Retirement Services

Riding the Retirement Pipeline

Jefferson D. CheshierPresented By:

401(k) World Pre-2000

Successful Retirement Practice Model: Connect Prospect and Mutual Fund or Annuity Wholesaler

2011 NFP SCHOOL OF EXCELLENCEINTERNAL USE ONLY. Not for public distribution.

Tornado of Market Forces Since 2000

� Internet Bubble

� Terror Attacks

� War� Corporate

Fraud

� EGTRRA� PPA� Increased

Regulation� LaRue� Fiduciary

Liability


Fraud� Housing

Bubble� Too Big to

Fail� Recession� TARP� Stimulus

Liability� Fee

Disclosure� Asset

Allocation Scrutiny

� “Autos”� Fee

Compression

Current 401(k) World


More people are “less confident” about having enough in retirement

15

20

25

30 ConfidentNot confident

(%)

CONFIDENCE IN HAVING ENOUGH MONEY TO LIVE COMFORTABLY THROUGH RETIREMENT, 1993–2010 (%)


0

5

10

15

1993

1995

1997

1999

2001

2003

2005

2007

2009

Sources: Employee Benefit Research Institute and Mathew Greenwald & Associates, Inc., 2011 Employee Benefit Research Institute Retirement Confidence Survey.

Many Americans aren’t saving enough

REPORTED TOTAL SAVINGS AND INVESTMENTS FOR ALL WORK ERS (%)

$50,000 to $99,000 9%

$100,000 to $249,999 14%$250,000 or more 10%


Source: The 2011 Retirement Confidence Survey; EBRI, April 2011. Findings among those providing response (does not include value of primary residence or defined benefit plans).

Less than $50,000 67%

� 38% of 401(k) plans have automatic enrollment� Up from 23.6% in 2006

� 83.8% use Auto enrollment for new hires only� 75% of plans have a default savings deferral rate of 3% or

less

Pension Protection Act of 2006 hasn’t provided broa d structural improvement


lessDefault %

% of Plans

� 60.3% have no auto escalation or voluntary escalation only

Source: Profit Sharing Council of America 53rd Annual Survey, 2010

1% 2% 3% 4% 5% >5%

3% 13.1% 58.0% 8.2% 8.9% 8.9%

Bottom Line

As an industry, we are not helping enough Americans adequately prepare for their

retirement.


� What if this trend continues?

Bottom Line

We’ll get “help”


Bottom Line

So what can we do?

� Provide value to business owners� Provide positive retirement plan experiences to business owners

and employees alike

� Business owners want more by wanting less – GIVE IT TO THEM!


� Own the issues, then call in the cavalry

� Regulatory developments

� Industry and product developments

� Legal developments

� Investment developments

� Work with partners, but divorce yourself from provi ders

Advisor Alpha

What is ‘Alpha’?

� The abnormal rate of return in excess of what would be predicted by an equilibrium model

� How does an advisor provide alpha to business owners?� 10+ years ago: Fund Picking


� 10+ years ago: Fund Picking

� 5 years ago: Asset Allocation Funds

� Now: The Advisor. Those who can create good outcomes by demonstrating knowledge, active participation in al l plan matters with the employer and high general involvem ent.

Change in the 401(k) landscape has accelerated

A growing emphasis on plan

performance and business owner satisfaction


A focus on fiduciary responsibilities

An intense scrutiny of fees

Demonstrating value is even more important now

BENEFIT PRICE


Value

Help business owners understand and appreciate value

Business owners turning to advisors, now more than ever

20102008

69%plans sold using

an advisor

82%plans sold using

an advisor


an advisor an advisor

401(k) Exchange, May 2010.

Business owners have begun using advisors for these reasons

27%

34%

22%

Fiduciary concerns doubled since ’08


Less time to

manage the plan

Concerns

surrounding fiduciary

responsibilities

Plan investments

assistance

12%

Improvement of

plan performance

Business owners want more from their advisors now

A more knowledgeable advisor

35%4%Other

$2.5M to $10M plan size


Better advisor support

of employee education

Advisor to take

on formal fiduciary

responsibility

4%

4%

12%

12%

8%

27% Better provider

service

Advisor too expensive

To replace

a retired advisor

Percentages don't add

up to 100 due to

rounding.

Business owners want more from their advisors now

$10M to $50M plan size

21%

Advisor too

expensive

21%

More employee

education support

More value for advisor fees


7%

11%

14%

11%

14%

Better advisor support for

servicing requirements

Advisor to take on

formal fiduciary

responsibility

Better provider

service

A more

knowledgeable

advisor

To replace

a retired advisor

Percentages don't add

up to 100 due to

rounding.

Understanding key factors of business owner satisfaction is today’s opportunity

Plan sponsor

Plan performance


Plan sponsor

satisfactionComprehensive fiduciary assistance

Demonstrating value

Many business owners don’t fully understand all the ir fiduciary obligations

16%Somewhat

confident

Neutral

Not confident

Degree of confidence surrounding fiduciary obligations


19%

34%

Very confident

Confident

23%9%

confidentNot confident

Many business owners want advisors to take on a formal fiduciary role

Very important

28%

Degree of importance that an advisor is willing to take on

formal fiduciary responsibility for the plan

63%


35%

Important

28%

16%

2%

19% Somewhat important

Neutral

Not important

Advisors don’t take credit for the work they do

Plan sponsors say advisors….

Don’t document

activities performed

Don’t track

and report

time spent

Don’t point out

reduced risk due

to help with

sponsor’s


activities performed

66% 71%

time spent

on the plan

sponsor’s

fiduciary role

71%

This is a missed opportunity to discuss services and activities that they provide

when underscoring value to plan sponsors

Business owners need help to better understand fees

53% 63%


53%don’t fully understand

provider fees billed

to their company

63%don’t fully understand

fees charged

on plan assets

Advisors explain fees, but only half-demonstrate value for fees

How well an advisor proves his/her value

according to plan sponsors

Well 35% 17% Very well


Well 35%

Not well6%

Neutral18%Somewhat well 24%

17% Very well

Plan sponsors need, and expect, more from advisors

They’re looking hard at plan performance and

considering their satisfaction levels

2011 NFP SCHOOL OF EXCELLENCEINTERNAL USE ONLY. Not for public distribution.25

They’re facing increased scrutiny over fees

They want comprehensive fiduciary assistance

Summary

� Inflection point in evolution of retirement planning business� Consolidation + compression = consternation?� Opportunity!

� 408(b)(2)

� 3(21) vs. 3(38) fiduciary status

� Continually shifting political, regulatory and oversight environments


� Continually shifting political, regulatory and oversight environments

� OWN IT!

� Plan sponsors need dedicated professionals to help them manage their fiduciary responsibilities in the same way they need:� Attorneys for legal matters

� CPA’s for tax matters

� Consultants for resource optimization and strategic planning

NFP Retirement’s Mission

To help Advisors build and manage theModel 401(k) Practice, it must be:

Scalableand Profitable


Scalableand Profitable

How do we help you do that?

By providing you with the tools and resources to create efficient and repeatable processes

Process Powerhouse: Retirement Plan Advisory Group (RPAG)

� Complete Back-office Sales, Marketing and Service Solution for Committed Retirement Plan Consultants

Proprietary, CFA-led investment analysis process

RFP/vendor benchmarking

Plan review


Plan review

Marketing materialsEmployee education

� Saves: Hours of ‘In-house’ Preparation and Analysis

RPAG membership: $12,000 / year

Revenue Diversification

Maximize

Proprietary NFP Tools

and Resources

• NFP Executive Benefits• Rollover Blueprint

Model (Asset Retention)• Plan Benchmarking


Diversify Revenue

Maximize Participant Outcomes

Proprietary Tools

� Marketing brochures

� Plan diagnostic

� Employee survey

� Plan-level fee analyzer


� White papers

� Retirement Services Update

� Legal & Compliance Update

� PensionOnline

NFP Leverage

� National Relationships with Vendors� $55 billion in retirement assets under management

� Our leverage, your independence


Contact Information

Jeff CheshierDirector, Retirement Services(512) [email protected]


Retirement Services - NFP

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