PLANSPONSOR - January - February 2024 - 34

PARTICIPANTS
" Once we can
prove that
we can move
the needle on
[participant]
outcomes with
customization,
and we can do
it in a way that
is cost-efficient,
then that's
a win-win. "
don't think there's going to be just one
solution. It's going to be almost a tiered
approach to investment customization. "
Tech-savvy participants who need no
external motivation to engage, or handholding
when they do, may prefer to use
an asset-allocation tool. " The pro is going
to be the ease of access for participants.
It will be on the recordkeeper's site,
so it's easy for participants to access, "
says Jennifer Doss, senior director and
defined contribution practice leader at
CAPTRUST in Raleigh, North Carolina.
" There's also typically no additional cost
for using those tools. " Managed accounts
and one-on-one fiduciary-advice meetings
typically carry an additional cost.
The con of these tools is that participants
usually have to take the initiative
themselves to access a tool, and, once they
do, there is generally no one to talk them
through how to use it. Doss says that may
both curb participant uptake and limit
how much customization results when
someone does use a tool.
Some tools may not actually give
fiduciary investment advice, either, she
cautions. " Every recordkeeper has a tool,
but there are vast differences between the
tools. Some are much more bare-bones
than others, " she explains. " Sometimes
with these tools, you may assume they're
giving participants fiduciary advice, but
when you really dig into it, it's just an
educational tool. "
An asset-allocation tool also answers
one very specific question, says Keith
Kotfica, senior vice president and head of
employee planning at Edelman Financial
Engines in Boston. That question is: What
should the participant's asset allocation
be in his or her workplace retirement
account? Being able to get the answer to
that one question by proactively seeking
it will be insufficient to motivate most
people to engage, he says. " People are not
wired like that. We're wired to respond
to something, an event that's happening
in our lives [see sidebar]. As a result, the
tools that are just focused on asset allocation,
which have been around for years,
haven't moved the needle much. They
don't resonate with most participants. "
A managed account requires less
ongoing participant engagement
than
do asset-allocation tools, since, once
someone gets into the account, investment
managers oversee the portfolio on
an ongoing basis. These vehicles also
typically include personalized guidance
on retirement- related topics such as
maximizing Social Security and picking
a withdrawal rate.
Intellicents inc.'s bioni(k) managed
accounts, when they are used as a plan
option rather than a default investment,
often get adopted by 10% to 20% of a
plan's participants, says Grant Arends,
co-founder and president of retirement
services at intellicents, in Overland Park,
Kansas. When someone opts in, he says,
that typically happens after the person
has a one-on-one meeting with an intellicents
adviser, during which they talk
through what investment option would
work best for that participant's situation
and goals. " Someone is not going to
sign up for something, and pay more for
something, if the [person] doesn't understand
what it is, " Arends says.
34 PLANSPONSOR.COM January - February 2024
In the event that a participant signs
up for an intellicents managed account
and then provides no additional data such
as outside assets, the managed account
engine can pull data, including that
person's account balance, current deferral
rate, age and the plan recordkeeper's
projection of the person's retirement readiness.
" I can provide a customized portfolio
based on just that data, but obviously the
customization will be more effective if the
participant engages, " Arends says.
Participants who are interested in
Edelman Financial Engines' personalized
advice and go to the firm's website
are asked to provide some information
such as their risk tolerance, the age
at which they want to retire and their
outside assets. The site then gives the
individual
a personalized asset-allocation
recommendation, allocating among
the plan's investment options.
The participant may, from there,
either utilize the company's 3(21) fiduciary
investment advice service, working
online or with an Edelman adviser, or go
into a managed account and have professionals
manage the portfolio, plus have
adviser access as well. Overall, about half
of participants who seek a personalized
investment allocation decide to work with
the 3(21) advice service, and the other half
choose the managed account.
One-on-one meetings call for more
employee effort. Workers need to take
time for the meeting and be willing to
give input about their finances and goals.
But such meetings can help those individuals
with their holistic financial planning,
in addition to their retirement account's
investment allocation.
Moreover, Arends says, one-on-ones
with an adviser help with the two factors
that lead so many people to have messy
finances-apathy and lack of accountability.
But he notes a caveat: " Engagement
in one-on-one meetings will only work
well if, before that, we're in front of that
employee group in a mandated, or highly
encouraged, group meeting. If you're just
trying to get engagement in one-on-one
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