The 20 Rising Stars of Retirement Plan Advisory 2008

“The overall trend is still upward,” Hogg said, “but what is happening now is a huge shift to target-maturity funds. Plan sponsors are simplifying their programs and their messages.” She noted that employees will always need a mix of ways of getting to where they need to be. But the original idea of educating them to ensure they do the right thing ran up against the reality of the time and the confidence it takes on the part of individuals to do what they need to do—even if they want to do it. Perhaps most telling in Hewett’s analysis was the importance of personal interaction. Of the nine methods commonly used to communicate investment concepts, the overwhelming winner was on-site seminars, workshops and meetings. About 90% of employers were using them, and close to half of those rated them ‘very effective.” Only 5% rated them ‘not very effective.’ The next best methods overall were targeted communication, personalized communication and one-on-one counseling or financial planning. In contrast, the clear losers were written materials, on-line guidance tools, call-center counseling and on-line seminars. The last was used by about half of employers, but only 12% rated it very effective while 19% rated it not very effective. being stuck between 68% and 75% for several years, according to Joyce Von Lindern, benefits manager. She noted that her staff and her plan provider, Fidelity, worked hard to get participation up to three-quarters from the depths of 38%, where it stood as recently as 2000. “In our most recent efforts, we have tried to contact people who have never participated or who have opted out,” Von Lindern said. “We found that, for the most part, people were not taking the time to read the material. There also were misconceptions about how the plans worked. We are now doing communications pieces with less detail, just the main ideas. We also have added a special section for new hires to help them catch up.” Sentara operates seven hospitals in the Tidewater region, as well as a nursing home, health insurance and a family-practice doctor group. All together it has 18,000 employees ranging from service-level staff with a high-school diploma to postdoctorate medical specialists. Von Lindern said the personal outreach, as well as the automatic enrollment and incremental increases starting this year, are beginning to make a difference. “We have a Fidelity rep who comes down one week each month and schedules meet- plan “People need personalized information. The challenge toeducation sponsors and providers, of course, is that more personalized can be more expensive and time consuming.” — Barbara Hogg “There is something telling there in employee behavior,” Hogg said. “People need personalized information. People like learning from others and hearing their questions answered. The challenge to plan sponsors and providers, of course, is that more personalized education can be more expensive and time consuming.” One other finding that jumps out of the Hewett survey is that there remains a huge opportunity for plan providers to increase participation and also pave the way to capture additional assets. The number of employers that did not provide any investment advisory services to employees in 2007 was a hefty 44%. Granted, that was down from 51% in 2005 and 56% in 2001. But it still means a lot of low hanging fruit either for the companies’ current provider to offer highervalue services, or for a competing provider to offer a more complete solution to the employers’ 401(k) administrators. From Theory to Practice Real-life examples bear out Hewett’s findings. Sentara Heathcare, based in Virginia Beach, Va., recently saw participation in its 401(k) and 403(b) plans start to rise again after SEPTEMBER 2008 ings one-on-one,” she said. “We also are working with Fidelity right now on a campaign to encourage people to start or increase their participation right now, while the market is down.” Beyond the obvious benefits for the employees, Sentara gets better service and the plan provider gets more assets. “Increasing participation does attract increased services from Fidelity,” Von Lindern said. “It also helps us with retention. Investor education gives us what we need as we give them what they need.” Von Lindern noted that there is no firm data to indicate that Fidelity captures additional assets outside the plans from Sentara employees, but anecdotally she said she knows of several such cases. “Once our people get that comfort level working with Fidelity, they are more likely to stay with them in other financial areas,” she added. The Behavioral Approach From the other side of the equation, plan providers are even more enthusiastic about new approaches to investor education. “Financial literacy absolutely means a lot of money,” RETIREMENT PLAN ADVISORY RISING STARS 7

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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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