Measuring the effort and success of any project is fundamentally a good idea. As the principle goes: plan, execute, report, assess, repeat. Of course, how you define the goal hugely influences the resources you put forth to reach it and how you score success.
With respect to retirement plans, we easily quantify a number of observations about performance: plan fees and their related efficiencies; investment costs, recordkeeping, administration, etc. We also track enrollment, participation rates, deferral rates and so on.
A productive use of benchmarking compares a plan’s cost for services to those in its peer group. On an apples-to-apples basis, this has the potential to drive greater value for the plan sponsor and foster greater fee and service transparency in the marketplace. And certainly, every company wants to get good value for their investment in a benefit plan and, of course, needs to be able to demonstrate they are meeting their fiduciary responsibility of paying reasonable fees for the services rendered to their plan.
This view of benchmarking is consistent with what we commonly refer to as Fiduciary 2.0 with its focus on funds, fees, and fiduciary responsibilities. As we mature toward an outcomes-based consciousness, we shift our focus to the critical aspects of participant engagement and achieving the retirement funding goal. We view plan performance more through the lens of attaining retirement income sufficiency as we begin to look past the important, but requisite, quantitative data points of Fiduciary 2.0. This speaks to long-term participant success and is, itself, the promise of Fiduciary 3.0 and the focus on success metrics.
Happier employees also tend to be healthier and retire closer to on-time. That is a win – win scenario for any company.
The shift here is not subtle. A Fiduciary 3.0 advisor comes prepared to a prospect meeting with more than deficiencies noted on Form 5500 or a benchmarking analysis of investment classes. She comes with a program expressly designed to engage participants, personalize communications (at scale), and demonstrates how she can help employees be more successful along their retirement path.
We know from countless studies and reports that the psychological benefits of being financially secure translate to greater personal well-being and productivity. That means better employee morale, greater professional productivity that, in turn, produces real benefits to the employer. Happier employees also tend to be healthier and retire closer to on-time. That is a win – win scenario for any company.
Plan cost metrics are important, but we know that a cost-efficient plan is not necessarily a successful plan. Neither is one that simply has a high participation rate. If success is defined by long-term retirement income sufficiency, then the plan participant and financial advisor need to know what the funding goal is, create a plan to get there, and track progress toward that goal. Yes, participation rates and fees are important data points, but trending contribution rates, match optimization, and ultimately, on-goal performance is how this industry must evolve to deliver success. The advisors who deliver this message and this business model, will own the next chapter of growth.
If you would like to learn how iJoin can help you move beyond benchmarking and evolve toward a Fiduciary 3.0 advisor delivering greater value, we’d love to talk. Contact us.