What Are YOUR Plan Performance Reports Telling You?

If you’ve been following along with our Top-Performing Plan blog series, or you viewed our three-part webinar series, you know that we believe that it’s essential for the retirement planning industry to hold itself to objective performance standards. They’re essential to help you, the fiduciary, understand exactly how your plan is performing.

We’ve talked about how, as a fiduciary, you want confidence that you’re providing your employees with a good retirement plan. But we’ve also explained that many people’s idea of good just isn’t good enough. We believe that a good plan is a top-performing plan wherein 1) the investment lineup outperforms, 2) the plan fees are low, and 3) the employees are better prepared for retirement.

Today, we’re closing out the six-part series with a focus on the importance of clear and easy to understand reporting.


Why reporting is important

The reports a fiduciary receives regarding the retirement plan are often the only way they can track the plan’s performance. Whether it’s tracking investment returns, plan fees, or employee retirement readiness goals, a report’s role is to share current progress and compare that to past performance. It should be simple and transparent, showing whether or not your plan lineup is performing well. We cannot stress how crucial good reporting is to a fiduciary’s ability to manage the retirement plan!


The problem with current reporting

A recent CFA Institute survey[1] showed that investors want transparency in the way fees are disclosed, and reports that are simple and easy to understand. Unfortunately, that’s not what they’re getting.

We think that there are three primary issues with the way most retirement plan reports are currently put together:

  • They are complex and hard to understand.
  • They place too much emphasis on methodology and filler information.
  • They are not focused on the right metrics.

For example, it’s not uncommon for an investment monitoring report to be up to 200 pages long. Those pages are filled with fund descriptions, graphs, charts, dates and percentages.  These reports explain in significant detail how each fund is tracked, and what calculations are used to determine performance. While all of that information is important for advisors to monitor, the average fiduciary (who also has many other work responsibilities) just doesn’t have the time – or the knowledge – to dig through that information to try to find the actual performance indicators for their plan.


A better way

Your plan performance reports should tell the whole performance story in a simple and easy to understand format. We think good performance reports should clearly:

  • Indicate the performance standard (the benchmark)
  • Indicate your plan’s performance
  • Indicate the benchmark performance
  • Indicate if you are top-performing (your plan is better than the benchmark)

In our opinion, performance reports should be separate from the other tracking and monitoring information that is often included with them. A fiduciary should be able to tell quickly how that element of the plan is performing, and how that compares to the last report.

As a fiduciary, you have a duty to do what’s in the best interest of your employees. You oversee, and are responsible for, the plan you are delivering to employees. The quality of your plan performance reports is only as good as your ability to understand them. Setting objective and meaningful standards (and then understanding those clearly) will help you ensure your plan is performing well.

If your plan performance reports are complicated and hard to understand, or you would like confidence that your plan is performing, please contact us at pensionconsultants@pension-consultants.com. We’d be happy to unveil the true performance of your plan!

[1] Source: https://nextgentrust.cfainstitute.org/wp-content/uploads/2018/04/CFAITrust-Global-Report.pdf
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