Data dump bigger burden on retirement plan advisers

Retirement plan providers and financial advisers have an ace up their sleeve to strengthen their relationships with plan sponsors: data. As fund companies, record keepers and financial advisers prepare to disclose fees next spring to plans and participants, plan sponsors undoubtedly will question if they're getting value for their money, according to Joseph Ready, director of Wells Fargo Institutional Retirement and Trust. That's a good time for plan providers and advisers to use plan information to prod plan sponsors to step up deferrals or improve their retirement plan's standing among those of other similar companies. “A big part of what we'll be challenged with is the value to cost equation with fee disclosure,” Mr. Ready said at the 2011 SPARK Forum this week. “How we use data to get specific at the plan and individual level will drive us beyond the cost equation we're stuck in today: How do we make sure we start driving quantitative and predictable outcomes?” Integrating the use of data begins with zeroing in on a plan sponsor's goals. A big part of that is assessing how plan sponsors define success, be it improving participation rates or raising deferrals. At the same time, participants have their goals, largely based on replacing income and having a steady paycheck in retirement, Mr. Ready explained. Providers and advisers alike can engage plan sponsors by examining their plan data and seeing overall how many participants in a given plan are participating in the plan, increasing deferrals and ensuring that they're diversified — performing all three objectives instead of just one at a time, he added. Demographic data, meanwhile, can show where participants stand as far as contributing toward retirement versus other co-workers in their respective age group and can work on improving their deferral and participant rates. Providers and advisers can also harvest the data and benchmark where a given plan client stands against plans at peer companies, as well as plans with similar demographics at the provider. This way, plan sponsors see how they measure up against competitors and understand what they need to work to attract and retain employees. “Benchmarking against industry peers is essential,” Mr. Ready said. “This answers the question of what you should be shooting for: How does my plan compare against the people I'm competing against?” The comparison also allows plan sponsors to establish quantitative goals to improve their plan design and encourages them to take action. “You have a lot of plan sponsors who, whether they're parental or feel a shared responsibility, ask about improving retirement readiness because it's the right thing to do, and you have others who say the company down the street is trying to attract the same participants,” Mr. Ready said. “Showing them where their plan is short, versus their competitors', might get them to take action.”