By Heather Ross, with Scott Dingwell

DC Edge spoke with Jordan Gelb and George Fraser about their passion for educating participants, what they think is critical for participant success and the value they bring to plan sponsors.

Getting employees "retirement ready" requires more than just providing a good 401(k) plan and a range of investments. Most employees need encouragement to participate and guidance on how much to save. While in-person participant education often gets overlooked in this era of cost containment and simplification, many retirement plan advisors consider it essential to help plan sponsors create the best opportunity for their employees to retire well with a healthy nest-egg.

George Fraser, Managing Director at Retirement Benefits Group, and Jordan Gelb, Senior Vice President at Merrill Lynch, take participant education to heart, making it a centerpiece of their service offering. "I have a passion for the participant," says Fraser. "I teach them that if you want to have enough to retire on, you have to participate in your 401(k) plan and you have to defer as much as you can—it's that simple." Gelb agrees. "Our challenge is to show employees that it's their responsibility to get themselves to retirement." Together with their teams, both meet with employees—thousands of them—to personally deliver the benefits of their company retirement plan.

With years of experience conducting employee meetings, they often follow group meetings with one-on-one sessions to counsel participants on a wide range of financial advice. This benefits the plan sponsor as well. "When you educate a plan's participants, you're mitigating some of the plan sponsor's fiduciary liability." Both pride themselves on the impact they're making with participants and their retirement futures.

So, what are they doing that works?

1. Encourage (Mandatory) Meetings

While plan websites, call centers and enrollment materials are additive tools, they can't educate participants if they're not being used. Both Gelb and Fraser believe that getting in front of employees is the most effective way of delivering education and increasing participation rates. They host education meetings at their clients' facilities, working with plan sponsors to ensure that the seats are filled. They strongly encourage making the meetings mandatory. "If most of my clients don't buy into it in the first round, they do shortly afterwards," says Fraser. For companies with 200 employees or less, Gelb also knows that if the CEO and the CFO show up at a meeting, the rest of the employees will, too.

A lot of what happens at these meetings is basic. "Live within your means," says Gelb. "That's probably the biggest message that needs to be sent at education meetings." Fraser talks about deferring as much as you can without dramatically affecting your lifestyle. "Small life choices can have a great impact down the road in terms of deferral rate. So you have to live today, but what can you change today that's going to dramatically affect how you live in the future?"

2. Speak at Their Level

"I think you really need to get down to the average person," says Fraser, who leads Retirement Benefit Group's Passion for the Participant program. Both want the participant to open up and feel comfortable, so they prefer to dress casually to create a more approachable atmosphere. Time is spent talking about contributions, how critical to success a healthy deferral percentage can be and what simple investments can get you there versus discussions about alpha and beta. "When I was with Morgan Stanley Smith Barney (MSBB), we took over a $35M plan with 2,200 employees. We held 27 meetings over a five-day period. We did small group meetings, with seven advisors in the room. We had fun. Each was about 20–30 minutes, and we talked about very basic information," he says. "We brought it back to simple concepts such as diversification and rebalancing, and let them know that target date funds offer both. We talk about the importance of dollar cost averaging and encourage participants to 'stay put' during volatile markets."

"After each meeting, we sat with employees to help them make their choices." Of course, Gelb and Fraser meet with more sophisticated investors and have higher-level discussions about plans' total investment options but find that most employees want— and need—simplicity.

Since a 401(k) plan is only as good as its participation rate, Gelb finds that working with plan sponsors to autoenroll (or re-enroll) employees into a QDIA when converting plans often tackles the first hurdle to get participation rates up while addressing the simplicity factor in education meetings. "I'm currently converting a $4M plan, with 1,700 people in the company of which 600 are eligible because the rest are union. But only 100 people are in the plan. So, we recommended they auto-enroll into a QDIA during the conversion. Once employees are on board and participating, model portfolios are typically the default choice within the plans they oversee, which cuts down on the need to plunge into the deep end of the portfolio construction pool."

3. Make it Relevant

Both Gelb and Fraser use some form of personalized, targeted communication that ties it back to the individual participant and makes it "real," such as a projection statement that highlights their retirement shortfall at age 65 or a postcard that highlights catch-up contributions for those over 50. Fraser insists on having access to participant data so that he can slice and dice data in order to uncover areas of need. Gelb is an advocate of risk tolerance questionnaires for those who want to build their own portfolios. Fed with more personal data, Gelb rolls out Merrill's Goal Manager Model Portfolios and Advice Access Program to help participants compute how much they need to save in order to achieve 80% income replacement ratios. He also works with the recordkeeper and human resources staff to use targeted communications to address a variety of topics, including insufficient diversification. "We've had these conversations with HR staff to remind them that they are, along with the CFO, fiduciaries in these plans and that they have responsibility to the participants to share these observations," he says. "If the participants don't want to do anything, that's okay. But the check mark is there and serves as a record that they've been informed."

4. Give Them Personal Attention

What really sets these advisors apart is the amount of one-on-one attention that participants receive whenever needed. Fraser says, "One of the key ways I can effect change and increase participation rates is to get in front of employees, and to do that, I make a commitment to the client for a certain number of advisor education days—say 50, and I stick to it."

Gelb sometimes posts a sign-up sheet at the company education meeting so that employees can come in throughout the day to share thoughts about saving. Both had inspiring stories of how they had gone the extra mile with a participant, and how that extra effort had resulted in a participant that was helped through a potential financial disaster. "We have discussions all the time with people through the 800# to our team," says Gelb. "Sometimes it's about maximizing their Social Security. Sometimes it's how to manage their debt issues. We do just about anything for participants. Unfortunately, there hasn't been a great deal of financial mentoring in this country to help people get to retirement." Fraser often talks about personal finance in his 1:1 sessions to help identify ways they can save more, such as qualifying for the tax savers credit (of which only 10% who qualify take advantage of) and consider enrolling in a Roth 401(k) if offered. "Our whole goal is to get that deferral rate up."

5. Provide Value to Plan Sponsors

Gelb and Fraser emphasize how their education meetings help increase participation and deferral rates, which are key success measures for 401(k) plans. As more plans are benchmarked against industry peers, a focus on education and its impact for plan sponsors is part of their value proposition. Fraser believes that offering personalized education is a differentiator and helps him retain business. "Right after an education meeting, I got a call from the CFO of a $35M plan, saying 'thank you for a fabulous job today' because I took some additional time with one of their employees."

DC plans require specialized knowledge, and both were quick to suggest that advisors who specialize in the defined contribution market provide much greater long-term value to plan sponsors. "When I take over a plan, I typically learn that they haven't seen or heard from the advisor on the plan in years. I can tell from looking at the fund menus that they're stale. In contrast, we help companies build competitive retirement programs," says Gelb. In some cases, Fraser will work with the provider to take over the education portion, thereby keeping the costs down. Both find ways to partner with advisors who may be closer to client locations and who are interested in learning the peculiarities of the DC business.

Beyond Education

Whether it's helping plan sponsors be better fiduciaries or playing a key role in helping participants retire well through education and plan design, having expertise in this industry is critical. As the industry moves toward specialization, Fraser says, "I'm hopeful that people understand that this is a very different business. There are advisors out there who are under-pricing and under-valuing what we do. We have a very important job and it's a difference maker to participants; our fees should match our expertise and the value we bring to the plan."

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