Written By:
Cody Mendenhall, CFP®, Executive Director
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Your Retirement Plan Needs Performance Standards
Last Updated: February 15, 2018
As a fiduciary, what you want most is confidence that you’re providing your employees with a good retirement plan. And, we know that a good plan is a top-performing plan. Makes sense. But many fiduciaries have no idea whether their retirement plan is a top-performing plan! Clearly, there’s a problem.
While most industries and professions have clear and measurable performance standards, the retirement plan industry has struggled to provide transparency into what should be its most valuable metric – plan performance.
What is a performance standard? A performance standard is an expression of the performance thresholds, requirements, or expectations that must be met to be appraised at a particular level of performance. Performance standards must be objective, measurable, and clearly understood. In short, a performance standard is a benchmark against which actual performance is measured.
We see performance standards everywhere, such as: measuring your child’s education using a grade point system; grading an NFL quarterback’s performance by using QBR; or tracking a mutual fund manager’s performance compared to an index.
However, the retirement plan industry is lagging behind other industries. Plan Sponsors and plan fiduciaries need performance standards to truly judge whether or not they are providing a good plan to their employees. A standard should be established for each critical element of the plan’s performance. Without performance standards, fiduciaries are left with misleading anecdotal measures like:
- the response time of call centers,
- 401(k) website hits or clicks,
- the number of flyers mailed or group education meetings conducted.
- the investment line-up is outperforming,
- the fees paid by the plan are low, and
- employees are better prepared for retirement.
