Wednesday, May 25, 2016

Why would ANYONE want to self-trustee a 401(k) Plan?

Very interestingly, a recent lawsuit has made a lot of noise in the retirement plan industry, but not for the reason people think.  This suit doesn’t involve a famous company or a huge service provider or even a large sum of money, rather what makes this case so interesting is that it is, in fact, a very ordinary every day plan.  The case I’m referring to is Damberg v. LaMettry’s Collision a $9-$10 million 401(k) plan who’s trustees (two owners) are being sued by two long term employees for excessive fees.  This is the first case of this nature that is “down market” of notoriety.   

Joe Reese walks through the paces of the implications here in a recent blog post on Unified Trust’s blog, linked here à  

Makes me wonder, why would ANYONE want to self-trustee a 401(k) Plan?

- Jason Grantz

Wednesday, May 11, 2016

The Fiduciary Rule: Intentions vs. Results

I was recently contacted by Christopher Carosa of who was looking for insights on the recently released Department of Labor (DOL) Conflict of Interest Regulations.  I found it particularly interesting that his questions regarding the rule weren’t so much mechanical in nature, meaning how it will work, but rather whether or not the rule will have the desired impact.  More specifically, he wanted to know whether it would actually prevent conflicts of interest or allow conflicts of interest to  persist. 

To see the full  dialogue as well as thoughts from other industry professionals, click here:

Outside of the article, Chris was also interested in how retirement savers can be more aware of potential conflicts of interest.  I identified three questions they could ask their current or potential service provider to hopefully help ensure that conflicts of interest are being properly disclosed or mitigated entirely.
  1. Do you (advisor or service provider) charge fees in a level manner neutral of any investment advice or recommendations you might make?
  2. Do you have any formal or informal arrangements with any investment product or product manufacturer that would create a bias in the advice you give me?
  3. Will you provide a simple summary that clearly defines all fees, services and investment recommendations in a format that is easily comprehendible?
A recommended best practice would be to have the service provider respond to these questions in writing so that it’s fully documented and the service provider can be held accountable.   My firm, Unified Trust has always operated as a fiduciary and taken a no conflict-of-interest approach.  Our strong fiduciary governance process focuses on improving the results and outcomes for our participant clients. 

However, the reality is that we are very different in the industry, and there are service providers in the industry who will continue to do business in a conflicted manner.  They will need to be prepared to be up front about any potentially inappropriate conflicts-of-interest that they might have.

It may be wishful thinking, but wouldn’t it be great if the industry took a different approach to the one taken when the fee disclosure rules came out?  Instead of being opaque and doing the minimum to comply, this time make clarity a priority, be direct with clients and do more than the minimum.

Tuesday, May 3, 2016

Managed Accounts are More Effective

Recently, Plan Sponsor Magazine published their 2015 PLANSPONSOR Defined Contribution Survey and in it was some very interesting data regarding Managed Accounts and outcomes.  See the full survey here: PLANSPONSOR 2015 Defined Contribution Survey

After reviewing the data, one thing becomes very apparent, plans that use a Managed Account combined with an advisor acting in a fiduciary capacity have better results than plans not using these services.  The article below from planadviser magazine dives into the data a little deeper and focuses on average balances.

Managed Accounts - Plans with Managed Accounts have better outcomes

**WARNING: A little commercial below, apologies, but that stats are what they are.**

These results correlate to my personal experience.  At my firm, Unified Trust, approximately 9 out of every 10 plans we bring on board are choosing to adopt our full suite of recommendations, most of which are maternalistic.   We suggest clients utilize automatic enrollment (starting at 6%), automatic deferral escalators and the UnifiedPLan Managed Account Solution.  When looking at these plans, the results are astounding.

As of the date of this writing, we see roughly 80% of participants stay in the defaulted managed account solution.  This solution provides the participants with the answers AT enrollment to most of their questions.  When can I afford to retire? Am I on track?  What will my monthly income be?  How much of that is from the plan, social security, outside assets and other sources of income?  What should my deferral rate be in order for me to get or stay on track?

Of the participants offered this managed account, we are seeing 71% of those participants on track for a fully funded benefit.  Most industry studies we've reviewed has the industry average at about 25% (lowest I've seen is 15%, highest is 40%).  The system of defaulting participants into a solution that delivers AND implements all of the answers is proven here to be nearly 3 times more effective than traditional methods in delivering the outcome that matters most, retirement readiness.

Whether it is outside studies like PLANSPONSOR's survey, or our first hand experience, I think the results speak for themselves.  The more that we as professionals take on ourselves and do for our clients, the better the results.

-Jason Grantz