Merry Christmas! Another year is about to close and it is a good time to remind ourselves of what is truly important in life, reflect on the past and begin making our plans for the new year.
Those of us in the retirement planning industry have spent the year working diligently to make the employer-sponsored, private retirement system work - in totality for all stakeholders. Each stakeholder rightfully demands attention, and must receive information and expert guidance for the system to work as intended.
The employers who sponsor the plans (plan sponsors) are one group of stakeholders. They have a unique set of needs as do another group of stakeholders, the fiduciaries of the plans who are charged with making decisions and overseeing the plan’s operation. Finally, we can’t forget the stakeholders that the private retirement system is intended to benefit – the employees and their families.
In the history of the employer-sponsored, private retirement system, it was the employers themselves that the marketplace first rushed to accommodate—after all, this was where the financial incentives were greatest. As a result, companies and private practitioners competed to satisfy the employers’ desires for low company expenses and fewer burdens on their internal staff, both of which directly affected the bottom line. Services were designed and marketed to give the appearance that the employer didn’t have much to do in the management of the plan and the fees were shifted from tangible corporate expenses (written out of the company checkbook) to the participant via investments and other expenses which were often not realized or noticed.
Later on, fiduciary duties came to light as plans were frequently poorly managed and the actual fees, although hidden, were very high. Therefore, in the last five to ten years, the marketplace has seen services developed to meet the needs of the plan’s fiduciaries and the retirement plan industry has improved dramatically as a result. Plans are now generally better managed, more competent in oversight and more transparent in their fees, which as a result, have significantly decreased.
Unfortunately, the intended recipients of this benefit, the plan participants, have been the last to get the full attention of the marketplace. That is not to say that there has been any shortage of marketing materials, colorful handouts, general training presentations and the like given to them but that there has not been an effective solution developed that fully addresses the needs of individuals planning for retirement.
Too many people are woefully unprepared for retirement as a direct result of the industry’s best and brightest devoting their energies to the employer (plan sponsor) and the plan’s fiduciaries. Next year we will be communicating to you our commitment to solving this problem. It isn’t going to be an easy problem to solve, but we can’t in good faith stand back and witness a problem that has become so glaringly obvious without taking action. Finding a solution is vital to the retirement health of our citizens and to the public policy of our nation, and even though it will take resources and dedication to create a better way to get individual employees ready for retirement, we simply must do something about it.
Beginning in 2012, we will accept the challenge and will take up the fight. I look forward to sharing more with you in the upcoming weeks and hope you will work with us to solve the final piece of the puzzle for an effective employer-sponsored, private retirement system.
Merry Christmas! May God bless you and your family.
