Kelly Michel, head of AIG’s 6,000-rep retirement group, comes to the broker dealer world with a rich history at record keepers, most recently Transamerica. That experience gives her unique insights that many of her peers lack, which is likely why she is so adamant about working only with record keepers that share data with her at a plan and participant level.
“We need the data not just for oversight and compliance, but also to help our advisors grow their practice. In the future, we may be forced to only work with record keepers that share data. What MassMutual is doing with Envestnet is progressive — we have to move away from the days of duct tape data sharing systems,” she explains.
Oversight could be become even more essential if the DOL promulgates their conflict of interest rule and as FINRA considers whether the recommendation of an IRA rollover is suitable. “Record keepers sell products. They should not be in conflict with BDs and their advisors who are trying to grow a practice,” Michel said.
Data becomes more important to segment participants and institute the “ideal” plan — which Michel acknowledges is difficult for even the most experienced plan advisor to convince clients to adopt, and almost impossible for the less experienced advisor. “We need to go beyond education, but most emerging advisors are uncomfortable with the ‘ideal’ plan,” she says.
Though custom TDFs and collective investment trusts (CITs) are all the rage, Michel commented that TDFs have not run their course. As DC plans become the major source of retirement income, Michel wonders why we don’t create a system where people cannot withdraw or even have access to DC assets until age 65, as is often the case with DB plans.
Though there are lots of hurdles, including inertia and technology challenges to overcome, we need to start incorporating some of the best DB practices into DC plans, says Michel. That starts with the “ideal” plan, but needs to go further to cover withdrawals.