401(k) Specialist Issue 3 - 2016 - 17

DELIVER 'MORE' FOR BETTER
401(K) PARTICIPANTS OUTCOMES
and yes, even advisors, seems a herculean
task, which-knowing Chetney's personality-is
probably the reason he's taken it on.
And like so many past and present colleagues
have come to expect, he has a plan.
" The key is to model financial wellness
programs like health and wellness programs
that we've now had for years, " he says. " We've
shown that if we cut out the cheeseburgers,
cigarettes and milkshakes, we have happier,
healthier and more productive workers. The
same goes for their financial health. "
Just like getting Americans to exercise
and eat right, it will involve a whole lot of
conversations, similar to what it took to get
them to invest in the first place-something
Chetney refers to as " back to the future. "
" When 401(k)s were this innovative
concept back in the 1980s, it took a lot
of conversations to get people to adopt, "
he explains. " We're not talking a lot as in
thousands of conversations, but tens-ofthousands
and even hundreds-of-thousands
of conversations. "
There first had to be a conversation to
get the employer of a small business to
understand and offer a 401(k) plan. Then,
at the participant level, every single one
had to be convinced of this crazy idea to
take money out of their paycheck and give
it to their employer, " which they probably
believed was going in the boss's drawer. "
It's one reason, Chetney argues, that it was
important to have name like Fidelity Investments
advocating for it, because no one
knew what it was-or at least not enough
to risk an investment.
" It took a lot of conversations to change
behavior, but that's where I think the industry
did a great job. They talked to the plan
sponsors and they talked to participants, and
now we have companies, the country and
the government all talking about why it's
so important. The government says I'll give
you a tax deduction, the plan sponsor says
I'll give you a match, and all of the macro
features and incentives are in place to emphasize
it's important. "
Institutionalizing financial wellness
programs-though growing effectively in
the mega plan space-will require the same
grassroots efforts by advisors. Conversation
after conversation, plan advisors are going
to have to help business owners and finance
departments alike understand how financial
wellness programs cannot only positively affect
their bottom line, but employee loyalty
and job satisfaction as well.
Like many 401(k) advisors and experts,
Chetney is happy with the way the industry
has handled the accumulation phase of
saving and investing that have gotten so
many participants to retirement. It's the
decumulation phase, or the through portion,
that's a bit more complicated, and has him
understandably concerned.
" There are a lot of successful people out
there that still have trouble with things like
simple budgeting, because they were never
taught. Accumulation and decumulation
are cool words for you and me, but 'save'
and 'spend' is what participants do. How
do we get them to slow down to the speed
of strategy and get them to focus on being
the CFOs of their family? How do we get
them to plan? For corporations, strategic
planning is all these exotic things. For a
family, strategic planning is basic budgeting,
planning for college, planning to buy a
house. [Financial education] didn't happen
in the home, it didn't happen in school, but
now there's an opportunity for it to happen
in the workplace. "
He believes that because the industry has
done such a good job at the accumulation
phase, participants who " do it right " will have
$3 million or $4 million for retirement. The
problem comes when these same participants
still nonetheless make $70,000 annually.
" Bad things can happen when you hand
someone a check of that size, " he laments.
" It's like when NFL players go broke so
soon after retirement. They have no idea
how to handle it, which leads to poor
decisions, and is the reason 401(k) financial
wellness is so critical. We've done well with
achieving investment alpha for our clients,
but now it's time to achieve retirement
alpha, which are simply better outcomes for
later in life. "
All well and good, but how will they
pay for it, or more specifically, how will a
The focus of conversations with plan sponsors
and participants needs to change, according
to Chetney. Bank of America Merrill Lynch's
" 2015 Workplace Benefits Report " found
that 83 percent of companies feel a sense
of responsibility for the financial wellness of
their employees. This goes beyond traditional
conversations about average account balances
and deferral rates, and brings employee
financial wellness and collective investment
trusts (CITs) to the forefront.
Future committee meetings need to focus
on quantifiable plan design and health, but
they also need to add qualitative aspects of
behavioral finance. How do employees " feel "
about their ability to budget? Their consumer
debt? Their ability to retire in the manner
they'd envisioned? Feelings - whether
positive or negative - drive most people's
behaviors. Often, a positive outlook will drive
more future positive behaviors, and conversely,
fear will drive continued paralysis or poor
decision making.
Financial wellness programs help advisors
and plan sponsors hone in on true behavioral
opportunities and focus programs and
content on helping employees have the
knowledge to make good choices and change
their behaviors. According the 2013 Financial
Finesse Return on Investment case study,
employees who take three actions to deepen
their financial knowledge increase their
401(k) deferral rate by almost 18 percent-
those who take five actions increase their
deferral rate by more than 43 percent.
As advisors and sponsors focus on changing
employee behavior, the emergence of CITs
available at all plan sizes allows advisors to
bring innovative investments that can help
drive positive participant outcomes. In many
cases, CITs will help rethink a plan's line-up
and offer same/similar investments at significantly
reduced costs to participants continuing
your focus on participant outcomes.
Have participants, advisors and sponsors
accounted for these changes in their committee
meetings? Have they changed their
own behavior to help meet the changing
dynamics of their committee members and
their employees? Now's the time.
ISSUE 3 2016 | 401kSpecialistmag.com 17
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401(k) Specialist Issue 3 - 2016

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