The financial services industry has seen dramatic and impactful change in the last couple of decades and that change has accelerated in the last few years. One of the most affected areas is the retirement planning universe. Traditional retirement savings plans—like pensions—have become almost entirely extinct and the 401(k) and similar alternatives have taken center stage as Americans’ primary retirement platforms. This offers both opportunities and potential pitfalls for employers.
Traditional pension plans put the entire financial and decision-making burden for managing plans on the employer. The employer would make the investment decisions, decide how much to invest, where to invest, how much risk to take and what benefit to offer employees when they retired. As the post-World War II boom began to fade, this became more and more of an unbearable financial burden for companies. Lawmakers grew increasingly concerned as they realized firms might begin to voluntarily close or go out of business once their retirement plans became too much of a liability and that most start-up firms might simply stop offering retirement plans.
The 401(k) and similar plans were a replacement option designed to be less dependent on, and less expensive for, employers, as well as being transferable for the increasingly mobile employees. While the 401(k) and similar plans are not as burdensome to employers, it is critical employers realize they still have a duty to their employees regarding any retirement plan they offer. The DOL fiduciary rule, regardless of whether or not it is implemented, has opened up a healthy discussion regarding advisors and representatives and if they are putting their clients’ interests before their own. In the 401(k) world, it is important employers realize they have a similar burden regarding their 401(k) plans.
In the parlance of the industry, that burden—putting the employees’ interests before your own—is called a fiduciary burden. Most employers are probably not fully comfortable with the idea they have a fiduciary duty to their employees in regards to their 401(k) plans. The amount of fiduciary responsibility they have to their employees can vary depending on how the plan is set up and managed. The good news for those employers, and their employees, is partnering with advisors and managers who understand the fiduciary burden and are willing be partners in taking on some of the risk is not as difficult as it used to be thanks, in part, to technological advances.
By helping employees meet their retirement goals, and navigate investment choices, advisors can simultaneously take some of the liability off employers who likely don’t have the training, or time, to give retirement or investment advice. The opportunity to provide much needed assistance to workers trying to save for retirement, who may be hungry for advice under their current plan, is a good example of why many advisors got into the industry in the first place. The chance to help employers at the same time by simply being the best professional they can be is an extra reward. Client One believes there is tremendous growth opportunity in the retirement planning world, and we are actively building programs and partnerships to grow that business. If you are interested in joining us in that effort, please contact us at 888.909.9399.
FOR FINANCIAL PROFESSIONAL USE ONLY. NOT FOR USE WITH GENERAL PUBLIC.
CP-0892 – 2017/3/1