An educated, engaged and motivated plan fiduciary is arguably the most important factor in determining a plan’s success. Yet it’s shocking how ill prepared most plan fiduciaries are to run their DC plans.
This observation is not a condemnation of the HR and benefits professionals tasked with running their company’s retirement plan. For almost all, the responsibility was thrust upon them with little or no training offered. Even worse, sometimes the person who had been in charge has left, so there’s no continuity.
We spend billions trying to educate employees, with dismal results. Yet we spend almost nothing on educating plan fiduciaries. And I’m not talking about the mega market or even plans with over $250 million that certainly have more resources, where people might even go to industry conferences. I’m taking about the hundreds of thousands of plans where the people running it have 10 other responsibilities — a group we rarely hear from.
A decade ago there was a move to educate more advisors, resulting in at least a bit of training and a few designation programs. As with employee education today, which is mostly a fiduciary hedge, broker dealers had a vested interest in making sure that advisors who worked on plans or acted as fiduciaries had some minimal level of training. I’d estimate that today, over 90% of DC plans are managed by HR or finance professionals with less than 5 years of experience and no formal training.
This matters to advisors because plans that do not have educated, motivated and engaged fiduciaries are less likely to hire the right professionals to help them manage their plans and deploy the resources necessary to help put their employees in a better position to retire. It’s time to start focusing our attention and money on helping these overworked HR and benefits professionals at small and mid-sized companies, helping them better run their DC plans — and limiting costs, work and liability while helping employees prepare for retirement.
The impetus for that could come from engaging the CFOs and CEOs to show how a poorly designed DC plan can increase costs when workers who either want to retire or should retire cannot do so, threatening the company’s viability with mostly older, higher paid, less productive workers.
