The 20 Rising Stars of Retirement Plan Advisory 2008

SPONSORED ARTICLE rate of almost 48% when participants are offered the Mainspring Managed service. In those plans that offer Mainspring Managed as an option, more than 58% of participants increased their contributions upon enrollment. And of those that increased their contributions, the average increase was 2.26% of pay (data is as of 2/29/08). asset allocation flexibility is far superior to an age-targeted or riskbased portfolio approach. Such solutions only incorporate an initial snapshot of risk tolerance and are not personalized to an individual’s unique needs. In addition, such investment solutions do not allow for change over time. One thing is certain: as the industry continues to respond to the retirement income gap dilemma in unique and practical ways, plan participants stand to benefit greatly. The increase occurs at least in part because each participant receives a customized Savings and Investment Plan Snapshot in their initial enrollment booklet. The Snapshot serves as a personalized retirement plan gap analysis. The gap analysis typically is an eye-opening experience and has served as a strong motivator for participants to overcome inertia and take action. Standard’s Approach: Up Close and Personal The Standard’s Mainspring Managed service goes beyond the traditional managed account/advice solution that is prevalent in the industry today. It is not just an investment plan; it is a formal, goalbased savings and investment plan implemented and actively managed by The Standard. Above all, it’s about addressing the needs of individual participants. The process of building a customized plan for a participant begins with the information included in the initial gap analysis report, which is given to each attendee at the enrollment meeting. From this information, a formal savings and investment plan is produced that focuses on achieving the participant’s projected retirement income needs. The managed account solution looks at each participant’s unique situation and determines an optimal course for the dependent variables of savings rate and asset allocation. Assets are invested among a series of broadly diversified, institutionally priced portfolios. Once a participant’s savings and investment plan is implemented, the account is reviewed on a quarterly basis. Outside assets, as well as spouse/partner assets, can be included in the plan if the participant wishes. Rebalancing or re-allocations are performed as necessary. Each quarter, participants receive a progress report, which illustrates progress made toward reaching their goals. In the case of a projected retirement income shortfall, tactical solutions are implemented (such as increasing the savings rate or revising the asset allocation strategy). The investment plan remains actively managed and assumes that a participant’s personal situation will change and evolve over time. As changes occur, the participant can call an investment advisor representative and have their savings and investment plan updated immediately. For example, a change in marital status usually requires an immediate update of the plan. Changes in a participant’s tolerance for risk over time can be incorporated into the plan as well. This SEPTEMBER 2008 Conclusion In conclusion, automatic enrollment in its current state offers certain advantages to plan sponsors and their employees. It is a step in the right direction. However, we at The Standard believe that a professionally managed saving and investment program is a much more holistic and individualized solution for the long term. Such a solution addresses the changing circumstances of the participant in a much more effective way. It should be considered as part of any plan design. We see others having success with managed account programs as well. Currently, 60% of Schwab’s plan sponsor clients make advice available to employees. The advice can be online, by phone or in-person. Although a relatively low percentage of employees use it (12%), those participants that did use it in 2006 earned a 3% higher return than those who did not (according to Schwab, as cited in the February issue of PlanSponsor Magazine’s “Riding the Tiger” article). Schwab also sees participant enrollment of 15% to 60% in managed accounts after one year, depending on employee demographics and the chosen implementation method. One thing is certain: as the industry continues to respond to the retirement income gap dilemma in unique and practical ways, plan participants stand to benefit greatly. About the Author: Chris Dugan is the director of retirement plans marketing at The Standard. He can be reached by email at cdugan@standard.com. About the Company: For more than 70 years, The Standard has provided retirement plan services to plan sponsors. Products are available on a full-service or recordkeeping-only basis through both a trust platform (in all states) and a group annuity platform (available in all states except New York). The Standard promotes a participant-centric approach with services such as Mainspring Managed, its managed account option for plan participants. For more information on The Standard’s retirement services, please visit http://retirement.standard.com or contact a pension consultant at (877) 805-1127. RETIREMENT PLAN ADVISORY RISING STARS 15 http://retirement.standard.com http://retirement.standard.com

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The 20 Rising Stars of Retirement Plan Advisory 2008 Contents Doing Well By Doing Good The Post-PPA Bounce Automatic Enrollment vs. Managed Account Unfair Advantage? You Bet The New World Order 20 Rising Stars of Retirement Plan Advisory Mentors’ Page

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