Editor’s Note: This is the first of three in-depth interviews with the finalists for the 2013 401(k) Advisor Leadership Award. Sponsored by NAPA and ASPPA, the award reflects the multi-faceted efforts of advisors to serve their clients (both plan sponsors and participants), act as a mentor, maintain high ethical standards, and consistently improve their practices and services in the retirement industry. One of the three finalists will receive this year’s award at the 2013 NAPA/ASPPA 401(k) Summit, March 4 in Las Vegas.
Leadership Award finalist Chad J. Larsen, PRP, AIF®, is president of Moreton Retirement Partners in Denver, CO. Larsen has dedicated the past 20 years to developing and implementing proven processes and strategies for clients seeking to improve their retirement programs. His long-term track record of success is a result of working with hundreds of employers, helping them to implement prudent processes designed to reduce fiduciary liability and plan expenses, meet specific plan objectives, and significantly improve participant outcomes.
Larsen is an Accredited Investment Fiduciary (AIF®) designee and is recognized as a PLANSPONSOR Retirement Professional (PRP) by PLANSPONSOR magazine. He has repeatedly been recognized and quoted in PLANSPONSOR for his work with clients, and in 2007 the magazine selected him as the Retirement Plan Advisor of the Year. In 2008 he was named among the 100 Most Influential People in Defined Contribution by 401kWire.com. PLANADVISER magazine named Larsen to the PLANADVISER Hall of Fame in 2011.
Larsen is also a frequent and nationally recognized speaker and presenter to employer and industry groups. He has conducted numerous retirement plan workshops to educate employers on the key elements of successful retirement plans. Larsen’s financial background and technical expertise provide a valuable resource for clients in the for-profit, non-profit, and public sectors.
A graduate of Brigham Young University, Larsen earned a BA in business finance with minors in accounting and economics. He is a registered representative with LPL Financial and an investment advisor representative with Independent Financial Partners.
NAPA Net spoke with Larsen about his career, his business philosophy and the practices that have made him a finalist for this year’s 401(k) Advisor Leadership Award.
In terms of skills, insight, and services performed, how would you describe the arc of your career in the retirement planning business, from your first job to your current one?
Larsen: I still remember the first 401(k) plan I wrote more than 20 years ago. At that time, there wasn’t much concern over fiduciary issues. While fees were reviewed, they weren’t the focus that they are today. Then the primary focus was on the investment options, which was force-fed to plan sponsors and participants. I’ve always felt that was somewhat misguided.
I believe that there have been significant improvements over the years in both the quality of the plans being offered and the quality of the services many consultants are providing. I’ve always felt that the focus of our industry should have been much more on helping participants understand the value of long-term savings rather than trying to turn every participant into an expert investor. I think auto-enrollment and target-date momentum are positive steps, but there are still improvements that should be made.
My focus today is much different from what it was 20 years ago, though the overriding principals remain the same. I feel that successful retirement plans are simply a function of helping individual participants make the best decisions they can and helping them to understand that they can’t cash out when changing jobs or deplete their plans with loans without doing irreparable harm to their chances to retire.
I spend much more time training committees about fiduciary best practices than I did before and trying to build a success model of services that our team can implement consistently across our client base. I also spend a lot more time in a consulting role, looking at variations of fee equalization and administrative cost containment as we review overall fee trends in the industry.
Recipients of the 401(k) Advisor Leadership Award are judged on how they use their expertise to help Americans prepare for their retirement future. What are the three top things an advisor should do to help clients’ participants retire with dignity?
Larsen: I think the number one thing we do is tell participants the truth about retirement. Unfortunately, I don’t think the industry has done a very good job of doing this over the years. The truth is that while contributing 3% of their pay is a good thing, they can’t expect to retire with dignity on a 3% contribution. If we know that participants will probably need to save a total of 12% to 15% of their income, we should tell them that when they’re 20 and not wait until they’re 50.
Second, I feel that participants need to know the difference between saving and investing. We need them to first become great savers. I don’t care how great an investor a participant is if she she’s contributing a low percentage of her income. No amount of investment gains can make up for a long-term lack of savings.
Third, we try to educate participants that the 401(k) is simply a way to increase their net worth. Some people may not have a desire to retire but everyone wants to have financial peace of mind. Building net worth is the name of the game because, ultimately, that will fund their retirement years. I don’t care what a person’s income is during his career, if he doesn’t have savings discipline he’ll never be able to retire with dignity.
One other thing we try to help them understand is what dignity will mean for them. That’s a very personal thing, and the financial needs around that vary by each individual participant.
What do you consider the most innovative idea that you’ve implemented in your own business?
Larsen: Over the past few years, I’ve spent a lot of time trying to talk to employers about the long-term cost to their organizations of employees who can’t retire when they’d like to. I love having this conversation because nobody has ever discussed it with them. The cost of keeping those employees beyond their normal retirement age is now estimated at $50,000 a year for each employee, due to the additional health care costs and lost productivity, as well as the loss of younger talent who have no place to advance in the company. Helping employers focus on these long-term costs versus the short-term cost of a match or of auto-enrolling participants has been very productive. Not all companies are in a position to focus on long-term concerns, but they appreciate the conversation.
Speaking as a mentor, what practical steps can other advisors take if they aspire to competing for the 401(k) Advisor Leadership award themselves?
Larsen: I’m passionate about what we do for our clients and I’m convinced that they and their participants will have better retirement outcomes if they implement our recommendations and ideas. I’ve also never been happy with the status quo in our industry that focuses on the investments in a plan rather than on the number of participants. I’ve reviewed a lot of plans over the years that had great funds but were horrible plans because there was less than 50% participation and 40% of the assets were in a money market. Just having good funds doesn’t make it a good plan.
The trend toward auto-enrollment is a positive step but I don’t hear anyone really talking about the leakage that drains out of plans every year when people change jobs. I don’t think auto-enrolling people will accomplish much if we also don’t do something to keep those same people from cashing out of their plans when they leave.
I think more people from within our industry need to speak out and challenge the status quo in order to keep things moving in the right direction. We also need leadership from Washington, which I feel has been asleep at the wheel for many years on many of these issues that could have a positive impact on participants and plan sponsors.
