Riding the Retirement Pipeline. Presented By: Jefferson D. Cheshier

Transcription

1 Retirement Services

2 Riding the Retirement Pipeline Presented By: Jefferson D. Cheshier

3 401(k) World Pre-2000 Successful Retirement Practice Model: Connect Prospect and Mutual Fund or Annuity Wholesaler

4 Tornado of Market Forces Since 2000 Internet Bubble Terror Attacks War Corporate Fraud Housing Bubble Too Big to Fail Recession TARP Stimulus EGTRRA PPA Increased Regulation LaRue Fiduciary Liability Fee Disclosure Asset Allocation Scrutiny Autos Fee Compression

5 Current 401(k) World

6 More people are less confident about having enough in retirement (%) CONFIDENCE IN HAVING ENOUGH MONEY TO LIVE COMFORTABLY THROUGH RETIREMENT, (%) Confident Not confident Sources: Employee Benefit Research Institute and Mathew Greenwald & Associates, Inc., 2011 Employee Benefit Research Institute Retirement Confidence Survey.

7 Many Americans aren t saving enough REPORTED TOTAL SAVINGS AND INVESTMENTS FOR ALL WORKERS (%) $250,000 or more 10% $100,000 to $249,999 14% $50,000 to $99,000 9% Less than $50,000 67% Source: The 2011 Retirement Confidence Survey; EBRI, April Findings among those providing response (does not include value of primary residence or defined benefit plans).

8 Pension Protection Act of 2006 hasn t provided broad structural improvement 38% of 401(k) plans have automatic enrollment Up from 23.6% in % use Auto enrollment for new hires only 75% of plans have a default savings deferral rate of 3% or less Default % 1% 2% 3% 4% 5% >5% % of Plans 3% 13.1% 58.0% 8.2% 8.9% 8.9% 60.3% have no auto escalation or voluntary escalation only Source: Profit Sharing Council of America 53 rd Annual Survey, 2010

9 Bottom Line As an industry, we are not helping enough Americans adequately prepare for their retirement. What if this trend continues?

10 Bottom Line We ll get help

11 Bottom Line So what can we do? Provide value to business owners Provide positive retirement plan experiences to business owners and employees alike Business owners want more by wanting less GIVE IT TO THEM! Own the issues, then call in the cavalry Regulatory developments Industry and product developments Legal developments Investment developments Work with partners, but divorce yourself from providers

12 Advisor Alpha What is Alpha? The abnormal rate of return in excess of what would be predicted by an equilibrium model How does an advisor provide alpha to business owners? 10+ years ago: Fund Picking 5 years ago: Asset Allocation Funds Now: The Advisor. Those who can create good outcomes by demonstrating knowledge, active participation in all plan matters with the employer and high general involvement.

13 Change in the 401(k) landscape has accelerated A growing emphasison plan performance and business owner satisfaction A focus on fiduciary responsibilities An intense scrutiny of fees

14 Demonstrating value is even more important now BENEFIT PRICE Value Help business owners understand and appreciate value

15 Business owners turning to advisors, now more than ever % plans sold using an advisor % plans sold using an advisor 401(k) Exchange, May 2010.

16 Business owners have begun using advisors for these reasons 34% Fiduciary concerns doubled since 08 27% 22% 12% Less time to manage the plan Concerns surrounding fiduciary responsibilities Improvement of plan performance Plan investments assistance

17 Business owners want more from their advisors now A more knowledgeable advisor $2.5M to $10M plan size Other 4% 35% Advisor to take on formal fiduciary responsibility 12% 27% Better provider service To replace a retired advisor 12% 8% Better advisor support of employee education 4% Advisor too expensive Percentages don't add up to 100 due to rounding.

18 Business owners want more from their advisors now More value for advisor fees $10M to $50M plan size Advisor too expensive 21% 21% More employee education support Better provider service 11% 14% To replace a retired advisor A more knowledgeable advisor 14% 11% 7% Better advisor support for servicing requirements Advisor to take on formal fiduciary responsibility Percentages don't add up to 100 due to rounding.

19 Understanding key factors of business owner satisfaction is today s opportunity Plan performance Comprehensive fiduciary assistance Demonstrating value Plan sponsor satisfaction

20 Many business owners don t fully understand all their fiduciary obligations Degree of confidence surrounding fiduciary obligations Neutral 16% Not confident 9% Somewhat confident 23% Very confident 19% 34% Confident

21 Many business owners want advisors to take on a formal fiduciary role Degree of importance that an advisor is willing to take on formal fiduciary responsibility for the plan 63% Very important 28% 2% Not important Important 35% 16% Neutral 19% Somewhat important

22 Advisors don t take credit for the work they do Plan sponsors say advisors. Don t document activities performed Don t track and report time spent on the plan 66% 71% Don t point out reduced risk due to help with sponsor s fiduciary role 71% This is a missed opportunity to discuss services and activities that they provide when underscoring value to plan sponsors

23 Business owners need help to better understand fees 53% 63% don t fully understand provider fees billed to their company don t fully understand fees charged on plan assets

24 Advisors explain fees, but only half-demonstrate value for fees How well an advisor proves his/her value according to plan sponsors Well 35% 35% 17% 17% Very well 6% Not well Somewhat well 24% 18% Neutral

25 Plan sponsors need, and expect, more from advisors They re looking hard at plan performance and considering their satisfaction levels They want comprehensive fiduciary assistance They re facing increased scrutiny over fees 25

26 Summary Inflection point in evolution of retirement planning business Consolidation + compression = consternation? Opportunity! 408(b)(2) 3(21) vs. 3(38) fiduciary status Continually shifting political, regulatory and oversight environments OWN IT! Plan sponsors need dedicated professionals to help them manage their fiduciary responsibilities in the same way they need: Attorneys for legal matters CPA s for tax matters Consultants for resource optimization and strategic planning

27 NFP Retirement s Mission To help Advisors build and manage the Model 401(k) Practice, it must be: Scalable and Profitable How do we help you do that? By providing you with the tools and resources to create efficient and repeatable processes

28 Process Powerhouse: Retirement Plan Advisory Group (RPAG) Complete Back-office Sales, Marketing and Service Solution for Committed Retirement Plan Consultants Proprietary, CFA-led investment analysis process RFP/vendor benchmarking Plan review Marketing materials Employee education Saves: Hours of In-house Preparation and Analysis RPAG membership: $12,000 / year

29 Revenue Diversification Proprietary NFP Tools and Resources NFP Executive Benefits Rollover Blueprint Model (Asset Retention) Plan Benchmarking Maximize Participant Outcomes Diversify Revenue

30 Proprietary Tools Marketing brochures Plan diagnostic Employee survey Plan-level fee analyzer White papers Retirement Services Update Legal & Compliance Update PensionOnline

31 NFP Leverage National Relationships with Vendors $55 billion in retirement assets under management Our leverage, your independence

32 Contact Information Jeff Cheshier Director, Retirement Services (512)