During the NAPA conference last week in Nashville, Tn., 401kTV interviewed over 25 plan advisors. Most of our discussions centered on participant and employee education. Surprisingly, only one advisor actually set a goal of 100% education engagement with participants. That’s not to say that the advisors did not care about education, they care very much. The fact that only one in 27 advisors actually mentioned it reveals the state of participant and employee education and the challenges that lie ahead.
In the following article, Ardian Hasko lays-out a stark assessment of the retirement industry’s education efforts…and it is not an easy read if you are a plan sponsor or advisor.
by Ardian Hasko, Dominick & Dominic LLC
The elephant in the room that nobody in the retirement space wants to talk about is the nation-wide employee 401(k) education system. The reason why nobody wants to address it, it’s because the education rate is embarrassingly low, between 4% – 8%, although in reality it is really closer to 4% of all plan participants. The fault for this lies mostly with recordkeepers but also advisors that created the 401(k) educational system this is why:
- Recordkeepers (Fidelity, Vanguard, ADP & more) have always been offering participant education sessions where a representative shows up once or twice per year to tell you to invest in Large Cap, Mid Cap, Bonds, Index or Target date funds without any real insight, personalized understanding or depth of analysis. The system and the hours dedicated to such services for the participants have been insufficient, filled with jargon or incompetency and have not added value in the long run as statistics clearly show.
- Advisors in turn (minus a few exceptions) have been mainly focused on the relationship with the C-suite and on the investment options in the plan because their own practice management process doesn’t allow for additional time to educate participants hence abandoning the majority of participants that make up the most vulnerable part of the total assets in the plan. This below is an example of a real offering of change in the participant education process (not a joke):
Participant Survey Results Are In! After reviewing and analyzing results from your 401(k) participant surveys, we hear you loudly and clearly. We’ll expand our coverage to tailor results to your participants’ needs. In order of priority:
- Apply adult education techniques and principles to 401(k) education.
- Provide shorter group meetings, and offer more voluntary one-on-one meetings.
- Offer more proactive online and phone meetings. This is an outrage! This is a re-packaging of the same stuff delivered with a different name.
This is what the above really means:
- We will not treat you as kids any longer (Adult).
- We know that procrastination is an issue on 401(k) so we will NOT proactively reach out to you but will let you VOLUNTARILY reach out to us because our time costs a lot of money and let’s be realistic, you’ll never call.
- We will give you the illusion of more tools (online and phone) by lecturing you with the same one hour long PowerPoint presentations and jargon filled conference calls that you’ll either get nothing useful out of or that you’ll never attend.
This should be unacceptable to a plan sponsor or participant.
Solution?
We are proud to say that we’ve found it! We’re the first Retirement Advisory group in the country that has achieved 100% Employee Education Participation rates and we’re proud to say that we provide 12 educational meetings per year on a personal basis and provide the employer and plan sponsor with written documentation of the understanding and level of education provided. We were able to achieve this because we applied innovation and creativity to the process and put the client first. The results have been outstanding with increased participation rates, conversion 50% + of eligible, non-contributing members to active, increased annual deferral rate by more than 1%, 80% + participation rates, doubled participation in retailers and low average salary companies.
Plan sponsors: Do the right thing for you and your employees! Refuse an old system, that doesn’t work for anyone, and embrace the future in employee education: demand 100% employee education participation rates because it is possible.
Read my other articles for more straight talk and accessible and easy to understand content regarding retirement, finance and investments.
Ardian Hasko is a Financial Advisor with a specialty in retirement plans and individual wealth management strategies. He’s a Vice President of the Private Client Group at Dominick & Dominick LLC, a division of Wunderlich Securities. For more information or for any questions please reach out directly at: [email protected]
