401(k) Specialist Issue 2 - 2016 - 35

PROVIDER PERSPECTIVE by Mario C. Giganti
How to Fully Optimize
Your 401(k) Plan Practice
AS EXPERIENCED 401(k) ADVISORS,
time is one of our most precious commodities.
We spend a significant portion of our
day and week meeting with plan sponsors
and participants. We also prepare, review,
research and assemble the information
found in the quarterly monitoring reports,
and determine the advice we provide to the
plan sponsor.
How we gather the information, input the
data, " crunch " the numbers, analyze the
results, research shortfalls, and determine
our conclusions is the most time consuming
and labor intensive part of the fiduciary
advice we offer.
To gain the most leverage, we must ask
MARIO C. GIGANTI
ourselves: What do plan sponsors actually
pay us to do? Or as Strategic Coach Dan
Sullivan asks, what is our " unique ability? "
As top 401(k) advisors, we must use the experience, knowledge and wisdom we've worked
hard to develop and package specific advice based on the information available. At fi360, we
describe this as a " call to action. " It is essentially our unique ability. While the plan sponsor
pays us to pull the information together (and it is required for us to analyze and give advice)
it is not the highest level of activity for which were compensated.
Therefore, to truly run an optimized 401(k) practice, we need to figure out how to leverage both
external technology (notice I did not say build your own technology) and internal people to provide
advice to as many plans as we can.
DATA INTEGRATION OF PLAN INFORMATION
Today, data integration is a key time saver. Most advisors spend significant staff resources
downloading custodial statement PDFs, finding information on specific holdings and then
typing in each holding's value into the reporting software. However, there are now multiple
software companies that bridge data between the custodian of the plan and your portfolio
monitoring software, thus eliminating the need to manually enter holding data.
If you work with five plans, this is not big deal. However, if you have more than 60 plans,
this can be a significant time-saver. Our office estimates this takes one hour for each plan.
Multiply that by the number of plans and then by the number of times reviewed during the
year - you can do the math.
DUE DILIGENCE CALCULATIONS AND PERFORMANCE ATTRIBUTION ANALYSIS
Most portfolio management software programs can automatically take the specific holding's
information and, with some plan specifics, calculate the fees and expenses charged to participant
accounts. It can then benchmark these fees against an established database of similar plans.
If set up correctly, the software also can automatically calculate the due diligence process
on all of the investment options and automatically identify any fiduciary shortfalls that
require further analysis by the advisor.
''Today, data
integration
is a key time
saver.
''
Many software programs allow the advisor
to analyze these shortfalls, document any
further research and summarize any recommendations
a single time to then populate
each plan that has that investment option as
part of its investment menu.
BATCH REPORTING AND CLIENT
VAULTS
Finally, the portfolio management
software can automatically " batch " reports
for every plan, and even upload them automatically
to the plans sponsor's client vault
(think centralized location of plan governance
documents) as evidence of their due
diligence file and monitoring process prior
to, or after, the client meeting.
Re-read the article I wrote for the last issue;
how we monitor plans on which we advise
can make the difference between profits
and losses. It's the area of the practice on
which we spend the most time. I have met
many supposedly successful 401(k) advisors
who had razor thin margins due to a manual
entry process for each plan, internal software
that constantly needs updating and lack of
consistency between plan sponsor reports.
Leveraging technology and people is a critical
step in optimizing your 401(k) advisory business-one
that fully maximizes profits.
Mario C. Giganti is an owner and chief investment
officer of Cornerstone Capital Advisors, a fee-only
registered investment advisory Firm in Ohio. He is
also an adjunct faculty instructor for fi360, a contributing
author of the Prudent Investment Practices
for Investment Advisors and Stewards and a CEFEX
Registered Analyst.
ISSUE 2 2015 | 401kSpecialistmag.com 35

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401(k) Specialist Issue 2 - 2016

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