Administration September 26, 2019

Teaching Employees Skills and Practices for Retirement Confidence

Unfortunately, there are no do-overs in life, but there are ways to help employees feel confidence about their financial futures going forward.

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The majority of Americans are stressed about their financial situations, with three out of four wishing they could get a financial planning do-over, according to a survey by the National Association of Personal Financial Advisors (NAPFA).

In addition, 34% of respondents believe finances will still remain a source of stress in their futures and 22% worry they will not enjoy their senior years due to money issues.

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Unfortunately, there are no do-overs in life, but there are ways to help employees feel confidence about their financial futures going forward.

TIAA’s 2019 Lifetime Income Surveys reveals skills and practices that build confidence in the financial future. For example, the ability to plan long-term and invest effectively are key drivers of feeling secure. Those who rate highly their ability to invest effectively are roughly three-times as likely to express confidence in always being financially secure, including throughout retirement.

Long-term planning can also play a role in financial confidence, as those who are able to master this skill are at least twice as likely to feel confident. However, TIAA’s survey found more than 60% of respondents haven’t created a written financial plan for retirement.

Retirement plan sponsors should encourage employees to create a written plan for retirement. A 2017 Wells Fargo/Gallop Investor and Retirement Optimism Index found 43% of those with a written plan are highly confident they are headed towards a comfortable retirement, whereas 23% of those without a written plan feel highly confident.

Good savings habits also build confidence as two-in-five respondents cite saving regularly as a means of boosting financial security. Yet, more than half reported not saving as much as they should have in 2018, including 22% who reported they saved “a lot less” than they should have.

Research from Principal Financial Group shows Super Savers, defined as those saving 90% or more of the IRS maximum or 15% or more of their income for retirement, are highly motivated by wanting to feel financially secure (62%), having a good lifestyle in retirement (57%), being prepared for the unexpected (43%) and wanting to save enough for retirement (42%) and travel in retirement (42%).

Though everyone surveyed fit the definition of a Super Saver, only 24% self-identified as such. Men were much more likely to be confident in their financial future (59%) compared to women (49%) and be confident in financial decision making (52% vs. 40%.).

Plan design features such as automatic enrollment and automatic escalation, as well as education, can help employees save more. However, financial wellness programs also help. Not only can such a program address being prepared for the unexpected, but teaching budgeting skills could help employees free up cash to save. Financial wellness programs that break things down into activities and smaller actionable steps may be the most successful.

TIAA found that Americans believe a financial planner can help. In particular, respondents want guidance on planning for retirement (61%), building greater savings (52%) and paying off their debts (50%). 

Some of the most successful retirement plans offer participants access to financial advisers.

Of those who participate in an employer-sponsored retirement plan, nearly seven-in-ten (69%) cite guaranteed income for life as one of their top two goals for their retirement plan, and almost half (45%) say that guaranteed income for life is their very top goal, according to TIAA. They are more likely to rank guaranteed lifetime income as one of their top two goals than keeping their savings safe regardless of what happens in the market (56%), earning a competitive rate of return on their savings (46%), or saving a specific amount of money (28%). Among the reasons guaranteed lifetime income is strongly valued: three-in-five (60%) say it provides a feeling of financial security and nearly half (46%) assert it makes it easier to save for retirement.

“Employer-sponsored retirement plans that provide guaranteed lifetime income through in-plan annuities give workers saving for retirement a method for insulating themselves from risks, such as the impacts of stock market volatility, longevity risk and even cognitive decline,” says Lori Dickerson Fouché, chief executive officer of TIAA Financial Solutions. “Having monthly income that’s guaranteed for life helps create certainty in people’s ability to fund their necessities and can lessen the impact and stress from unexpected expenses that are beyond their control.”
Deals and People September 25, 2019

Start-Up Specialist America’s Best 401k Acquired by Creative Planning

Creative Planning already has a well-established 401(k) offering, but the acquisition will open up its market reach to smaller plans.

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Creative Planning has announced the acquisition of America’s Best 401k, a technology driven retirement plan provider focusing on a high-transparency, low-fee model.

America’s Best 401k Founder and President Tom Zgainer will remain in his current role. The financial terms of the deal are not being disclosed.

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In a number of conversations with PLANADVISER held over the last few years, the leadership at America’s Best 401k have emphasized their intention to “disrupt” the traditional retirement plan recordkeeping model. Now, speaking about his firm’s goals in acquiring America’s Best 401k, Peter Mallouk, CEO of Creative Planning, says the “disruptor” mindset will continue. He says Creative Planning has long embraced the same principles driving America’s Best 401k, and in fact the firms already work together extensively behind the scenes.

“As the current 3(38) investment fiduciary and registered investment adviser for America’s Best 401k, Creative Planning has in-depth knowledge of the firm’s clients,” Mallouk says. “We became the fiduciary for all of their plans a few years ago, and we have taken on the role of picking their investments and handling the fiduciary services for their clients. So in that respect, this deal has been some time coming.”

Mallouk notes that Creative Planning already has a well-established 401(k) offering, but it tends to be best for large, established plans that have millions of dollars and lots of participants, and which are seeking in-person education services. America’s Best 401k, on the other hand, has specialized in efficiently serving start-up plans and smaller entities with a digital-first footprint.

“They have built an incredibly efficient and technology driven platform,” Mallouk says. “We expect to be able to leverage their digital onboarding and client service model, which makes high quality plans accessible even for startups and smaller employers. Their capabilities will round out our recordkeeping offering completely, and of course there is a good cultural fit. They have focused on the same things we have from the start—full fiduciary services and highly transparent, indexed-based fund lineups.”

Echoing the leadership’s language at America’s Best 401k, Mallouk says the retirement plan industry is “laden with conflicts of interest and very high fees relative to service levels.” Investment lineups continue to exist for the wrong reasons, he suggests, but increasingly plan sponsor clients are pushing back.

“What’s happening broadly is that providers have to do more for the same fee,” Mallouk says. “From that perspective, it is very helpful to be a fiduciary these days, and to have a low-cost fund lineup. On top of this, things continue to get even move competitive from a value-for-fee perspective. You really have to have strong technology and established economies of scale to be able to be competitive in this type of recordkeeping marketplace. That’s why you will see more and more consolidation.”

Mallouk expects the integration of America’s Best 401k to be fairly rapid, given the extent of the existing collaboration.

“Part of the excitement for us is that we have already been fulfilling a big part of their offering for years now,” he adds. “For us, this deal is ultimately about being able to say ‘Yes’ to more Creative Planning clients, and to do so in a seamless way, rather than maintaining and explaining two separate brands. The other component is being able to integrate their powerful technology within our current platform. That’s the integration we are working on now.”

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