industry leading programs such as “The Final Word,” focused on using the right words to make effective finals presentations to boards, and “New Words for the New Economy” to help participants understand and maximize benefits. These programs were developed through extensive research with plan sponsors and participants. Their newest program draws from the lessons of Hollywood screenwriters. “Tell Me More” helps advisors create a “logline” that previews their benefits to clients in 15 words or less, and prompts prospects to say “tell me more.” For strategic relationships, Invesco will send in a team to review an advisor’s pitch book and materials.

Invesco is well known in the DC market for its large-cap value funds and mid-cap value strategies, including some that were part of the Van Kampen purchase. With competitive fees, Invesco’s value complex includes distinct strategies focused on deep value, relative value and companies that pay divi-dends. In their core strategies, Invesco will combine passive and active strategies to keep fees low. Though nascent, Invesco’s TDFs have been cited as one of the fastest growing in the DC market by Morningstar, and they also offer a risk parity strategy called Invesco Balanced-Risk Allocation Fund.

Invesco offers strong support for plan advisors with a robust and deep group of external wholesalers supported by internal professionals, industry leading value-added tools and a strong investment line-up, making them a valuable partner for the focused plan advisor.

Business Metricswww.invesco.com/us


dC: 10

Retail: 103

dc AUM:


Total AUM:

$745.5 Billion

Investments:

mutual funds

Collective Trusts

Smas


Tdf (To/Through/Both): Both

Target Risk

managed accounts


Stable value

money market

Bonds

yes

Top 5 funds by dc Assets (with asset total & last year new flow):

IvZ International growth: $5 Billion

IvZ Comstock: $3.6 Billion

IvZ growth and Income: $4.7 Billion

IvZ Small Cap growth: $2.4 Billion

IvZ Equity and Income: $4.1 Billion

Key Contacts:Sales: Jeffrey hemker, CIma® 630.258.6931, [email protected] accounts: matt foster 832.814.8775, [email protected]: Invesco Retirement division Sales desk 800.370.1519

NAPAPARTNERCORNER


Firm Profile John Hancock Investments provides asset manage-ment services to individuals and institutions through a unique manager-of-managers approach. We operate as an independent and well-resourced investment advisor. This structure enables us to be highly respon-sive, develop funds based on investor need, and then search the industry to find the portfolio management teams with the best skill set, track record, and experience to manage those funds. Our funds provide access to specialized portfolio teams at some of the best managers in the world. Our independence and experience as one of the longest-tenured manager of managers enable us to achieve what we believe is an exceptional level of oversight. Our approach to in-vesting has led to a diverse set of investments deeply rooted in investor needs, along with strong risk-adjust-ed returns across asset classes.

Key Contacts:Sales: aaron Esker, [email protected], 617.663.4281

Service: aaron Esker, [email protected], 617.663.4281

Business Metrics

www.jhinvestments.com


dC: 7Retail: 70

dc AUM:

Total: $7.5 Billion

Total AUM:

$75 Billion

Investments:

mutual funds

Smas



Target Risk


active


money market

fixed Income

yes

Bonds

yes


John hancock disciplined value fund

John hancock Classic value fund

John hancock disciplined value mid Cap fund

John hancock Rainier growth fund

John hancock lifestyle Portfolios (asset allocation Strategies)



Firm Profile John Hancock has more than 150 years of experience and is a member of the Manulife Financial Group of Companies.

John Hancock knows what goes into making a healthy, successful retirement plan. We are one of the nation’s largest providers, meeting the needs of partici-pants across a wide range of industries and plan sizes.

As your efficient provider, John Hancock gives you the innovative tools, resources and the people power to help you build and maintain a profitable retirement plan business and meet your clients’ needs.

The company has two offerings in the 401(k) marketplace: JH Signature™, our small market solution; and JH Enterprise®, our open architecture solution for the mid-market.

JH SignatureTM

JH Signature is a fully-packaged solution, offering a multi-class structure, local compliance and ERISA expertise, as well as a team of investment specialists who help research, select and monitor the asset managers on the platform.

JH Enterprise®

JH Enterprise is John Hancock’s open architec-ture retirement plan offering, providing plan sponsors with $10 million or more in assets with access to more than 18,000 investment options and a robust, real-time, proprietary record keeping system.

The company’s two commitments to their busi-ness partners and clients: We are easy to do business with, and we make plans work.

For more information, visit www.jhrps.com. (For plans domiciled in New York, visit

www.jhrps.com/ny.)

Key Contacts:Sales: 1.877.346.8378

Data as of June 30, 2013

Business Metricswww.jhrps.com, www.jhrps.com/ny


65

dc AUM:


Total AUM:


dc Plans UM:

44,972

dc Participants UM:

1,645,894


Tdf Proprietary/outside: Proprietary subadvised 1) To Retirement 2) Through Retirement

TdRisk Proprietary/outside: Proprietary subadvised

Custom glide Path

service Model(s): (bundled/unbundled/both):

Bundled and unbundled

distribution Model(s): (advisor/direct/both):

advisor


micro (<$1 million)

Small ($1-$10 million)

mid ($10-$100 million)

Plan Type(s):

dC

dB

457

Taft hartley

IRa


3(21)

NAPAPARTNERCORNER


Firm Profile Legg Mason has a rich history in the DC market and is making strong moves to become more prominent in the DCIO arena. Though Legg Mason has never owned a record keeper as other well-heeled DCIOs have, they did own a brokerage firm and created private-label services with other record keepers for their advisors looking to access their funds. In 2005, Legg “traded” their advisors for Smith Barney’s funds to focus on managing money. (Those advisors are now part of Morgan Stanley.)

While Bill Miller is Legg’s most renowned port-folio manager, the firm is comprised of eight different independent money managers which have access to shared services like the DCIO group headed by in-dustry veteran and thought leader Gary Kleinschmidt. The network of independent investment managers includes:

Batterymarch Financial ManagementAn equity specialist focused on bottom-up stock

selection, integrated risk control and cost-efficient trading. An early entrant into overseas investing, too.

Brandywine Global Investment ManagementPursuing value since 1986 across equity and

fixedincome,globallyandintheUnitedStates.Historically institutionally focused, the firm has both a boutique’s agility and a leader’s stability and resources.

ClearBridge InvestmentsEquity manager with more than 45 years of

experience and long-tenured portfolio managers who build income, high active share or managed volatility portfolios.

Legg Mason Global Asset AllocationOffers global expertise in strategic and tactical

asset allocation and custom risk management. Solu-tions-focused, the firm combines asset allocation with Legg Mason’s independent manager expertise.

Legg Mason Global Equities GroupA collection of specialty firms dedicated to

global equities. Each pursues its own strategy while benefiting from Legg Mason’s global scale. LMGEG includes: Esemplia Emerging Markets, Legg Mason Poland and Legg Mason Australian Equities.

The Permal GroupA global pioneer in multi-manager, multi-strate-

gy alternative investing. The firm has made invest-ments in new and established hedge fund managers across strategies, asset classes and regions since 1973.

Royce & AssociatesKnown for its disciplined, value-oriented

approach to managing small caps. An asset class pio-neer, the firm’s founder is one of the longest tenured active mutual fund managers.

Western Asset ManagementOne of the world’s leading global fixed-income

managers. Founded in 1971, the firm is known for team management, proprietary research and a long-term fundamental value approach.

The firm focuses on 1,200 plan advisors who specialize in the DC market, providing a con-cierge-like service which gives the advisors access to Legg’s fund managers, their ERISA help desk pow-ered by Ascensus, white papers (many of which are by ERISA expert Marcia Wagner) and other value-added services focused on the use of social media and building a pipeline of prospects.

While Legg Mason “checks all the boxes” need-ed to make it one of the 14 Tier 1 DCIO providers, what distinguishes Legg (and very few others) is their senior management and thought leadership. Gary Kleinschmidt started in the DC business in the 1980s, moving to Ascensus (then BISYS) in the 1990s and then to Van Kampen, which was a pioneer in the DCIO market, in the 2000s. He moved to Legg in 2007 to gain access to a firm that was comprised of eight different managers and because of their focus on DC plans after the 2005 advisor trade with Smith Barney. Gary serves on the NAPA Leadership Council, the group’s governing board.

Thought leadership is important for Legg Mason, which is why they created the Legg Mason Retirement Advisory Council comprised of leading professionals from various record keepers, advisory firms and broker dealers. Following a recent expansion, the Council now includes Brian Graff, Executive Director/CEO of ASPPA and NAPA. The Council supports research and thought leadership on a variety of topics, including auto-IRAs, creating undergraduate programs to attract more people into the retirement industry, and aFirst&10whitepaperencouragingAmericanstofirst contribute to their retirement plan and then to contribute 10%.

The DCIO market is getting more competitive and the stakes will get much higher, with fewer than 50 providers focused on the advisor-sold market and fewer than 15 who are considered in the top tier based on sales, the number of wholesalers and value-added services, as well as the quality and depth of their investments. In the future, two factors will distinguish firms within the top tier: quality of senior management and thought leadership to help clients (advisors, record keepers and broker dealers) to distinguish themselves and improve participant outcomes. Legg Mason’s DCIO group enjoys great support from the firm and will continue to be a leader in this market.

This description was written by Fred Barstein on behalf of the National Association of Plan Advisors (NAPA). It was not written by Legg Mason.

NAPA is not associated with Legg Mason.

9/13 FN1312984

Key Contacts:Sales: gary kleinschmidt, head of legg mason Retirement 215.872.1317

Service: ursula henry, vice President, account Service manager

Business Metricswww.leggmason.com


dC: 8

Retail: 60

dc AUM:

Total: $20 Billion

Non-IrA retirement AUM:

$92 Billion

Total AUM:

$654 Billion as of may 31, 2013

Investments:

mutual fund

group annuity

Collective Trusts

Smas




active


money market

fixed Income:

yes

Bonds:

yes

Top 5 funds by dc Assets:

Royce Pennsylvania mutual fund: $507 million gross Sales, $2.3 Billion aum

Royce Total Return fund: $381 million gross Sales, $1.5 Billion aum

Western asset Core Bond fund: $487 million gross Sales, $1.2 Billion aum

ClearBridge appreciation fund: $275 million gross Sales, $484 million aum

Western asset Core Plus Bond fund: $444 million gross Sales, $1.9 Billion aum



Firm ProfileMassMutual employs state-of-the-art technology to provide comprehensive record keeping services to our clients. Our innovative technology provides a strong foundation of industrial processing strength on a plat-form that is scalable and flexible enough to meet the ever-changing and unique needs of our client base.

Our record keeping services go beyond providing efficient benefit processing, financial integrity and on-demand access to information. By combining our powerful record keeping system with client data, we can provide prescriptive solutions to our clients and their participants that promote plan health and participant retirement readiness. Our flexible data requirements make it easy for our clients to share data with us, experience simplified year-end testing and provide innovative solutions to help drive employee action. This combination of data and technology also allows us to measure the true outcomes of our clients’ plans (employee replacement income in retirement) and help our clients and their advisors make key plan design decisions.

Our powerful technology provides the foundation that supports our local service teams and empowers them to provide our clients with high-touch, personalized service. MassMutual is committed to providing quality, highly personalized service and innovative, technology-rich solutions to our clients so their participants can retire on their own terms.

Business Metricswww.massmutual.com/retire/intermediaries


81

dc AUM:

Total: $118 Billion

retirement AUM:

Total: $133 Billion

Total AUM:

$613 Billion

dc Plans UM:

34,700


37,100

dc Participants UM:

2.5 million


2.8 million


Target date: RetireSmaRT Target date Series (In Retire-ment, 2010, 2015, 2020, 2025, 2030, 2035, 2040, 2045, 2050, 2055)

Target Risk: RetireSmaRT Target Risk Series (Conservative, moderate, moderate growth, growth)

Custom glide Path

service Model(s): (bundled/unbundled/both)

Both

distribution Model(s): (advisor/direct/both)

advisor, Consultant


• Start-Up ($0-$250,000)• Micro ($250,000-$1 million)• Emerging ($1-$5 million)• Small ($5-$15 million)• Mid ($15-$75 million)• Large ($75-$150 million)• Institutional (+$150 million)

Plan Type(s):

dC, dB, Non-Erisa, 457, Taft hartley, Non Qualified, IRa


3(16) yes- via mesirow financial



Key Contacts:Sales: 800.874.2502, option 4

NAPAPARTNERCORNER


Firm Profile

Known for its tagline, “The Right Way to Invest,” OppenheimerFunds is one of the largest and most respected investment management companies. As of June 30, 2014, OppenheimerFunds, including sub-sidiaries, managed more than $249 billion in assets, including mutual funds having approximately 13 mil-lion shareholder accounts, including sub-accounts.

OppenheimerFunds’ Retirement Consultants work with you to embrace the many changes and trends in today’s DC plan environment. Our technical expertise and practical retirement experience, coupled with OppenheimerFunds’ five decades of investment excellence as a renowned investment manager, allow us to offer ideas beneficial to your practice. This includes new ways of thinking about plan design, and ideas about niche products and asset classes not often seen in the DC marketplace.

Through the lens of a unique perspective shaped by our expertise in both plan design and investment strategies, we help financial advisors develop tactics to seize opportunities in this market. Our goal is to work with you as a consultative partner on the many facets of your retirement business.

Shares of Oppenheimer funds are not deposits or obligations of any bank, are not guaranteed by any bank, are not insured by the FDIC or any other agency and involve investment risks, including the possible loss of the principal amount invested.

Before investing in any of the Oppenheimer funds, investors should carefully consider a fund's invest-ment objectives, risks, charges and expenses. Fund prospectuses and summary prospectuses contain this and other information about the funds, and may be obtained by asking your financial advisor, visiting oppenheimerfunds.com, or calling 1.800.525.7048. Read prospectuses and summary prospectuses care-fully before investing.

Oppenheimer funds are distributed by OppenheimerFundsDis-tributor, Inc. 225 Liberty Street, New York, NY, 10281.

© 2014 OppenheimerFunds Distributor, Inc. All rights reserved.

RPL0000.216 August, 2014

Business Metricswww.oppenheimerfunds.com

Advisor support:

External senior retirement consultants: 12

Internal regional retirement consultants: 6

Total retirement AUM:

$104 billion*

dcIo AUM:

$35 billion*

Total ofI AUM:

$249 billion*

Top five ofI dcIo funds:

oppenheimer developing markets fund

oppenheimer International growth fund

oppenheimer global fund

oppenheimer International Bond fund

oppenheimer main Street mid-Cap fund

*As of 6/30/2014

Key Contacts:National Retirement Sales director – West: Clint modler, 303.378.4644

National Retirement Sales director – East: Paul Temple, 212.323.5119



Business Metricswww.thornburg.com


dC: 5

Retail: 14

dc AUM:

Total: $9.4 Billion

New 2012: $3.7 Billion

Total AUM:

$93.9 Billion

Investments:

mutual funds

group annuity

Collective Trusts

Smas


active

fixed Income:

yes

Bonds

yes


International value: $8.5 Billion assets2012 flow: $3,013 Billion

International growth: $72.4 million assets 2012 flow: $48.9 million

value: $142 million assets2012 flow: $85.5 million

limited Term Income: $87 million assets 2012 flow: $49.4 million

Core growth: $171 million assets2012 flow: $49.6 million

Key Contacts:Sales: Rocco diBruno, managing director, Thornburg Retirement group, [email protected] office 877.215.1330 ext. 7150 Cell 609.405.4810

Service: Julie geraci, Retirement Plan manager, [email protected], 505.467.7214

Firm Profile Thornburg Investment Management was founded in 1982 and is headquartered in Santa Fe, New Mexico. Thornburg manages fixed income funds, equity funds, and separate accounts for high net worth and institutional investors. Assets under management are approximately $74 billion. We focus on preserving and increasing the real wealth of shareholders after ac-counting for inflation, taxes, and investment expenses.

History of StewardshipThroughout Thornburg Investment

Management’s 30-year history, our focus on investors has been the cornerstone of our investment management business. Instead of directing attention towards marketing and gathering assets under management, our efforts have been focused on two things – generating strong investment returns and servicing our clients. We believe that if you do those things well, the rest will take care of itself. This commitment to investors has enabled Thornburg to earn an enviable reputation for strong historical performance and responsible stewardship.

Retirement GroupThe Thornburg retirement group provides a

series of share classes specifically designed for the retirement plan market; our mutual funds are available as an investment option on many leading open-architecture and bundled-service 401(k) platforms. Thornburg’s team of retirement plan professionals is dedicated to helping sponsors follow judicious decision-making processes based on industry best practices. Via educational seminars, books, and investment tools, Thornburg strives to be a leader in providing the resources for plan sponsors to identify and fulfill their fiduciary responsibilities.

Thornburg Equity FundsThornburg’s equity management approach

is bottom-up, focused on the fundamentals, and comprehensive. Each Thornburg equity portfolio is focused on a limited number of securities, so that a single holding can have a positive impact on performance. The management teams search for firms they believe will have a promising future, and seek to buy shares of those companies at a discount to their true, intrinsic values.

Thornburg Value FundShare Classes: R3 (TVRFX), R4 (TVIRX), and R5

(TVRRX)

Thornburg International Value FundShare Classes: R3 (TGVRX), R4 (THVRX), R5

(TIVRX), and R6 (TGIRX)

Thornburg Core Growth FundShare Classes: R3 (THCRX), R4 (TCGRX), and

R5 (THGRX)

Thornburg Investment Income Builder FundShare Classes: R3 (TIBRX), R4 (TIBGX), and R5

(TIBMX)

Thornburg Global Opportunities FundShare Classes: R3 (THORX), R4 (THOVX), and

R5 (THOFXx)

Thornburg International Growth FundShare Classes: R3 (TIGVX), R4 (TINVX), R5

(TINFX), and R6 (THGIX)

Thornburg Developing World FundShare Class: R5 (THDRX), and R6 (TDWRX)

Thornburg Bond FundsSince the launch of our first fund nearly 29

years ago, Thornburg has applied a disciplined, bottom-up, credit-research-focused strategy to fixed-income management. We view ourselves as organic in our approach, avoiding leverage or complex strategies which could backfire in periods of market uncertainty.

Thornburg Limited Term U.S. Government FundShareClass:R3(LTURX),andR5(LTGRX)

Thornburg Limited Term Income FundShare Class: R3 (THIRX), and R5 (THRRX)

Thornburg Strategic Income FundShare Class: R3 (TSIRX), and R5 (TSRRX)

Vision, Mission & Values

Vision StatementOur vision is to be a trusted partner for our

clients and a respected leader in global asset management.

Mission StatementOur mission is to add value with active portfolio

management to help our clients reach their long-term financial goals. We achieve this through our investment strategies, adhering to our values and investment principles, and offering employees a challenging and rewarding place to build a career.

Thornburg Values• We do the right thing.

We act with integrity and put our clients first.• We think for the long term.

We engage in thoughtful decision making and believe that investment excellence should drive our decisions.

• We work together to achieve common goals. We show respect and humility towards each other and our clients. We believe in creating a supportive work environment that fosters teamwork, collegiality, and effective communication.

• We strive for excellence. We make the extra effort, practice continuous improvement, and stay flexible to adapt to changing circumstances.

• We are committed to employees.

We foster an environment that provides flexibility and opportunity for growth, while also requiring accountability.

• We are independent. We will remain a privately owned, independent firm to ensure that we act in the best interest of our clients and employees.

• We are community minded. We support philanthropic giving and encourage employee volunteerism.

NAPAPARTNERCORNER


Firm ProfileTransamerica Retirement Solutions is a leading provid-er of customized retirement plan solutions for small to large organizations.

Transamerica partners with financial advisors, third party administrators and consultants to cover the entire spectrum of defined benefit and defined contri-bution plans, including 401(k) and 403(b) (Traditional and Roth); 457; profit sharing; money purchase; cash balance; Taft-Hartley; multiple employer plans; nonqualified deferred compensation; and rollover and Roth IRA.

Transamerica helps more than 3 million retirement plan participants save and invest wisely to secure their retirement dreams.

Our ServicesWe partner closely with our clients and their advisors or consultants to tailor our services to meet their specific needs, including:•Plan-levelrecordkeepingandadministrative services•Participantcommunicationsandeducationservices — with a clear focus on retirement readiness and improving outcomes•Fiduciaryriskmitigationservices•Openinvestmentarchitecture•Complianceguidanceandregulatorysupport

Our MissionAt Transamerica Retirement Solutions, we help people save and invest wisely to secure their retirement dreams.

Our BeliefsWe believe in an exclusive focus on retirement. We fo-cus all of our resources, expertise, energies and atten-tion exclusively on retirement plans and participants. We make it easier for organizations to extend valuable benefit programs to their employees by streamlining administrative responsibilities and easing fiduciary obligations; and we make it more appealing for em-ployees to take full advantage of all their program has to offer by simplifying the message. We collaborate with financial advisors and consultants to customize our retirement plan solutions to best meet the needs of their sponsors’ participants.

We believe in our people. We have created a dynam-ic workplace that rewards people who demonstrate initiative. Our workforce is diverse and we encourage a free-flowing exchange of ideas. Our people are adaptable, flexible and open-minded in their interac-tions with one another and with our clients and their advisors or consultants. We provide a supportive work environment that allows us to focus on performing our

jobs to the very best of our ability. What’s more, we werenamedonPension&Investments’annuallistof “Best Places to Work in Money Management” for the second consecutive year, placing second among organizations with over 1,000 employees.

We believe in retirement readiness — we believe that everyone should have access to a secure retire-ment. It’s been said that one of the absolute hallmarks of a civilized society is the ability of a citizen, after decades of work, to retire with financial dignity. We’re fully dedicated to improving and promoting retirement readiness throughout our country.

Our LocationsTransamerica Retirement Solutions serves national and regional clients through an integrated network of offices. Localized sales and client service are managed throughout our regional offices all across the country.

Our Parent CompanyTheTransamericaCorporationisaUnitedStatessub-sidiary of Aegon N.V., a diversified global financial ser-vices firm headquartered in The Hague, The Nether-lands. The Transamerica group of companies operates the Aegon N.V. investment and pension businesses in theUnitedStates.

For more information about Transamerica Retirement Solutions Corporation, please visit trsretire.com

Business Metricswww.trsretire.com

dc AUM:


retirement AUM:


Total AUM:

$102.9 Billion

dc Plans UM:

20,345


21,257

dc Participants UM:

2.4 million


3 million +


Tdf: outside

TdRisk: outside

Custom glide Path


Both


advisor


• Micro (<$1 million)• Small ($1-$10 million)• Mid ($10-$100 million)• Large ($100-$250 million)• Mega (+$250 million)

Plan Type(s):

dC, dB, Non-ERISa 403(b), 457, Taft hartley, Non Qualified, IRa


3(21)

3(38)

Key Contacts:Sales: 888.401.5826



Business Metricswww.adp.com/401k


7

dc AUM:


retirement AUM:

$49.9 Billion

Total AUM:

$49.9 Billion

dc Plans UM:

40,559


$49.9 Billion

dc Participants UM:

1,461,000


1,461,000


Tdf: outside

TdRisk: outside – 43 unique Td Risk series


Bundled


Both


micro (<$1 million)



Plan Type(s):

dC

Non-Erisa 403(b)

457

Taft hartley

Non Qualified

IRa: SImPlE IRa


3(21) — Through mesirow financial

ADP

Key Contacts:Sales: adP Sales Support desk at 877-218-0415 Service: adP Client Service at 800-929-2170

Business Metrics

AllianceBernstein

Key Contacts:Sales/Service: 800-243-6812

www.alliancebernstein.com


dC: 5

Retail: 50

dc AUM:

Total: $5.1 Billion

Total AUM:

$451 Billion

Investments:

mutual funds

Collective Trusts

Smas


Tdf: Through

Target Risk


Both

Bonds:


Retirement Strategies: $1.1 Billion

discovery value: $939 million

high Income: $639 million global Bond: $536 million

discovery growth: $316 million

Business Metrics

www.abgnational.com


105

Total AUM:

$56 Billion


16,000


1.1 million


Tdf: Proprietary/outside

Target Risk

Custom glide Path

service Models (Bundled/unbundled/both):

Both

distribution Models (advisor/direct/both):

Both


micro (<$1 million)



large ($100-$250 million)

Plan Type(s):

dC

dB

Non-ERISa 403(b)

457

Taft hartley

Non-qualified

IRa

fiduciary services offered

3(21)

3(38)

3(16)

Alliance Benefit Group, LLC (RK)

Key Contacts:don mackanos, 904-610-4058, [email protected] Sales: [email protected]

NAPAPARTNERCORNER


Business Metrics

American Funds (Record Keeper)

Key Contacts:Sales: Brendan mahoney, Retirement Sales managerService: Chris guarino, Retirement Plan Services operating director, 1.800.421.9900

www.americanfunds.com


dC: 22

Retail: 74

dc AUM:


retirement AUM:

$379.5 Billion

Total AUM:

$1,109.9 Billion

dc Plans UM:

36,051


36,051

dc Participants UM:

900,000


900,000


Tdf Proprietary/outside: yes, proprietary — american funds Target Retirement Series

TdRisk Proprietary/outside: yes, proprietary — american funds Portfolio Series

service Model(s):


distribution Model(s):

advisor


micro (<$1 million)


mid ($10-$100 million): dCIo only

large ($100-$250 million): dCIo only

mega (+$250 million): dCIo only

Plan Type(s):

dC

dB: dCIo only

Non-ERISa 403(b)

457: dCIo only

Taft hartley: dCIo only

Non Qualified: dCIo only

IRa


3(21)

3(38)

Business Metricswww.americanfunds.com


dC: 22

Retail: 74

dc AUM:


New: $47.8 Billion


$242 Billion

Total AUM:

$1,019.9 Billion

Investments:

mutual fund

group annuity

Collective Trusts

Smas


Tdf (To/Through/Both): Through

Target Risk: yes

Passive/Active/Both

active


Stable value

money market

fixed Income:

yes

Bonds:

yes

Top 5 funds by dc Assets(with asset total & last year new flow)

The growth fund of america: $122.1 Billion, $11.7 Billion

fundamental Investors: $58.2 Billion, $5.3 Billion

EuroPacific growth fund: $108.6 Billion, $18.9 Billion

New Perspective fund: $47.6 Billion, $3.6 Billion

american Balanced fund: $61.7 Billion, $7.3 Billion

American Funds (DCIO)

Key Contacts:Sales: Brendan mahoney, Retirement Sales managerService: Chris guarino, Retirement Plan Services operating director, 1.800.421.9900

Business Metrics

Allianz Investors

Key Contacts:Sales/Service: glenn dial, managing director, head of uS Retirement distribution, [email protected], 212.739.4275kilie donahue, vice President, manager, Internal Retirement Consulting Team, [email protected], 212.739.4278

www.allianzinvestors.com


dC: 5

Retail: 21

dc AUM:


New funds: $2.8 Billion


$12.7 Billion

Total AUM:

$43.8 Billion

Investments:

mutual fund

group annuity

Collective Trusts

Smas



Target Risk

managed accounts


active


money market

fixed Income

yes: Part of a Portfolio

Bonds

yes

Top 5 funds by dc Assets : (with asset total & last year new flow)

allianzgI Small-Cap value: $983 million, $2.3 Billion aum

allianzgI Retirement funds: $115 million, $200 million aum

allianzgI dividend value: $678 million, $2.6 Billion aum

RCm Technology: $75 million, $100 million aum

NfJ International value : $463 million, $1.0 Billion aum



Business Metrics

www.aspireonline.com


5

dc AUM:

Total: $7,675.1 m

retirement AUM:

$342 m

Total AUM:

$8,016.6 m

dc Plans UM:

6,748


34

dc Participants UM:

158,510


4,209

service Models (bundled/unbundled/both)

Both

distribution Models (advisor/direct/both)

Both


micro (<$1 million)



Plan Type(s):

dC

dB

Non-ERISa 403(b)

457

IRa


None

Aspire Financial Services (RK)

Key Contacts:Sales: Pete kirtland 813-517-0561, [email protected] luckinbill 919-279-0514, [email protected] Service: mark agustin 813-517-0582, [email protected]

Business Metrics

www.blackrock.com/dc


dC: 9

Retail: 148

dc AUM:

Total: $527 Billion*

Total AUM:

$4.4 Trillion*

Investments:

mutual funds

Collective Trusts

Smas


Tdf: To

Target Risk

managed accounts


money market

Top 5 dc funds

BlackRock lifePath Target date funds

BlackRock global allocation fund

BlackRock Basic value fund

BlackRock Equity dividend fund

BlackRock Strategic opportunities fund*Asof3/31/14

BlackRock (DCIO)

Key Contacts:Sales: dick darian, head of dC advisor-Sold distribution, 551-697-1165, [email protected]

Business Metrics

www.capinnovations.com


dC: 4

Retail: 10

dc AUM:

Total: $20 mm

New 2012: $20 mm

Investments:

mutual funds

group annuity

Smas

Top funds by dc Assets:

Capital Innovations global agribusiness, Timber and Infrastructure fund

vertical Capital Innovations mlP Energy fund

Capital Innovations (DCIO)

Key Contacts:Sales: michael underhill, 262-746-3102, [email protected] Service: Susan dambekaln, 262-746-3103, [email protected]

NAPAPARTNERCORNER


Business Metrics

www.dailyaccess.com


dC: 8

dc AUM:

Total: $8.5 Billion

retirement AUM:

$8.5 Billion

Total AUM:

$8.05 Billion

dc Plans UM:

1,595


1,595

dc Participants UM:

194,987


194,987


Tdf Proprietary — Custom InterServ model asset Portfoli-os/outside — 1325 Tdfs

TdRisk Custom InterServ model asset Portfolios/unable to determine if any of the 1325 Tdfs are Risk adjusted

Custom glide Path: yes — Custom InterServ model asset Portfolios/unable to determine if any of the 1325 Tdfs incorporate custom glide paths

service Model(s):

unbundled


advisor only

Primary Market)s) served:

micro (<$1 million): Exception


mid ($10 - $100 million)

large ($100 - $250 million)

Plan Type(s):

dC

dB

457

Taft hartley

Not Qualified


3(21): Through wholly-owned subsidiary, InterServ, llC

3(38): Through wholly-owned subsidiary, InterServ, llC

3(16): Not in-house; third party availability

DailyAccess Corp.

Key Contacts:Sales: [email protected]: [email protected]

Business Metrics

www.cohenandsteers.com


Retail: 10

Investments:

mutual funds

Collective Trusts

Smas

Cohen & Steers (DCIO)

Key Contacts:Sales and Service: matthew gannon, 212-478-4453

Business Metrics

www.federatedinvestors.com


dC: 6

Retail: 52

dc AUM:



Total AUM:

$375 Billion as of 3/31/13

Investments:

mutual fund

Collective Trusts

Smas

Passive/Active/Both

Both


Stable value

money market

fixed Income:

yes

Bonds:

yes


Total Return Bond fund: $3,762 dC assets, $7,524 Total assets

Institutional high yield fund: $1,045 dC assets, $2,090 Total assets

Strategic value fund: $3,379 dC assets, $6,758 Total assets

ultra-short Bond fund: $958 dC assets, $1,916 Total assets

kaufmann fund: $2,661 dC assets, $5,322 Total assets

Federated Investors, Inc.

Key Contacts:Sales: Bryan Burke, SvP, National Sales manager-Retirement/Insurance, 412.491.1066Service: Wally Jones, Platform Specialist, 412.720.8567Jason kessler, Platform Specialist, 724.720.8503



Business Metrics

www.fidelity.com, www.advisor.fidelity.com


38

retirement AUM:

Total: $1.2 Billion

dc Plans AUM:

22,660

dc Partcipants UM:

$16.3 million


$20.7 million


Tdf Proprietary/outside: fidelity freedom funds and several outside fund families

TdRisk Proprietary/outside: fidelity asset manager funds and several outside fund families

Custom glide Path

service Model(s):

Bundled


advisor & direct


micro (<$1 million): Exception




Plan Type(s):

dC

dB

457

Taft hartley

Non Qualified

Fidelity Investments (RK)

Key Contacts:Sales: 800.684.5254, option 1Service: 866.444.4015

Business Metrics

401k.guardianlife.com


21

dc AUM:

$2,764,000,000

retirement solutions:

$2,764,000,000

Total AUM:

$2,764,000,000

dc Plans UM

2,560

retirement Plans UM

2,560

dc Participants UM

65,402

retirement Participants UM

65,402


Tdfs: from T. Rowe Price, american Century and vanguard

Custom glide Path: managed account Services with custom glide paths through Stadion management, llC

service Model(s) (bundled/unbundled/both):

Both

distribution Model(s) (advisor/direct/both):

advisors


micro (<$1 million)


Plan Type(s):

dC

dB

Taft hartley


3(21)

3(38)

Guardian Retirement (RK)

Key Contacts:Sales: 866-390-7268

Business Metrics

www.gSamfunds.com


dC: 6

Retail: 70+

dc Assets Under supervision:

$66,335 m*

Total Assets Under supervision:

$935,271.6 m*

Investments:

mutual funds

Collective Trusts

Smas


Balanced funds


Both

capital Preservation funds

Stable value

money market


goldman Sachs mid Cap value fund, $6,804.2 million

goldman Sachs Small Cap value fund, $4,167.0 million

goldman Sachs growth opportunities fund, $2,620.5 million

goldman Sachs large Cap value fund, $646.8 million

goldman Sachs financial Square money market fund, $587.9 million

*Asof3/31/14

Goldman Sachs Asset Management (DCIO)

Key Contacts:Sales: david a. Solomon, (212)-902-2409, [email protected]

NAPAPARTNERCORNER


Business Metricswww.jpmorgan.com/retirement


17

dc AUs:

$163 Billion

Retirement auS:

$165 Billion

dC Plans um:

919 plans

Retirement Plans um:

1,025 plans

dC Participants um:

2.1 million

Retirement Participants um:

2.3 million


Tdf: JPmorgan SmartRetirement® funds and several outside fund families.

TdRisk: J.P. morgan asset management proprietary funds and several outside fund families.

Custom glide Path:

yes




advisor and direct





mega (+$250 million)

Plan Type(s):

dC

dB

Non-ERISa 403(b)

457

Taft hartley

Non Qualified


3(21)

JP Morgan Asset Management(RK)

Key Contacts:Sales: 800.988.9084Service: 800.345.2345

Business Metrics

www.jpmorganfunds.com/retirement


dC: 9

Retail: 92

dc AUM:

$101.8 Billion

Total AUM:

$1.5 Trillion

Investments:

mutual funds

Collective Trusts

Smas


Tdf

Target Risk

managed accounts

Passive/Active/Both

active


Stable value

money market

fixed Income:

yes

Bonds:

yes


JPmorgan Smartretirement:$17.9 Billion$3.3 Billion

JPmorgan mid Cap value fund:$5.4 Billion$1.1 Billion

JPmorgan large Cap growth fund:$5.1 Billion$2.6 Billion

JPmorgan Core Bond fund:$1.9 Billion$429 million

JPmorgan uS Equity fund:$1.4 Billion$445 million

JP Morgan Asset Management (DCIO)

Key Contacts:Sales: mike miller, (727) 204-7825 [email protected]: Jason Colarossi, (212) 648-0060 [email protected]

Business Metrics

www.ingretirementplans.com


50

dc AUM:

$316 Billion

retirement AUM:

$316 Billion

Total AUM:

$461 Billion

dc Plans UM:

47,547

retirement Plans:

47,547

dc Participants UM

5.1 million

retirement Participants UM

5.1 million


Tdf Proprietary & outside

TdRisk Proprietary & outside


Bundled & unbundled


advisor


micro (<$1 million)





Plan Type(s):

dC

dB

Non-Erisa 403(b)

457


3(21)

3(28)

ING

Key Contacts:Sales: 1.866.481.3653, option 4Service: 1.866.481.3653, option 3



Business Metricswww.mfs.com


dC: 9

Retail: 84

dc AUM:



Total AUM:

$353.7 Billion as of 6.30.13

Investments:

mutual fund

group annuity

Collective Trusts

Smas


Tdf (To/Through/Both): To

Target Risk

Passive/Active/Both

active

fixed Income

yes

Bonds:

yes


mfS value fund $7.9 Billion, $6.5 Billion

mfS International value fund $1.5 Billion, $1.1 Billion

mfS Research International fund $1.7 Billion, $1.6 Billion

mfS growth fund $1.5 Billion, $1.2 Billion

massachusetts Investors growth Stock fd $1.6 Billion, $1.3 Billion

MFS

Key Contacts:Ryan mullen, Senior managing director, National Sales, 617.954.6914mike Schwanekamp, managing director, 513.604.6421

Business Metricswww. milliman.com

dc AUM:

$27 Billion

retirement AUM:

$71 Billion

Total AUM:

$161 Billion

dc Plans UM

831

retirement Plans UM

1,059

dc Participants UM

647,804


1,876,614

Asset Allocation funds

Tdf: outside

Td Risk: Proprietary

Custom glide Path


Both

distribution Model(s) (advisor/direct/both)

Both

Primary Market(s) served





Plan Type(s)

dC

dB

Non-ERISa 403(b)

457

Taft hartley

Non-qualified


3(21)

3(38)

Milliman (RK)

Key Contacts:Sales: gerald Erickson, 952-820-2401, [email protected]: laura van domelen, 303-672-9050, [email protected]

Business Metrics

July Business Services (RK)

Key Contacts:Sales: Blake Willis, 254-296-4015 Ext 105, [email protected] Service: michelle leCates, 254-296-4015 Ext 188, [email protected]

www.julyservices.com


9

dc AUM:

$2.5 Billion

retirement AUM:

$2.5 Billion

Total AUM:

$2.5 Billion

dc Plans UM:

2,600-plus


2,800-plus

dc Participants UM:

88,000-plus


92,000-plus


Tdf: outside — open investment architecture

Td Risk: outside — open investment architecture

Custom glide Path: open investment architecture


Both

distribution Model(s) (advisor/direct/both):

advisor


micro (<$1 million)



Plan Type(s):

dC

dB

Non-ERISa 403(b)

457

Non-qualified


3(21) via strategic partnerships



NAPAPARTNERCORNER


www.nuveen.com/Retirement/Retirementofferings/overview.aspx

Number of External Wholesalers

dC: 3

Retail: 50

dc AUM:

$11 Billion

Total AUM:

$225 Billion

Investments:

mutual funds

Collective Trusts

Smas

fixed Income Bonds

Target Risk

managed accounts


Both


Nuveen Real Estate Securities

Nuveen Equity Index

Nuveen Small Cap Index

Nuveen mid Cap Index

Nuveen Small Cap Select

Business Metrics

Nuveen (DCIO)

Key Contacts:Sales: Brian Brummell, 949-440-4815, [email protected] Redden, 937-643-3005, [email protected] Smith, 312-917-7991, [email protected] king, 312-917-9798, [email protected]

National accounts: Chris fitzgerald, 312-917-7768, [email protected] folwell, 508-660-1605, [email protected] Smith, 312-917-6904, [email protected]

Business Metricswww.oneamerica.com


32

dc AUM:


retirement AUM:

$23.1 Billion

Total AUM:

$23 Billion

dc Plans UM:

9,700


10,000

dc Participants UM:

514,000


620,000


Tdf Proprietary/outside: outside (alliance Bernstein, allianz global, american Century, fidelity, Russell, T.Rowe Price, and Wilmington Trust)

TdRisk Proprietary/outside: outside (american Century, dfa, manning & Napier, Russell)

Custom glide Path: custom models and glide paths are financial advisor driven

service Model(s):


distribution Model(s): advisor/direct/both):

advisor


micro (<$1 million)



large ($100-$250 million): limited

mega (+$250 million): limited

Plan Type(s):

dC

dB

Non-Erisa 403(b)

457

Taft hartley

Non Qualified

IRa


3(21)

3(38)

OneAmerica

Key Contacts:Sales: National Sales desk: 1.866.313.7355Service: National Sales desk: 1.866.313.7355

Business Metricswww.nationwidefinancial.com

Number of External Wholesalers

43

dc AUM:

$93,282,000,000

retirement AUM:

$93,359,000,000

dc Plans UM

39,498

retirement Plans UM

39,589

dc Participants UM

2,189,157


2,189,262


Tdf: Proprietary and outside from multiple fund families, e.g., vanguard, american funds, T. Rowe Price

Td Risk: Proprietary and outside from multiple fund fami-lies, e.g., vanguard, american funds, T. Rowe Price

Custom glide Path


Both

distribution Model(s) (advisor/direct/both)

advisor


micro (<$1 million)





Plan Type(s)

dC

Non-ERISa 403(b)

457

Non-qualified

IRa


3(21) — outsourced



Nationwide Financial (RK)

Key Contacts:Sales and Service: National Sales desk, 1-800-626-3112



Business Metrics

www.Putnam.com/dCIo


dC: 13

Retail: 50+

dc AUM:

Total: $14 Billion


$17.1 Billion

Total AUM:

$140 Billion

Investments:

mutual funds

Collective Trusts

Smas


Tdf (To/Through/Both): To (Retirementadvantage and Retirement Ready)

Target Risk: Putnam dynamic asset allocation Portfolios

managed accounts : full-service plans only

Passive/Active/Both

active


Stable value

money market


Putnam Equity Income –$4.7 Billion

dynamic asset allocation Portfolios –$3.7 Billion

Putnam Income fund – $1.2 Billion

Putnam International Equity – $1 Billion

Putnam Retirement advantage (CIT)- $610 million

Putnam (DCIO)

Key Contacts:Sales: Putnam Retirement Sales, 1.800.719.9914Service: dCIo operations, 1.800.648.7410

Business Metricswww.oppenheimerfunds.com


dC: 12

Retail: 89

dc AUM:



Non-retirement AUM:

$50.5 Billion

Total AUM:

$215.3 Billion

Investments:

mutual fund

Collective Trusts

Smas


Target Risk


active


money market

fixed Income:

yes

Bonds:

yes


developing markets fund:$9.4 Billion, $3.2 Billion

International Bond fund: $2.0 Billion, $508.6 million

global fund: $4.5 Billion, $774.8m

main Street: $1.3 Billion, $274.1 million

International growth fund: $2.9 Billion, $915.8 million

OppenheimerFunds

Key Contacts:Sales: James howard, 212.323.5016 [email protected]

Business Metricswww.principal.com


98

dc AUM:

$143.3 Billion

retirement AUM:

$174.3 Billion

Total AUM:

$483.2 Billion

dc Plans UM:

33,315


40,658

dc Participants UM:

3.7 million


4.3 million


Tdf: Principal lifeTime Portfolios, Principal TrustSm Target date funds; a variety of outside options are also available

Td Risk: Principal Strategic asset management (Sam) Portfolios; a variety of outside options are also available

service Models (bundled/unbundled/both)

Both

distribution Models (advisor/direct/both)

advisor


micro (<$1 million)





Plan Type(s)

dC

dB

Non-ERISa 403(b)

457

Taft hartley

Non-qualified

IRa


3(21)

3(38)

Principal Financial Group (RK)

Key Contacts:Sales: doug grove 630-705-0665Service: Tim minard 515-247-6204


Business Metricswww.ridgeworth.com, www.planadvisortools.com


dC: 6

Retail: 9

dc AUM:

Total: $2.6 Billion



$2.6 Billion

Total AUM:

$48.1 Billion

Investments:

mutual fund

Collective Trusts

Smas


Target Risk

Passive/Active/Both

active

fixed Income funds Available

yes

Bonds

yes


mid-Cap value: $655 million aum, $221 million 2012

Total Return Bond: $152 million aum, $68 million 2012

large Cap value: $504 million aum, $169 million 2012

moderate allocation: $149 million aum, $38 million 2012

Small Cap value: $294 million aum, $98 million 2012

RidgeWorth Investments

Key Contacts:Sales: Brandon Shea, dCIo National Sales manager 615.364.1603, [email protected]: James kish, Internal desk manager for the Retirement & Investment Specialists 404.845.7625, [email protected]

Business Metrics

www.troweprice.com/fi


dCIo: 9

dcIo AUM:


Total firm AUM:

$614 Billion

Investments:

mutual funds

Collective Trusts

Smas


Tdf: “Through” glide path: 1) Retirement funds 2) Target Retirement funds

Target Risk: Personal Strategy funds

Passive/Active/Both

active


Stable value

money market

fixed Income:

fixed Income mutual funds


T. Rowe Price Retirement funds

T. Rowe Price growth Stock fund

T. Rowe Price Equity Income fund

T. Rowe Price mid-Cap growth fund

T. Rowe Price Blue Chip growth fund

T. Rowe Price

Key Contacts:Sales: mark Cover, director, distribution Services 410.345.4956 800.371.4613 [email protected]

Business Metricswww.Putnam.com/advisor/full-service-401k/


9


Tdf: open architecture platform Putnam Retirementadvantage and RetirementReady series

TdRisk: open architecture platform Putnam dynamic asset allocation funds

Custom glide Path:

Putnam model portfolios


Bundled; can also support unbundled with TPa


advisor/Consultant






Plan Type(s):

dC

Non-ERISa 403(b)

Non Qualified

IRa


3(21)

3(38)

Putnam (Record Keeper)

Key Contacts:Sales: 800.719.9914Service: 888.411.4015

NAPA Net – The Magazine is one bene�t of being a NAPA member… here are some others.

Whether you join as an individual member or through a NAPA Firm Partner (like your broker dealer or company), NAPA helps you manage your practice, grow your AUM and identify business opportunities and vital plan management services.

If you’re not already a member, what are you waiting for?Contact: Lisa Allen at 703-516-9300 x127 · [email protected]

Practice Management

and Networking

• NAPA – 7,000+ members and 100+ Firm Partners

• NAPA 401(k) SUMMIT • NAPA DC Fly-In Forum• Committee Leadership

Business Intelligence

• NAPA Net Daily • NAPA Net Online Portal• NAPA Net–The Magazine • NAPA quarterly webcasts

Advocacy

Your Voice on Capitol Hill and in the DOL, Treasury and IRS

NAPAnetthe magazine

THE OFFICIAL MAGAZINE OF THENATIONAL ASSOCIATION OF PLAN ADVISORS

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DC POWER HITTERSFALL 2013 // NAPANET.ORG

NAPA’S 2015 Industry Lists

A plan advisor usually decides to work with a provider — especially a DCIO — based primarily on the quality of their local wholesaler.

So in 2014 we set out to identify what separates the truly elite DC wholesalers — and then backed it up with the first-ever list of the top DC wholesalers. In 2015, we’ll do it all over again — in fact, we’ve already begun the nominating/voting/selection process.

For information on how to participate in that process, go to NAPA Net (www.napa-net.org). Click on the “Industry Intel” tab in the nav bar, then on the entry for “Top DC Wholesalers.”

The 2015 list — a.k.a. “Wingmen” — will be published in our Spring issue. Look for more information about the nominating and selection process on NAPA Net and in the NAPA Net Daily. And for providers that would like to congratulate their Wingmen who make the list via an ad in the Spring issue, please email Erik Vander Kolk at [email protected].

Where is the next generation of plan advisors coming from?

To answer that question, NAPA set out to find the top young advisors — the profession’s “Young Guns.” The result of that effort was our list of the “Top Plan Advisors Under 40,” published in our Summer 2014 issue.

The selection process is based on a combination of voting by NAPA members and profiles of the advisors’ business. For information on how to participate in that process, go to NAPA Net (www.napa-net.org). Click on the “Industry Intel” tab in the nav bar, then on the entry for “Top 50 Plan Advisors Under 40.”

Our 2015 list — a.k.a. “Young Guns” — will be published in the Summer issue. Look for more information about the nominating and selection process on NAPA Net and in the NAPA Net Daily starting in February, and via individual outreach efforts to NAPA Firm Partners. And for firms that would like to congratulate their Young Guns who make the list via an ad in the Summer issue, please contact Erik Vander Kolk at [email protected].


i n s i d e T h e s T e w a r d s h i p m O v e m e n T

sk any CEO whether they would prefer to be regarded by their employees as a good leader or a good fiduciary. I believe you’ll find that nearly every CEO will say that they would prefer to be

regarded as a good leader.Now make a subtle change to the

question, and ask any plan sponsor whether they would prefer to be regarded by plan participants as a good leader or a good fiduciary.

Most plan sponsors will pause before responding because they have been con-ditioned to answer, “fiduciary.” However, upon reflection, most will likely respond that they would prefer to be regarded as a good leader. Plan sponsors “get” leadership; they struggle with fiduciary duty. They get the fact that as a good leader they will be acting in the best interests of participants.

Consider the following two definitions. Which conveys a higher sense of purpose?

A fiduciary is a person who has the le-gal responsibility to act in the best interests of others.

A leader is a person who has the ability to inspire and the capacity to serve, and is passionate and disciplined about protecting the long-term interests of others.

Clearly, the description of a leader conveys a higher sense of purpose.

Still not convinced leadership trumps fi-duciary? Consider the following six words:

Character, Competence, Courage — Purpose, Passion, Process

These are the words we use to define the attributes of a leader. Which of them is subject to interpretation or oversight by regulators? None; nor do any of them have

popular toward the end of the First Wave. It also was the time when personal

computers made it possible for retirement advisors to access software and databases that once required a mainframe computer to run.

The Second Wave: StewardshipThe Second Wave seemed to form

around 1999 and crested about one or two years ago. We can label this period as the time of “Stewardship” since the focus was on best practices associated with a prudent process and the technology to support the process. The fiduciary movement certainly continued to dominate this period, but not all elite retirement advisors wanted to, or were able to, serve in a fiduciary capacity. The Second Wave began to flatten out about 18 months ago when it became evident that regulators were not able to pass new fiduciary legislation.

The Third Wave: LeadershipThat brings us to the Third Wave. I

think we’ve entered the period of time that is best described as “Leadership.” It’s clear that “fiduciary” has run its course with elite advisors as a way of defining a professional standard of care. Yes, we may still get addi-tional fiduciary requirements from the SEC and DOL, but they will likely be de minimis disclosure standards as opposed to defining any meaningful professional standard. And, in the off chance that a “uniform fiduciary standard” is promulgated by the SEC, it will likely have the effect of eliminating “fidu-ciary” as a point of differentiation. Further-more, the public continues to demonstrate an indifference to the fiduciary standard.

legal implications. All six words are busi-ness-neutral, and are applicable to brokers and advisors alike.

The point: Fiduciary is old school — leadership is the new.

Wave ActionIt seems that elite retirement advisors

redefine their point of differentiation about every 15 years. The trends come in waves, and we may be witnessing the formation of the Third Wave — the Leadership Wave.

The First Wave: Governance

I would peg the beginning of the First Wave as the period from 1985 to 1999. We could label this time as the period of “Gov-ernance” since the focus was on prudent decisionmaking. During this 15-year period, elite retirement advisors evolved from selling product to providing plan sponsors a process.

“Fiduciary” emerged as the hot topic: Who was a fiduciary, and what was their role and responsibilities? At least once a week I would end up in a heated discussion with an ERISA attorney who would argue that there was no requirement or need for their clients to prepare an IPS; that an IPS would only expose their clients to more liability, not less. Few professionals were comfortable using the term fiduciary, and even the largest institutional investment consultants would not acknowledge fiducia-ry status in writing.

The First Wave also was marked by the transition from being compensated by com-missions and soft dollars to being paid a percentage of assets under management or a project-based fee. Revenue sharing became

The Third Wave:Leadership is the New FiduciaryMany 401(k) plans are not using the science behind behavioral finance to create the best possible outcomes for plan participants.

By doNALd B. TroNe

A


Survey after survey demonstrates that what the public really cares about is trust and whether their advisor is inspiring and engag-ing — that their advisor is a leader.

For example, a lot of attention is being paid to marketing the differences between a 3(38) and 3(21) advisor. Most explanations are filled with legal and technical jargon. Do you know what the real difference is between 3(38) and 3(21)? Seventeen. (That was meant to be a joke!) To the plan sponsor, the differ-ences are not significant. Two hours after you provide an explanation, most plan sponsors will have forgotten what you said and what they agreed to do.

If you want to get to the heart of the matter, ask this question of the plan sponsor: Who’s going to lead? That takes us back to the premise the plan sponsors “get” leader-ship; they want to be viewed as leaders. And as good leaders, they also know when to delegate. That’s the real difference between 3(38) and 3(21): Is the plan sponsor willing to delegate its leadership role to the advisor?

ConclusionLike any movement, you build upon

what worked previously. Elite advisors must still be able to demonstrate good governance — the details of their procedural prudence. They must still be able to demonstrate that their process reflects industry best practices and is supported by appropriate technolo-gy — that they are good stewards. However, now elite advisors also need to show how their governance and stewardship is integrat-ed with leadership.

Plan sponsors get “leadership,” they don’t get “fiduciary.” We have to move away from the cold technical and legal jargon associated with a fiduciary standard, and begin to communicate with plan sponsors in a language they understand. The Leadership Movement has begun. Time to catch the wave! N

» donald B. Trone, gfs®, is the founder and ceo of 3ethos. don and Mary Lou Wattman are the coauthors of the new book, LeaderMetrics®: What Key Decision-makers Need to Know When Serving in a Critical Lead-ership Role. don was the principal founder of fi360, the AIf/AIfA designations and the foundation for fiduciary studies, and was the first person to direct the Institute for Leadership at the U.s. coast guard Academy.

The Waves of Differentiation

FIRST WAVE: GOVERNANCE / 1985-1999

SECOND WAVE: STEWARDSHIP/ 1999-2013

THIRD WAVE: LEADERSHIP / 2013-PRESENT

There is movement from product sales to a defined prudent process. Point of differentiation: The retirement advisor is a great decision-maker.

There is movement to broaden and deepen key relationships, and to the building of trust and loyalty. Point of differentiation: The retirement advisor is a great leader.

There is movement to adopt best practices and technology which support a prudent process. Point of differentiation: The retirement advisor is a great steward.


Sea Change in the DC Advisor Market

i n s i d e T h e m a r k e T p l a c e

million), there will be whales if you look for them.

So what does it mean? Wealth manage-ment advisors without a DC strategy risk losing those clients to the advisor manag-ing their DC plan. DC advisors without a wealth management strategy, or even plans to move towards a “Four Corners” practice including health care and P&C, are missing an incredible opportunity.

Industry visionary Bill Chetney is tak-ing a slightly different tack — he’s team-ing up DC-focused advisors with Conor Delaney and Courtnie Nein of Goodlife Advisors, who have created a network of 30 advisors within LPL using their own RIA. That group “sherpas” employee-based advi-sors through the wilds of independence by doing everything for them, including renting an office and converting clients. Goodlife will team their network, projected to grow to 200 advisors in two years, with GRP DC focused advisors to provide complete partic-ipant advice and education.

So while some pundits complain that there’s no new generation of plan advisors, or that fees are compressing and the gov-ernment is making it harder to do business, there’s a buzz saw of young advisors watch-ing, listening and learning who have made retirement, not wealth management, the go-to strategy to build their practices. And the 250,000+ blind squirrels of today are the core advisors of tomorrow. N

» fred Barstein is the founder of The retirement Advisor University (TrAU). he was the driving force behind the launch of the NAPA Net web portal in 2012 and NAPA Net the Magazine in 2013, serving as their first editor in chief.

advisory practices since the Great Recession has been both stunning and stealthy.

We last reported that half of all 300,000+ active financial advisors had at least one DC plan under management with 5,000 (or less than 2%) with 10 plans and $30 million. New research expected from the Wagner Institute is showing that a whopping 90% of all advisors have a DC plan and that 25,000, or almost 10%, have at least $25 million. What happened and what does it mean?

If you go to the industry conferences or read the popular lists of top DC advisors, you might actually believe the bleeding deacons that there are not enough young advisors to serve the market. Except that they are dead wrong. The new generation of advisors making up most of the “core” plan advisors has been quietly working away, building up DC and wealth management practices — too busy to travel the industry circuit or care about industry lists. Witness two under-40 advisors I met at a recent LPL conference whom I had never heard of. Each has gathered 60+ DC plans in the past five years.

One of them is Mike Cavanaugh, an advisor in Chicago. Cavanaugh won $300 million in two years, but he could walk through CFDD unnoticed. He had been mainly a wealth management advisor. He said it used to take him 18 months to develop a wealth management client; that same client within his DC plan is closed in 22 days.

The other, a young HighTower advisor who came from Morgan Stanley, started focusing on DC plans three years ago. When meeting partners with a new law firm client, one of the partners confessed he had $35 million — and no advisor. While most wealth management clients will be within the mass affluent class ($250,000-$2.5

s noted media expert Mar-shall McLuhan once stated, “The fish will be the last to discover water.” There’s a major shift from wealth man-agement to retirement, not only in the advisor world but

also for asset management. It takes a new breed of advisors to notice this shift and take advantage while others keep operating under an old and outdated paradigm.

So what happened, why should you care, and what can you do about it?

Most large DC practices were built on the backs of wealth management business-es, some from benefit or insurance shops. Retirement (and especially corporate retirement plans) has always been viewed

as a niche market — even a weird market — even though the top asset management firms tend to have significant DC market share. But the evolution and growth of DC

Though most dc practices had been built on the backs of wealth management businesses, the opposite is now true.

By fred BArsTeIN

A

New research expected from the Wagner Institute is showing that a whopping 90% of all advisors have a dc plan and that 25,000, or almost 10%, have at least $25 million.”



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PantoneColors:

NAPA Net MagazineDue 11/3insert December

Publications:

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REVOLUTIONARY.#AdvisorVoices That’s why we introduced Worksite

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i n s i d e T h e n u m b e r s

employers with 1,000 or more employees.Not that there isn’t a gap in coverage —

unpublished estimates from EBRI drawn from the March 2013 Current Population Survey suggest that approximately 20 million private sector workers earning between $30,000 and $100,000 per year don’t have access to a retirement plan at work. That’s a gap that needs to be filled, and advisors, working with plan sponsors and providers, are working to do so every day.

So yes, claiming that “fewer than half of working Americans have access to a work-place retirement plan” is technically accurate. But while it makes for a compelling headline — or a clarion call to action — it represents a gap in a full appreciation of the data that hinders our understanding of the real gap in coverage, the factors underlying those gaps, and in the process undermines our ability to address it. N

» Nevin e. Adams is the editor in chief of NAPA Net the Magazine.

21–64 who work the full year (those covered by ERISA, make $5,000 or more in annual earnings and work for employers with 10 or more employees), 30.5 million (or about a third of this population) worked for an employer that did not sponsor a retirement plan in 2013. Put another way, two-thirds of workers who might reasonably be expected to be covered by a voluntary workplace retire-ment plan under current law did work for an employer that sponsored a plan.

The Impact of Plan Size Now, about that segment of the working

population that works for employers that have fewer than 10 workers. An analysis by EBRI notes that for wage and salary work-ers ages 21–64 who worked for employers with fewer than 10 employees, just 13.2% participated in a plan, compared with 57.0% of those working for employers with 1,000 or more employees. Filtering for those workers who are full-time, full-year, at employers with 1,000 or more workers, two-thirds (66.5%) participate, compared with just 16.9% at employers with fewer than 10 workers.

One is inclined to look for other expla-nations than employer size alone; perhaps smaller employers pay less, or hire younger workers (who might also be paid less) — and those factors might play some role. However, the EBRI analysis found that even controlling for age, workers at smaller employers still had persistently lower levels of participation across the age groups.

In fact, across various earnings levels, workers at small employers (fewer than 100 employees) were less likely to participate in an employment-based retirement plan. Even among workers making $75,000 or more, a considerable disparity was found — just 27% of those in that income category working for the smallest employers participated in a plan, compared with 81% of those working for

ure you have. It’s a statistic that is widely cited and reported, both in the mainstream press and on Capitol Hill. It comes from a reliable, objective source (the U.S. Census Bureau’s Cur-rent Population Survey) and conjures

up a compelling need for action by advisors (and others) hoping and working to expand the availability of workplace retirement plans.

Indeed, the timeliest survey on em-ployment-based-retirement-plan offering and employee participation is the National Compensation Survey (conducted by the U.S. Department of Labor’s Bureau of Labor Statistics), which found in March 2014 that 48% of private-sector workers (and 81% of public-sector workers) participated in an employment-based retirement plan.

However, a more restrictive definition of the work force is to consider full-time, full-year wage and salary workers ages 21–64. How does this break down?

An analysis by EBRI noted that in 2013, of the 76.6 million wage and salary workers who worked for an employer/union that did not sponsor a retirement plan:• 8.7 million (11.4%) were self-employed

— meaning workers who could have started a plan for themselves without the need for action from their employers.

• 17.9 million (26.4%) were ages 25 or younger or 65 or older.

• Nearly 30 million (43.6%) were not full-time, full-year workers.

• 29.2 million (43.0%) had annual earn-ings of less than $20,000.Now of course, many of these workers

fell into several of these categories simulta-neously, such as being under age 21, having less than $10,000 in annual earnings and not being full-time, full-year workers. So what’s the real number?

Think about it this way: If we were focusing on wage and salary workers ages

SBy NevIN e. AdAMs

The Gap in Coveringthe Under-coveredhave you heard this one? “only about half of working Americans are covered by a workplace retirement plan.”

Two-thirds of workers who might reasonably be expected to be covered by a voluntary workplace retirement plan under current law did work for an employer that sponsored a plan.”

i n s i d e T h e n u m b e r s

More than 140 firms have stepped up with their check books, business intelligence, and “can do” attitude to support NAPA, the only organization

that educates and advocates specifically for plan advisors like you. NAPA is grateful for its Firm Partners. We hope you appreciate them too.

Should your firm be on this list and enjoy the benefits of NAPA Firm Partnership? To learn more contact Lisa Allen 703-516-9300 x127 · [email protected]

Care about You and Your Practice

(k)ornerstone 401k Services401(k) RekonADP Retirement ServicesAlliance Benefit Group – NationalAlliance Benefit Group – North

Central StatesAllianceBernsteinAllianz Global Investors

DistributorsAmerican Century InvestmentsAmerican FundsAmerican National Bank of

Texas TrustAspire Financial ServicesAXA EquitableBank of America Merrill LynchBenefit Plans Administrative

Services (BPAS)BenefitsLink.Com, Inc. /

EmployeeBenefitsJobs.comBlackRockBlue Prairie GroupBlueStar Retirement ServicesBNY Mellon Asset ManagementBoulevard RBroadridge/Matrix Financial

SolutionsCapital Analysts of the Midwest,

Inc. (CAMI)CAPTRUST Financial AdvisorsCenter for Fiduciary Management

/FiRMCharles Schwab & Co.Cohen & Steers Capital

ManagementColonial SuretyCommonwealth Financial NetworkCooney Financial AdvisorsCoSource Financial Group, LLCCUNA Mutual Retirement

Solutions

DailyAccessDeane Retirement Strategies, Inc.Dice Financial Services GroupDirect Retirement SolutionsEagle Asset ManagementEagle View AdvisorsEaton VanceEHD Advisory Services, Inc.Envestnet Retirement SolutionsFederated InvestorsFerenczy & Paul LLPFi360Fidelity InvestmentsFiducia Group, LLCFiduciary BenchmarksFiduciary Consulting Group at

PSAFiduciary Consulting Group, LLCFinancial TelesisFranklin TempletonGalliard Capital ManagementGoldman Sachs Asset

ManagementGordon Asset Management, LLCGraystone Consulting, a business

of Morgan StanleyGreat-West FinancialGreenspring Wealth ManagementGross Strategic MarketingGROUPIRAGuardian RetirementHutchinson Financial Inc.iJoin Solutions, LLCInspiraFSInstitutional Investment ConsultingIntegrated Retirement InitiativesInterServ, LLCInvescoJ.P. MorganJensen Investment ManagementJohn Hancock Financial Network

John Hancock InvestmentsJohn Hancock Retirement

Plan ServicesJuly Business ServicesKarp Capital ManagementLAMCO Advisory ServicesLatus GroupLeafHouse Financial AdvisorsLegg MasonLincoln Financial GroupLPL FinancialMassMutual Retirement ServicesMayflower Advisors, LLCMCF AdvisorsMFS Investment Management

CompanyMillenniuM Investment &

Retirement AdvisorsMillimanMML Investors ServicesMorgan StanleyMutual of Omaha Retirement

ServicesNAPLIANationwide FinancialNFP Securities, Inc.Nicklas Financial CompaniesNorth American KTRADE AllianceNuveen InvestmentsOneAmericaOppenheimerFundsParnassus InvestmentsPenChecks, Inc.Pension Consultants, Inc.Pension Resource Institute, LLCPentegraPershingPIMCOPioneer InvestmentsPlan Administrators, Inc (PAi)Precept Advisory Group

Presidium Retirement AdvisersPrincipal Financial GroupPrincipled AdvisorsPrincor Financial ServicesPutnam InvestmentsRaymond JamesRBF Capital Management, Inc.Rebalance IRARetirement Fund ManagementRetirement Learning CenterRetirement Resources Investment

CorpRetirement RevolutionRidgeWorth InvestmentsRPS Retirement Plan Advisors, Inc.SageView Advisory GroupShea & McMurdie FinancialShoeFitts MarketingSignator InvestorsStrategic Wealth ManagementT. Rowe PriceThe Maresh Yoshida 401k GroupThe Retirement Advisor University

(TRAU)The StandardThornburg Investment

ManagementTransamerica Financial AdvisorsTransamerica FundsTransamerica Retirement SolutionsTsukazaki & Associates, LLCUBS Financial ServicesVantage Benefits AdministratorsVigilant Financial PartnersVOYA Financial, Inc.VOYA Investment ManagementvWise, Inc.Wealth Management Systems, IncWells Fargo AdvisorsWisdomTree Asset Management List as of 11/7/14

NAPA FIRM PARTNERs

YOU WOULDN’T PAY FOR YOUR CO-WORKER’S LUNCH EVERY DAY,

WHY WOULD YOU PAY FOR THEIR 401(K) RECORDKEEPING COSTS?

John Hancock Life Insurance Company (U.S.A.) and John Hancock Life Insurance Company of New York are collectively referred to as “John Hancock”.

Both John Hancock Life Insurance Company (U.S.A.) and John Hancock Life Insurance Company of New York do business under certain instances using the John Hancock Retirement Plan Services name. Group annuity contracts and recordkeeping agreements are issued by: John Hancock Life Insurance Company (U.S.A.), Boston, MA 02210 (not licensed in New York) and John Hancock Life Insurance Company of New York, Valhalla, NY 10595. Product features and availability may differ by state. John Hancock Investment Management Services, LLC, a registered investment adviser, provides investment information relating to the contracts. Plan administrative services may be provided by John Hancock Retirement Plan Services LLC or a plan consultant selected by the Plan.

NOT FDIC INSURED | MAY LOSE VALUE | NOT BANK GUARANTEED | NOT INSURED BY ANY GOVERNMENT AGENCY © 2014 All rights reserved.

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