The 20 Rising Stars of Retirement Plan Advisors 2007 - (Page 13) sponsored article REDEFINING THE PARTICIPANT Generally speaking, there are three groups of plan participants and each group needs to be addressed in a different way: • Those who want to build their own retirement and investment plan (the “do it myself,” or “self-guided” individual.) This participant group is independent and self-assured about the market and investing. While retirement planning tools and education are made available by their employers or plan providers, in most cases they choose not to use them. Their needs are simple—they want high-quality investment options, or access to a self-directed brokerage account window. Generally speaking, this group is relatively small—perhaps 10% of all retirement plan participants fall in this category. • Those who want assistance and/or guidance in the form of some investment education and interactive tools (the “help me do it” individual.) This participant group wants to retain some independence in the planning process, but needs help getting started. In addition, they would like some guidance to help them maintain their portfolios over time. Depending on the industry, and participant demographics, this group typically is another 30 – 40% of the employee population. • Those who want advice or professional management of their account (the “do it for me” individual.) This participant group can be convinced that savings and retirement planning is important and necessary. However, they lack the knowledge, time and/or discipline to manage the process. Depending on the industry, and participant make-up, this group is typically 50% or more of the employee population. (As an aside, the industry seems to be responding to the needs of this group. According to the Profit Sharing Council of America’s 49th Survey of Profit Sharing and 401(k) plans, almost half of all 401(k) plans now offer a participant advice service.) While the characteristics of each group are distinctly different, there is one common denominator: once a retirement plan is in place, every participant needs continuous feedback along the way. They need to understand what progress is being made. A successful retirement plan, at its core, needs to be goal-based. It starts with a determination of retirement income needs based on an individual’s unique vision of their life in retireSEPTEMBER 2007 ment. There are really only two basic questions that a participant wants answers at any given point in time: at the rate I am saving, will I have enough money at retirement to fund my vision? If at a certain point in time, there is a projected income shortfall, what tactical solutions do I need to implement to get me back on track? THE STANDARD SOLUTION The Standard’s participant-centric solution addresses the unique needs of these three groups of participants. In addition, our solution includes a goal-based approach for each participant, regardless of which group they are in. Specifically, a gap analysis report is prepared for all participants that shows immediately whether or not they are on track to meet their stated retirement income goals—or are projected to have a shortfall. In the case of a projected shortfall, the gap analysis includes tactical solutions for “closing the gap,” such as increasing their contribution or revisiting their asset allocation strategy. 1. The Standard’s “do it myself ” (self-guided) solution. These participants want to actively maintain their investment strategy and portfolio themselves. The Standard makes it easy for them to revise their investment plan along the way, by providing them with retirement and investment planning tools; however, few true “do it myself ” participants will utilize them. The Standard solution allows this participant group to build their own portfolio in an open-architecture environment. They select from a list of individual, non-proprietary funds approved through our strict due diligence and investment selection screening process. This group may also select, if they so desire, a pre-allocated portfolio comprised of these same funds. Alternatively, participants may choose to invest through a self-directed brokerage window if it is made available to them through their plan. 2. The Standard’s “help me do it” solution. The Standard solution makes retirement and investment planning tools available to this group. Most of these participants will utilize these tools to validate their thinking process and decisions, while maintaining control. The tools provide suggestions, but the participant must “push the button.” Participants in this group tend to choose a pre-allocated portfolio versus building their portfolio from a list of individual funds. Utilizing easy-to-use tools to assess their risk RETIREMENT PLAN ADVISORS RISING STARS 13
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