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Advisors Must Lead a Team Effort To Define Successful Plan Outcomes

Even with so many American employers of all types and sizes offering 401(k)s to their workers, there is no one-size-fits-all answer to a very basic question about employer-based retirement plans: “Where do you think your employees are going to get the money to stop working?”

How plan sponsors can best answer that question, and how advisors can help them get there, is the focus of the cover story of last month’s special “Outcomes” issue of NAPA Net the Magazine.

Freelance writer Judy Ward cites multiple recent surveys proving the point that plan sponsors disagree widely on what the overall point of their 401(k) is, and adds that it shouldn’t be any other way. Individual plan sponsors, she writes, need to develop a plan that is responsive to the kinds of employees they have, and also conforms to the purpose of their plan. Figuring out that purpose, Ward says, is where the advisor comes in.

For example, a Wells Fargo poll from 2014 that says only 54% of sponsors saw their plan as being responsible for securing their employees’ retirement. Nearly 40% said it was designed to be a supplement, and 8% saw it as a simple benefit to make their business more attractive to potential recruits. With no laws requiring that a plan sponsor define a mission for their plan, it’s up to advisors to help create targeted outcomes for clients and their employees.

Ward spoke with a number of advisors — including Newport's Peter Phillip, Wells Fargo's Joe Ready, Unified Trust's Greg Kasten, Bukaty's Vincent Morris and Blue Prairie's Carmela Elco — some of whom recommend studying clients’ workplaces and taking note of demographics and industry trends in defining and clearly stating a purpose for the plan. Brian Allen, an advisor based in southwest Missouri, says that most plans fall into three categories: “Choice,” “Informed” and “Ready.”

With a "Choice" plan, the sponsor takes a hands-off approach to the plan and doesn’t expect it to be much more than a simple value-add. “Informed” plan sponsors feel an obligation to inform employees about the plan and its impact on their retirement readiness, but don’t feel responsible for retirement outcomes. “Ready” plans take a paternalistic view that the plan will be the primary, if not sole, vehicle their workers use to save for retirement. It is up to advisors, Ward writes, to work with their plan sponsors to analyze which approach is best, based on a range of factors about their employees and the company’s overall mission and financial health.

Ward’s cover story, "Retirement Ready — Or Not?", is one more than a dozen articles in the special Outcomes issue by industry thought leaders like Sheri Fitts, PAi’s Michael Kiley, Fiduciary Benchmarks’ Tom Kmak, Rocco DiBruno, Retirement Resources’ Jim Phillips and Patrick McGinn, Ryan Miller from MFS, BlackRock’s Chip Castile, Richard Davies of AB Institutional Investments and execs from Newberger Nerman, American Funds, Pentegra and Transamerica. They are all now online, in NAPA Net’s “Industry Intel” tab — just click here.

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