The horsepower behind 401(k) plans: A specialist adviser

It appears that 401(k) specialist advisers are getting the job done, as data shows that plan sponsors who work with them experience a spike in worker deferral rates and appreciate advisers’ help with the fiduciary process.
After fee disclosure regulations from the Labor Department and heightened scrutiny of fiduciary duty, advisers are finding that dabbling in the retirement plan business while holding out hope for IRA rollovers may no longer be a worthwhile endeavor. Rather, a new kind of 401(k) adviser is emerging who focuses on serving retirement plans and helping employees achieve the best possible retirement savings outcome through education and other services.
It’s a labor-intensive process, particularly in situations when plan sponsors might hesitate to make drastic changes.
“We took on an account that had a 40% participation rate [in its 401(k)] plan,” said George Fraser, managing director and financial consultant at Retirement Benefits Group, an affiliate of LPL Financial.
Following an evaluation, the company in question now provides a match. It also has started an auto-enrollment program at 1%, a tactic Mr. Fraser uses when plan sponsors are reluctant to automatically enroll workers in the plan — typically because those workers earn low wage.
“We re-evaluated it: Now the company provides a match, auto-enrolls at 1% and auto-escalates [the deferral] at 1% with no caps,” he said.
“We go out and we do what we do, spending time on this additional training: How can we empower you?” Mr. Fraser added.
That extra attention is starting to yield results, according to a recent survey from the Retirement Advisor Council, a plan adviser advocacy group that’s sponsored by 401(k) service providers and asset managers.
Last September, the group surveyed 407 sponsors of retirement plans with $5 million to $500 million in assets. Out of the 334 plan sponsors who work with an adviser, 83% have seen an increase in participants’ deferral rates over the last two years, and about a third of those employers have seen deferral rates rise by at least 6% of pay.
Seventy-five percent of the sponsors working with a plan adviser estimate that at least half of their workers are on track for retirement, and 53% of those with an adviser say that the adviser does an “outstanding job” of helping them implement fiduciary processes.
It takes a special kind of adviser to get those results. “These advisers will gather information on participation and contribution rates, asset allocation in the plan, fees and record-keeping services,” said Melissa Cowan, national sales manager at Morgan Stanley. She was on a conference call discussing the results of the Retirement Advisor Council’s study.
“[These plan advisers] are knowledgeable about fee structures; they take on a role as a liaison and assist in fee negotiation and resolution,” Ms. Cowan added.
Apparently, there is also a sweet spot for advisers who want to be more involved with retirement plans: Small to medium-sized employers. Owners are preoccupied with running their businesses, so the expert counsel of an adviser, especially one who can dedicate time to improving results for participants, is greatly appreciated.
“Small and medium-sized firms often don’t have the resources for a full HR staff,” said Michael H. Gouldin, CEO of Gouldin & McCarthy, an advisory firm that works with retirement plans. He also participated on the conference call. “Clients turn to us more often than not for help and questions on their plans.”
“It makes it easier to run the plan overall,” he added.