As I write this, my final column as NAPA President, I can’t help but reflect on the musings and observations within my previous columns and try to reconcile those thoughts with the announcements and observations of late by others. The predominant issues of the past will not likely drive our relevance or success in the future as advisors or as an association. Instead, it is likely that three issues will determine the future for those of us working for America’s retirement:
- access and coverage;
- retirement readiness determining the point of departure from the workforce; and
- the unknown costs of longevity and health care and their impact on the sustainability of a dignified retirement to the very end.
In physics it is said that nature abhors a vacuum and will try to fill the void in one manner or another. The same could be said about business innovation and even government involvement, especially when the void impacts what is deemed effective (or ineffective) social policy by any number of groups. Need proof that powerful forces are already at work on important issues? If so, consider the following news reports.
First, In the Dec. 10, 2018, issue of Pensions & Investments, a front page article’s headline was: “After 40 years, some say the 401(k) is due for a facelift,” (free registration required) including comments from Ted Benna, the widely acknowledged “father of the 401(k),” about his suggestions for improvement, along with the views of others. While the article did a good job of documenting the success of 401(k) plans, which “helped tens of millions of workers save between $10 trillion and $15 trillion when you count the money that has been transferred out of 401(k)s into IRAs,” it also went on to discount that success by lamenting that the aggregate accumulation includes “paltry amounts for many” and the estimate that employer-sponsored plans are only available to about half of working Americans. The latter statistic, one that has barely budged in the last 40 years, is often pointed out by industry critics.
Second, ThinkAdvisor.com reported on the announcement in The Wall Street Journal of a new partnership focused on a new paradigm for retirement plans to help address the issues stated above. The article, “Microsoft, BlackRock Partnering on Retirement Platform,” which ran on Dec. 13, 2018, included the following statements by BlackRock CEO Larry Fink and Microsoft CEO Satya Nadella. “Retirement systems worldwide are under stress and providing financial security to retirees has become one of the most defining societal challenges of our time. Working with Microsoft will enable us to build a powerful solution for millions of hardworking Americans,” said Fink. “Our two firms will apply the power of the cloud and AI to introduce new solutions that address this important challenge and reimagine retirement planning,” said Nadella. This development is simply an evolution of the existing movement by certain recordkeepers and custodians in offering account aggregation technology and proactive in-house advisory services and managed account solutions. It begs the questions, how far behind is Bezos and Amazon and who will their industry partner(s) be? And will advisors be factored into the equation?
So, what’s an advisor to do to maintain job security, business sustainability, client loyalty, enterprise value and industry relevance? Let me suggest it is by adopting a “The Future is Now” mindset – meaning trying to determine what will be the norm five to seven years out and charting a plan of action to get there in 2019 to be ahead of the curve. Let me suggest four items for your consideration.
- Embrace and deliver effective financial wellness programs that focus on moving the participant metrics in the here and now. After all, focusing on retirement readiness out in the future without out driving measurable near-term change is like wanting to lose 50 pounds without changing your diet and workout regimen today. This focus will provide an advisor the opportunity to document their impact, build relationships and showcase value creation, all of which are not easily discounted and displaced once in place.
- Work with plan sponsors in a more holistic manner. Become a multidisciplinary, trusted advisor at the intersection of financial and human capital. Multiple and diversified revenue streams will build a moat around your relationship and allow for pricing flexibility in combatting fee compression driven by the commoditization and technology of large scaled providers.
- By combining #1 and #2, consider doing additional work in the start-up and micro markets. These plans are admittedly a challenge from a profitability perspective until they grow, but perhaps the solution is in the ancillary revenues used as a subsidy until plan profitability manifests. Bottom line, if we individually and collectively don’t address coverage, someone else will – and we may not like the solutions. Can we afford to not be relevant to 50% of the market? Do you think it will stop there if successful solutions are implemented?
- Support the efforts of NAPA and the ARA to be our voice in DC and across the country in the various state capitols. We must maintain our seat at the table and be considered part of the solution and not part of the problem, as many of our critics believe us to be. There is strength in numbers and we must remain strong and get stronger through the unified voice of the five sisters associations under the ARA umbrella – now led by former NAPA President Steve Dimitriou.
In closing, it has been my honor and privilege to serve the organization and our members for the last year as President. I will continue to serve and volunteer in one capacity or another, as I believe in who we are, what we do and why we do it. The exciting news is next in line are two very talented and passionate women in Jania Stout and Pat Wenzel. The membership of NAPA will be in good hands with these ladies heading our Leadership Council and collaborating with and supporting the efforts of Brian Graff and his dedicated team as we collectively work for America’s retirement.
Jeffery Acheson, CPFA, is NAPA’s 2018-2019 President. He is the founder of Advanced Strategies Group, LLC.