Skip to main content

You are here

Advertisement

Best Practices? Think Herd Mentality.

Plan advisors, especially those who see themselves as the vanguard of the industry, pride themselves on keeping up with the latest trends, bringing innovative solutions to their clients and prospects.

But while these are noble thoughts and might get you a speaking slot at an industry conference, be careful about pushing plan sponsors too hard in adopting innovative ideas. Because when it comes to employee benefits, especially retirement plans, most companies prefer to be part of the herd.

Most plan sponsors, especially in the mid and small markets, don’t see any payoff in pushing the envelope when it comes to their DC plans. Until DC plans become a key recruiting incentive, there's no real reason to have a “super” plan as long as the benefits are competitive.

There are companies like IBM and United Technologies that do seem to push the envelope — becoming media darlings in the process — but most are more comfortable waiting for others to lead, acting only when it is really safe, and then very cautiously.

The auto plan is a case in point. Though there is a safe harbor under the Pension Protection Act of 2006, relatively few plans are using the “ideal plan,” which includes auto enrollment and auto escalation. Forget about a big uptick in adoption of retirement income provisions until the DOL provides a safe harbor for situations where the underlying insurance company blows up — and even then, adoption will likely be slow until the herd moves en masse.

So while some advisors regard themselves as thought leaders, others who are more interested in building a solid business will be willing to be more mundane.

Advertisement