Blog Post Retirement Plan Help

Does Your Retirement Plan Help You Attract Employees?

Does your retirement plan help attract employees to your firm? Really?  Are you sure?  If it does, how do you measure this?

The best way to use your retirement plan to attract employees is to contribute a lot of money!  For example, if you contribute 10% or 15% of salary, you will have an awesome plan.  This would definitely get the attention of recruits.

Can your business afford to put in 10% or 15% for employees?  I didn’t think so. If you can only contribute, say, from 2% to 4%, how do you position your plan?  Do you say things like:  you’re immediately eligible; there is no vesting schedule; there are awesome on-line tools; we offer an amazing selection of funds (by the way, be careful about promoting returns); there is a cool app for the plan; you can use an excellent investment management program for the plan; etc…

If you want to promote your plan it would make sense to have an aspect(s) of your plan that stands out from plans at the firms you compete with for staff. Some feature or component that genuinely makes your plan different.  And it would be great if you could succinctly explain to prospective employees, in maybe 20 to 25 seconds, why your plan is unique.   It would be even better if it is simple for people to understand and remember.

This is how we suggest our clients position their plan to prospective hires:  AT ABC, WE WANT TO HELP OUR EMPLOYEES PREPARE FOR THEIR FUTURE.  WE (CONTRIBUTE)(MATCH) X%.  OUR PLAN COSTS ARE (20%)(35%)(50%) OF THE INDUSTRY AVERAGE, WE OFFER LOW COST FUNDS FROM VANGUARD AND PERSONAL GUIDANCE TO HELP YOU ENROLL AND PLAN FOR YOUR FUTURE.

Would something like this work for your company?  If you cannot contribute a lot to your plan, is there anything about your plan that you can promote?  What is it? How does it work for you?

 

Vacation on an island

Should You (The Employer) Pay the Administrative Costs of Your Retirement Plan?

No.  Unless…

For competitive reasons you decide to pay for the costs of the plan.  In your situation, it may not be enough to provide an employer match or contribution to the retirement plan.  If you pay for plan costs and promote your plan during the hiring process, learn how to articulate the value of your plan to prospective staff.   Otherwise, what’s the point?  

OR

You simply WANT to pay for the benefit for your staff.  You are nice about it! Nothing wrong this, is there?  If you appreciate the work your employees do and want to help them accumulate more towards retirement, paying for the benefit makes sense.  This does happen – in the real world. Many of our clients take this approach.  Once again, make sure you get the credit you deserve.

CAN YOU DO THIS?

If your service provider “bundles” its product offering together, this is not an option for you.  This is crappy! Bundling fees together might be sold as a simple, turnkey approach but this is nonsense.  It is lame and antiquated. Virtually all independent record keepers can provide unbundled retirement plan service options.  An unbundled product is simple to administer, provides more choice over how you pay for services, and better clarifies how each provider is performing.

This is your employees’ money – it’s their benefit.   Most of the assets are employee deferrals and the long term benefit of the plan accrues to them.  As such, you are certainly not obligated to pay for plan services.

BUT  

AND THIS IS A BIG BUT!

If you decide not to pay for services, ensure that your employees pay, at the minimum, reasonable costs for the plan.  And it would be better if your fees are much lower than average.  The average fees for smaller employers are awful.  Don’t compare your plan costs to industry averages.  Most small employers can reduce their costs by 50 to 75% WITHOUT ANY SACRIFICE IN THE QUALITY OF INVESTMENTS OR SERVICES.

Don’t feel obligated to pay for your retirement plan’s services.  But if you choose not to, don’t use over-priced services and an out-of-date provider structure that forces your staff to pay far more in fees than they should.   Your employees’ money should go towards their future and not the bloated financial services industry.

How does your plan handle this?  Do you know who pays for which services?

Blog Picture - Vanguard

Why I Recommend Vanguard

BY USING VANGUARD FUNDS, I think my clients will have a higher likelihood of having more money in their accounts in the future than if they use comparable investments from other mutual fund companies.  Sounds like something Captain Obvious might say.

OF COURSE NO ORGANIZATION IS PERFECT.  Within Vanguard I am sure there are large and small disagreements on company direction. However, there are specific long-term aspects of the Vanguard approach which should help my clients achieve the best results.  The following are the top four reasons, in no particular order, that Vanguard helps me help my clients:

PROMOTION OF LOW-COST INDEXING.  Behind the legendary efforts of John Bogle, Vanguard has been the major driver in promoting the benefits of low-cost indexing, also known as passive investing, as the smartest way for people to invest.  They are not the sole provider of index funds, and there are many other champions, however they are clearly the leading proponents of this approach.

CONSISTENT MESSAGING.  By and large, the Vanguard message has been the same throughout the years.  Set-up a well diversified portfolio of low-cost investments and, thru the ups and downs, let the markets work for you.   Sure, they offer active funds and ETF’s.  However, their active funds are significantly less expensive than most and this has not diminished their advocacy of indexing.

VANGUARD DOESN’T PAY ADVISERS.  In an industry full of conflicts of interest, this is critical.  I receive no compensation or commissions from Vanguard to promote their investments.  Nothing. Zero.  Zip.  Nor do they assist my firm by sponsoring events or paying for our marketing efforts.  It has been liberating to provide my services to clients in a direct way.  My clients know exactly how much I make and who pays me (they pay us on a flat fee basis).  The guidance that I provide is no longer compromised by how I am compensated.

NO HYPE.  In all of my dealings with Vanguard, they have never hyped returns or products or “new” angles on investing.  This is very refreshing.  In my experience, I have come to believe that the more an investment is hyped by the financial services industry, the less good it is for the investor.  Of course education and guidance are important and part of the process in helping people become better investors and aware of their options.  But hype is something entirely different.  And I don’t get hype when I interact with Vanguard.

IT’S QUITE SIMPLE.  With my 20 years of experience, when I consider the factors important to investor success, I am confident that recommending Vanguard will give my clients the best chance to get the most return on their investment.

DREAMS

Can a 77 Year Old Have Dreams?

Is this an interesting or provocative question?  When do people concede their hopes for the future? How does it happen?  Certainly how a retiree, or an aging person, views their future will have a big impact on their quality of life.

Ken Dychtwald, founder of AgeWave, is a thinker on aging in America that I have been following for some time.   I enjoy his work immensely.  It has helped shape how I think of both my life and career.

In one of his talks, he relates the story of John Glenn’s effort in 1998 to go back into space at age 77.   At the time, this was met with some controversy.  There were those who thought it was a publicity stunt.  Dychtwald explains how, at a press gathering, Glenn was asked about this by a younger reporter.  Glenn’s response was: “Just because I am 77 doesn’t mean I don’t have dreams!”

Dychtwald relates this story in a very emotional and meaningful way.  I recall how he paused after sharing Glenn’s reaction to let the impact of his statement sink in.  It had a profound affect on the audience as it did me.

As you go through your day and life, don’t you find yourself thinking of the future?  Maybe the next 6 months or year.  Or maybe the next three, five, or ten years.   Sure, you may not want to travel in space, but you probably imagine yourself in a better place.  Your curious about what you will be doing and how you will relate to the important people in your life.  You wonder what might have happened and how things will have worked out.  What will you have accomplished?  What will you be like?

When does this end?  At what point do people spend more of their time reflecting on their past instead of looking towards their future?

This story reminds me of a sad moment over the Thanksgiving Holiday years ago.  I was visiting my dad’s Family in central Illinois.  My grandmother, in early 90′s at that point,  had given up on her future.  As we were talking, she said “I hate my life.”  She had lost her husband of over 60 years and her health was failing.   Her spirit and energy were gone – there was nothing to look forward to.  She was at the point where all hope was gone.

As you think of your future, and the future of the older people in your life, remember that having hopes, goals, and/or dreams is a great way to get as much out of life as you can.

What do you want to accomplish?  What is in your future?