How Advisers Can Help Plan Sponsors

At the Plan Sponsor Confidential panel at the 2017 PLANADVISER National Conference, two winners of the 2017 Plan Sponsor of the Year awards program spoke about how their adviser has helped them—and why they thought they needed to begin working with an adviser in the first place.

 

“The main reason is inertia,” said Larry Schmidt, director of human resources at Searles Valley Minerals, of the reason why Searles hired Bukaty Companies Financial Services as its retirement plan adviser. “We are a mining company, and the leadership and employees don’t change often. Some of our employees are in their 80s. We are cautious in making changes, but we realized that sponsors will ultimately be held responsible for plans that don’t produce. We needed to get off the dime.”

 

The retirement plan committee of LSG Group “wasn’t convinced we needed help from an adviser because we had help from our finance department,” said Tobias Junker, vice president of human resources total rewards and labor relations. “But when we were asked about our fiduciary responsibilities,” we could not answer. “We went on a journey 15 years ago and decided to create a three-pronged approach comprised of the fiduciary committee, the recordkeeper and a retirement plan adviser, whose independence from the recordkeeper is key,” Junker said.

 

Schmidt agreed that it is a fallacy to think that a recordkeeper can accomplish all of the things that an adviser does. However, by “working together, they can work well in sync,” he said.

 

The primary task that LSG Group’s adviser was charged with, Junker said, was to combine the company’s 22 entities—all with their own 401(k)s and very different needs. The adviser issued a request for proposal (RFP) and meticulously reviewed the results over the course of two years, he said. Then, once Bank of America Merrill Lynch was selected as the recordkeeper, it took LSG and its adviser nine months to create an investment lineup “to serve all the different needs, all the different risk profiles,” Junker said.

 

The end result was lower administration and investment fees, and higher participation. The adviser also recommended automatic enrollment and escalation, which, Junker said, “work perfectly.”

 

‘Our adviser gave us the courage’

 

As far as what Bukaty has brought to the table for Searles, Schmidt said, “There are dozens of examples of how [Vince Morris, president] has helped us,” not least of which is recommending automatic enrollment at a 4% deferral rate paired with 1% annual escalation up to a 10% threshold and re-enrollment into a target-date fund. That went against everything we believe, in terms of making decisions for employees—but the vast majority of plan participants never made a peep.

 

“We went from an 83% participation rate to a 96% participation rate, with a 40% increase in the average balance,” Schmidt continued. “Our adviser gave us the courage to do it. Our adviser is very, very thorough. He gives us the defense for every investment decision we make, and his work has resulted in much less turmoil in the fund lineup.”

 

Engaging participants through on-site meetings at the mines and holding focus groups with employees to find out what they want have also been critical, Schmidt said. “Vince Morris has helped us think about what we are doing and provides us with detailed quarterly minutes.”

 

Targeted communication is critical, Junker agreed—particularly for LSG, which has 120,000 participants in 60 countries speaking 40 different languages.

 

Junker said he realized he and the other members of the fiduciary committee cannot just rely on their adviser and recordkeeper. “We must keep on challenging each other,” he said. “At every quarterly meeting, we now have a lively innovation and challenge session,” which is very productive.”