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THE OFFICIAL MAGAZINE OF THENATIONAL ASSOCIATION OF PLAN ADVISORS

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YoungGUNSTop 50 Plan Advisors Under 40

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A registered investment advisor, member FINRA/SIPC

“I’D LIKE TO OFFER PLAN SPONSORS SOMETHING

REVOLUTIONARY.#AdvisorVoices That’s why we introduced Worksite

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36 Does suitability equal FiDuciary? by Steven Sullivan FINRA’s guidance on rollovers looks a lot like fiduciary prudence.

40 View From the summit by John Ortman and John IekelA look at some high points of the 2014 NAPA 401(k) Summit.

44 rumble in the Jungle by Fred BarsteinA power struggle is emerging between record keepers and advisors.

49 naPa Partner cornerOur directory of leading record keepers and DCIOs.

Young guns by John Iekel

40

401k

44Featuring the top 50 plan advisors under age 40.

Cover Illustration by Tyler Charlton

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For the second year in a row, MassMutual is proud to win the Lipper Fund Award for Best Mixed Assets Small

Fund Group. This year we are also honored to win Best Overall Small Fund Group and Best International

Large-Cap Core Fund (MassMutual Select Overseas Fund).

We take great pride working alongside outstanding financial professionals and retirement plan sponsors,

and look forward to another year of helping participants retire on their own terms.

To learn how MassMutual Funds can help you and your clients, or to obtain a prospectus, call MassMutual

at 1-866-444-2601 or visit MassMutual.com/Retire

CELEBRATING.A REPEAT PERFORMANCE WORTH

TOTAL RETIREMENT SERVICES + TPA + DEFINED CONTRIBUTION + DEFINED BENEFIT + NONQUALIFIED + NONPROFIT + GOVERNMENT + TAFT-HARTLEY + STABLE VALUE + PEO + IRA

To qualify for the Lipper Mixed Assets Small Fund Group award, fund groups must have at least three mixed-asset funds. MassMutual Funds ranked #1 out of 37 eligible companies. To qualify for the Overall Small Fund Group award, fund groups must have at least three mixed-asset funds, three equity funds and three fixed-income funds. MassMutual Funds ranked #1 out of 26 eligible companies. Small Fund Groups are defined as having less than $50.7 billion in assets under management as of November 30, 2013. The lowest average decile rank of the three years’ Consistent Return measure of the eligible funds per asset class and group will determine the asset class group award winner over the three-year period. In cases of identical results the lower average percentile rank will determine the winner. Consistent Return measure does not reflect sales charges.

MassMutual Select Overseas Fund ranked #1 out of 42 qualified funds, which comprised 135 share classes in Lipper’s International Large-Cap Core Funds category.

All rankings are for the three-year period ended November 30, 2013.

Lipper, a wholly owned subsidiary of Reuters, is a leading global provider of mutual fund information and analysis to fund companies, financial intermediaries and media organizations.

Past performance is no guarantee of future results. Principal value and investment return will fluctuate, so an investor’s shares/units when redeemed may be worth more or less than the original investment. Investment portfolio statistics change over time. The investment is not FDIC-insured, may lose value and is not guaranteed by a bank or other financial institution.

Investors should consider a Fund’s investment objective, risks and charges and expenses carefully before investing. This and other information about a Fund is available in its prospectus (or summary prospectus). Read it carefully before investing. ©2014 Massachusetts Mutual Life Insurance Company. All rights reserved. MassMutual Financial Group refers to Massachusetts Mutual Life Insurance Company (MassMutual) and its affiliated companies and sales representatives. Principal Underwriter: MML Distributors, LLC, 1295 State Street, Springfield, MA 01111. RS: 33501-00

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ediTor-iN-ChiefFred barstein

PUbliShererik Vander [email protected]

ediTorJohn [email protected]

SeNior wriTerJohn [email protected]

ASSoCiATe ediTortroy [email protected]

ArT direCTortony Julien

AdverTiSiNG CoordiNATorrenato macedo [email protected]

NAPA offiCerS

PreSideNTsteven Dimitriou, aiF, PrP

PreSideNT eleCTJoseph F. Denoyior

viCe PreSideNTsamuel brandwein, qPa, cFP, cima, crPs

exeCUTive direCTor/Ceobrian h. graff, esq., aPm

NAPA Net the Magazine is published quarterly by the national association of Plan advisors, 4245 north Fairfax Dr., suite 750, arlington, Va 22203. For subscription information, advertising and customer service, please contact naPa at the above address or call 800-308-6714, or [email protected]. copyright 2014, national association of Plan advisors. all rights reserved. this magazine may not be reproduced in whole or in part without written permission of the publisher. opinions expressed in bylined articles are those of the authors and do not necessarily reflect the official policy of naPa.

Postmaster: Please send change-of-address notices for NAPA Net the Magazine to naPa, 4245 north Fairfax Dr., suite 750, arlington, Va 22203.

stock images: shutterstock

06 letter From the eDitorby Fred BarsteinMake your voice heard!

08 insiDe naPaby Steve DimitriouNAPA intensifies its efforts to engage members and Firm Partners.

10 insiDe the beltwayby Brian H. GraffRetirement: The new health care.

12 insiDe the lawby David N. LevineSignificant potential liability exists in three key areas of client services.

14 insiDe inVestmentsby Jerry BramlettTarget date funds: Is it time for professional intervention?

16 insiDe the Plan ParticiPant’s minD

by Warren CormierExplaining participant behavior via prospect theory.

18 insiDe the Plan sPonsor’s minD

by Steff C. ChalkA look at the unabashed needs of today’s plan trustee.

20 insiDe the stewarDshiP moVementby Donald B. TroneWhat is the “merely fiduciary” standard of care?

70 insiDe the marKetPlaceby Fred BarsteinPowerful forces are affecting all five pillars of the industry.

72 insiDe the numbersby Nevin E. AdamsA look inside EBRI’s 2014 Retirement Confidence Survey.

columns

70


those who make the extra effort — effort that may not result in immediate financial returns. But they are also the first ones to be hired and the last ones to be fired. n

ith this fourth issue of NAPA Net the Magazine, we have completed our first annual cycle. So far, the response has been positive. The magazine, the NAPA Net web portal the NAPA Net

Daily provide an integrated way for busy DC professionals to keep up with what’s happening on a daily basis, know what the industry’s thought leaders are saying and access a wealth of business intel and other resources.

I would say that NAPA Net is being heard loud and clear, with more than 30,000 reading at least one of our publi-cations. Many important decision makers in Washington and on Capitol Hill read the Daily. That helps fulfill one of NAPA’s main goals: to let Washington know that there are many accomplished and expe-rienced plan advisors out there who care and who are making a difference.

In this issue we highlight the emerging younger plan advisors, with NAPA’s list of “Top 50 Plan Advisors Under 40” — the first of its kind for our industry. There are a lot of great DC advisors, but it seems that the ones who get mentioned most often are older. This raises the question of where the new blood — the “Young Guns” — are coming from. In a market focused on retirement planning, we need to think

about the day when the current group of plan advisors rides off into the sunset. Who will be replacing them? Senior writer John Iekel tackles that question in our cover story.

The next market which will come under scrutiny by Washington is IRA rollovers. In a feature story on page 36, Steven Sullivan explains the new rules and requirements that are emerging. Look for increased activity by regulators and legisla-tors in the IRA arena.

Finally, as the DC market matures, a subtle power shift from record keepers to advisors, teams and broker dealers is taking place that can be, at times, uncom-fortable and contentious. Isn’t that usually the case with change? Read more about this power shift on page 44.

The DC market is constantly chang-ing. Retirement is becoming a top issue for politicians, employers, workers and the financial services industry. For NAPA and NAPA Net to stay relevant, we need your participation. We need to hear from you.

We are always looking for ways to in-clude new voices, especially plan advisors. So contact me if you want to contribute a post on NAPA Net or suggest an idea for a magazine article. And if you are concerned about what’s happening in Washington and want to make a difference, make sure you register for the NAPA DC Fly-In Forum at the end of September. Thought leaders are

l E T T E R f R O m T h E E d i T O R

FreD barstein » editor-in-chief

Make Your Voice Heard

W let washington know that there are many accomplished and experienced plan advisors out there who care and who are making a difference.”

l E T T E R f R O m T h E E d i T O R

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clear view of retirement,improving outcomes

We keep participants on course toward a funded retirement.What makes our approach to retirement readiness so effective is that it’s so

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if not, what steps they can take to improve it. Think how much more engaged your

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call 888-401-5826 or visit trsretire.com.

Securities offered through Transamerica Investors Securities Corporation (TISC),440 Mamaroneck Avenue, Harrison, NY 10528. Transamerica and TISC are af� liated companies.14599-FA_AD (01/14)© 2014 Transamerica Retirement Solutions Corporation


i N s i d E N A P A

Get Engaged!throughout 2014, we’re intensifying our efforts to engage with naPa members and Firm Partners at a deeper level,

by demonstrating the value naPa provides them — and the industry

NAPA can be aggressively proactive re-garding what advisors want to see from a regulatory point of view. But doing so starts with you. Look for and participate in a higher-profile and more active Govern-ment Affairs Committee this year under the leadership of Jeff Atcheson, QPFC, AIF. Also, join the quarterly member-only “Washington Update” webcast series that began in April. After all, you can’t change the discussion if you don’t know the issues!

Also, please consider donating to NAPA’s political action committee, the NAPA PAC. A healthy, funded PAC assures that our voice is heard where it needs to be. Thanks to the hard work of NAPA Political Director Jim Dornan and his staff, the NAPA PAC is fighting the good fight — making our views known and exerting our influence in the legislative arena. But compared with oth-ers fighting for the same brief attention spans of our legislators, they are doing it mostly by force of personality and effort. Think of what they could do if we can give them a level playing field from a budgetary point of view! A mere $50 or $100 per member would put our PAC in a position commen-surate with our standing and importance in America’s financial landscape.

In short, expect to hear more from me and NAPA. Telling you about what we are doing is all about demonstrating the value and the need for NAPA — for both indi-vidual members like you and for our Firm Partners. We want your attention, and we want your active support. After all, we are your voice. n

» steven Dimitriou, aiF, PrP, is naPa’s 2014-2015 President. he served as President-elect in 2012 and 2013. Dimitriou is a managing Partner at mayflower advisors, llc, in boston.

gaging NAPA’s Firm Partners more. Doing so begins with demonstrating the value of their relationship with NAPA. We began that process this year with the launch of NAPA’s 401(k) Practice Builder. We developed the Practice Builder to help educate our Firm Partners’ newer advisors and staffers about the marketplace and to help them build their businesses. But we will not end there — in conjunction with our Firm Partners, we are developing other potential education oppor-tunities as well, including in the credentialing arena.

This year will certainly see a continued push in our advocacy efforts. We are off to a fantastic start with the PAC’s success at the NAPA 401(k) Summit in March, but we must keep that momentum going. There are several issues looming over the course of this summer legislatively and from a regulatory point of view that we must stay ahead of: the fiduciary redefinition, IRA rollovers, congressional and budget proposals, and state-proposed plans.

With a little more support, I believe

would like to start my first column as NAPA President by thanking Marcy Supovitz, who served so well as our first President. The effort Marcy put into NAPA during the organization’s first two years was amazing and self-less. She essentially worked two jobs, and on behalf of the organization and

its members I want to express our deep grat-itude. Of course, I now have the enormous task of following in her footsteps!

What can the average NAPA member look for during my term? In one word, engagement. Our advocacy efforts in Wash-ington and our education efforts among our membership mean nothing if our members are not engaged and active.

To begin with, I want those of you who don’t even know you are members to become aware of that fact! Chances are that if you are reading this, you are a member. Whether you knew it or not, your employer (a NAPA Firm Partner) paid for your mem-bership.

For those of you who are aware, I want to convey the importance of what we are do-ing on your behalf in Washington and state capitals, and to encourage you to participate in those efforts. For example, the NAPA DC Fly-In Forum this fall will be bigger and better than last year’s inaugural event — and it is already the most unique event in our industry. Also, the NAPA 401(k) Summit is fast becoming our industry’s national convention, not just another conference. The work has already begun on next year’s Summit — keep an eye on NAPA Net for a unique voting tool (the same one we used last summer) that allows you to directly shape the Summit agenda.

One key to achieving my goals is en-

by steVen Dimitriou

I our advocacy efforts in washington and our education efforts among our membership mean nothing if our members are not engaged and active.”

9S U M M E R 2 0 1 4 • n a p a - n E t . o R g

KEEP YOUR RETIREMENTPLANSON TRACK

Investors should carefully consider a fund’s investment goals, risks, charges and expenses before investing. To obtain a Franklin Templeton fund summary prospectus and/or prospectus that contains this and other information, call 1-800-342-5236. Investors should read the prospectus carefully before investing.All investments involve risks, including possible loss of principal. Principal invested is not guaranteed at any time, including at or after the fund’s retirement target date; nor is there any guarantee that the fund will provide sufficient income at or through the investor’s retirement.Franklin Templeton Distributors, Inc., One Franklin Parkway, San Mateo, CA 94403 © 2013 Franklin Templeton Investments. All rights reserved.

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• We take a comprehensive, disciplined approach to risk management, looking at both risk and return from every angle—and at every phase of the investment life cycle.

• Each portfolio is backed by the breadth and depth of our global resources, and our 65+ years of experience investing across market cycles, asset classes and the world.

To see why Franklin LifeSmart is a smart choice for your clients’ retirement plans, visit franklintempleton.com/lifesmart.

USEN_DC_LIFESMART_ONTRACK_TRADE_10x12_NAPA_060114.indd 1 4/24/14 1:02 PM


i N s i d E T h E b E l T w A y

Dozens of states are now considering the issue of retirement coverage. why are states getting involved in erisa plans?

Retirement: The New Health Care

by brian h. graFF

that, why don’t they just do a 401(k)? For one thing, employees can save more because of the higher limits in a 401(k) plan. There is opportunity here — a rising tide lifts all boats.

The view of ASPPA and NAPA is that strategically we must participate in the legislative debate over these proposals. Our goal: to ensure that there will be a role for the private sector. If we don’t participate, it’s likely that state legislators will create a state-mandated program that only allows for a state product.

We’ve been 100% successful so far in those states we’ve been involved in. Assum-ing we can continue at that level, our expec-tation is that we can get legislators to allow the private sector to fulfill the requirement for coverage.

The reality is that state legislators are intent on doing something because not enough people are saving enough for retire-ment. We do face a challenge — there are too many people in this country who still lack access to a retirement plan at work. There are people here in Washington who want to blow the whole thing up and not have any private sector role anywhere. Our view is that we can expand coverage, in-cluding through an employer mandate, and show that the private sector is now playing a prominent role in solving that problem, and that it must continue to do so if we are to achieve the goal of expanding coverage.

The key is that as those of us who represent NAPA in Washington and in state capitals where these issues are being discussed get engaged, you do too. Get en-gaged with your local politicians; let them know your take on these issues as a success-ful member of the plan advisor community. We’re here to help you. n

» brian h. graff, esq., aPm, is the executive Director/ceo of asPPa and naPa.

their health insurance and health care deliv-ery systems, focusing huge amounts of time and energy on that issue.

But enactment of the Affordable Care Act essentially took the health care issue away from those state legislators. And that’s where retirement comes in. In an import-ant sense, retirement is becoming the new health care.

Typically, the retirement security bills introduced in state legislatures take a two-part approach. The first part is a mandate — a requirement that employers must offer some kind of plan, the minimum level of which would be a payroll deduction IRA, or an “auto-IRA.”

The second part is the state default option. The view among AARP and others is that the industry is ripping people off and only the state can provide a reasonably priced and reliably packaged payroll de-duction IRA. Our view is that since private sector products can pass the requirement, we’re pretty confident that with their focus on micro plans, payroll providers and others will be very successful in distributing their products and competing with the state product.

By way of analogy, we have found in the 403(b) world that when there is com-petition it is almost invariably the products that are sold that win the day, because someone is out there convincing someone to save for retirement. The reality is that products which are distributed through payroll companies are likely to be the more popular choice.

We believe that state mandates create an opportunity to upsell. Small business-es, which have always been reluctant to provide a 401(k) plan for their employees for many good reasons, would now be required to do something. So the question that naturally follows is: If they have to do

ith the nation’s retirement system “broken” — at least according to its crit-ics and a growing number of reports in the media, that is — but only modest interest on Capitol Hill in

tackling the access and coverage problem on a nationwide scale, a kind of retirement policy vacuum has come to exist.

But politics, like nature, abhors a vac-uum. And so the cause of retirement access is being taken up by state legislators around the country. Over the course of the last year, dozens of states have considered the issue of retirement coverage — most notably in Connecticut, California and Maryland.

Why are states getting involved in ERISA plans? Because state legislators want to do something. Recent polls have shown that retirement security has become the number one economic concern among Americans. So we know that members of state legislatures are hearing about the issue from their constituents.

But there’s more to this issue. In recent years, the attention of many state legislators has been focused on budgetary issues and health care. Some states — like Massachu-setts, for example — explored regulating

W

the reality is that state legislators are intent on doing something because not enough people are saving enough for retirement.”

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i N s i d E T h E l A w

Step Carefully: The Evolving Role of the Advisor

that is “fiduciary” advice. When an advisor is sitting in a one-on-one meeting with a participant and the participant asks, “What should I do?”, it may be hard for some advisors to say they can’t give actual advice. There are steps an advisor can take to limit his/her risks in providing participating education, but without stepping carefully, when a participant loses money because of education that became advice, the advisor could easily face liability as a fiduciary.

Plan Operational and Correction Advice In the course of their client relation-

ships, many advisors will hear this question: “We found a mistake in how we ran the plan; what should we do?” In addition, some advisors affirmatively take on a role of assisting their clients with questions about how to manage day-to-day oper-ations, such as implementing participant contributions through their payroll systems or fixing the failure to properly implement loan repayments or a post-termination distribution election. When an advisor steps into this role, the advisor can easily become a fiduciary for plan administrative — not just investment — activities, with the related fiduciary liability. Similarly, if the advisor’s advice is relied upon and turns out to be wrong, insurance coverage may not be available. As such, an advisor who elects to provide this advice should focus carefully on what is contractually agreed to, as well as which services are actually provided once the contract goes into effect.

Individual Wealth Management and IRA Rollover Advice

Some advisors include individual wealth management as a core part of their business model; others specifically elect not

to provide these services. In recent years, however, more and more advisors have been focusing on providing advice to participants on whether to roll over 401(k) accounts to IRAs. Although no one can know for sure until the “new” proposed fiduciary defini-tion (now called the “conflict of interest rule”) is issued, it is very likely that, not-withstanding the contours of DOL Advisory Opinion 2005-23A, IRA rollover advice is likely to be considered a fiduciary act when the definition of fiduciary is updated. If an advisor gets paid in any way for a rollover — from fees on the incoming rollover to ongoing fees that might be higher than the fees in the participant’s 401(k) plan — there probably will be significant prohibited transaction risks (and penalties) that an advisor could face.

There are many services beyond tradi-tional investment consulting that an advisor can provide to clients; we’ve only briefly touched on a few of them here. In the mod-ern retirement plan landscape, almost every activity an advisor undertakes involves risk. Avoiding all risk isn’t a practical solution. However, with some careful planning, ad-vice and counseling, an advisor can branch out into additional retirement-related activ-ities, provide quality services to clients and proactively manage its legal risk. The key is just to step carefully. n

» David n. levine is a principal with the groom law group, chartered, in washington, Dc.

or years on end, the advisor com-munity has been bouncing from one legal compliance requirement to another. Several years ago, fee disclosure was at the center of many advisors’ ERISA compliance uni-verse. In 2015, whether or not an

advisor is a fiduciary — and the extent to which they are involved with IRAs and IRA rollovers — is likely to take center stage.

However, the evolving legal require-ments which apply broadly to the retire-ment industry as a whole are only one part of the puzzle. As study after study shows, the fees paid in the industry for traditional “investment consultant” services are under significant pressure. As a result, many advisors have focused on additional services that they can provide to their clients. The decision to provide — or not to provide — services beyond traditional investment consulting is an individual one. However, should an advisor, whether consciously or inadvertently, provide a broader range of services, it is important to keep in mind that the key is stepping carefully because many of these services can open up new areas of potential ERISA liability. Let’s walk through three key areas: participant education, plan operational and correction advice and individual wealth management activities, including IRA rollover advice.

Participant Education An advisor can provide participant “ed-

ucation” in many forms, including services such as in-person group meetings, webinars, online programs and one-on-one counsel-ing. From a legal perspective (and under DOL Interpretive Bulletin 96-1), there can often be a fine line between education that is “non-fiduciary” in nature and advice

be careful: significant potential erisa liability exists in three key areas of client services.

by DaViD n. leVine

Fin the modern retirement plan landscape, almost every activity an advisor undertakes involves risk.”

Why view target date performance the same way when every client is different?

Call 1.800.638.7780 to request a prospectus or summary prospectus; each includes investment objectives, risks, fees, expenses, and other information that you should read and consider carefully before investing. The principal value of the T. Rowe Price target date funds is not guaranteed at any time, including at or after the target date, which is the approximate year an investor plans to retire (assumed to be age 65) and likely stop making new investments in the fund. If an investor plans to retire signi� cantly earlier or later than age 65, the funds may not be an appropriate investment even if the investor is retiring on or near the target date. The target date funds’ allocations among a broad range of underlying T. Rowe Price stock and bond funds will change over time, with a higher equity allocation initially. The target date funds are not designed for a lump-sum redemption at the target date and do not guarantee a particular level of income. T. Rowe Price Investment Services, Inc., Distributor.

When choosing a target date solution for your clients, performance is only one consideration. T. Rowe Price offers two target date solutions designed for different plan objectives, risk priorities, and participant needs.

To learn more about evaluating target date solutions, go to troweprice.com/tdf

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Step Carefully: The Evolving Role of the Advisor

i N s i d E i N v E s T m E N T s

arget-date funds have helped to advance diversification and risk-appropriate allocations more than any other asset allocation vehicle to date. They are easy to explain (match your target retire-ment date with the appropriate

fund) and adopt (check the box). They tend to achieve high adoption rates, especially when used as a default option.

One of the criticisms of TDFs is that generally they do not adjust their glidepath in a dynamic fashion based on market conditions. In most TDFs, participants are continually invested based on mostly static glide paths, regardless of changing asset class valuations. Given the bullet that many near-target investors dodged in the Great Recession if they remained fully invested, this issue of risk management within TDFs ought to be of growing concern.

High Equity Exposure in TDFs: Sounding the Alarm

A recently published book, Fiduciary Handbook for Understanding and Selecting Target Date Funds, by pension consultant Ron Surz, attorney John Lohr and ethicist Mark Mensak, sounds the alarm as to what the future of TDFs might hold. According to the authors, “Sometime in the future there will be a market correction of the magnitude of a 2008 or even a 1929. Un-less risk controls are tightened, especially near the target date, fiduciaries will be sued as a result of losses.”

The authors focus on the “Big 3” TDF providers — T. Rowe Price, Fidelity and Vanguard — which, they contend, “main-

The authors state that, “it is the height of folly to assume that a market trading at 45 times normalized earnings (Shiller/PE), as the S&P 500 was in 2000, can achieve similar returns to one trading at 7 times, as it was in 1982, let alone the expected returns of any reasonable glide path.”

They bolster their argument by demon-strating that, while valuations cannot tell us much about returns in the short term, over a longer period of time, “the correlation between valuation and subsequent stock market returns [increases] as the time hori-zon lengthens from 1 to 20 years.” The au-thors back this statement with an analysis illustrating that the correlation of valuation and future return is 20% over a 1-year period, and then rises steadily to more than 70% as the investment period lengthens to 20 years. Even 10-year returns have a 60% correlation between current valuation and future returns.

The connection between low valua-tions and outperformance is not new. The famed investor Benjamin Graham, in his 1949 book, The Intelligent Investor (which many consider the stock market bible) made a strong case for allocating invest-ments to securities with a low valuation relative to their intrinsic value. Robert Shiller, who has said that Graham inspired his valuation approach, states in Irrational Exuberance (based on a historical analysis of the relation between price-earning ratios and subsequent returns) that, “long-term investors — investors who commit their money to an investment for 10 full years — did do well when prices were low relative to earnings at the beginning of the 10 years

tain the same exposure today as they had in the 2008 fiasco. Setting the stage for a repeat calamity, this time much more devastating.”

A few weeks before that book was published, Grantham, Mayo and Otterloo & Co. (GMO) released a white paper, “In-vesting for Retirement: The Defined Con-tribution Challenge” that sounded a similar alarm. However, rather than simply take the position that TDFs’ equity exposure is risky, the authors focus on the need for TDFs to be managed as “valuation-aware” portfolios.

T

by Jerry bramlett

TDFs: Is it Time for Professional Intervention?many 3(38) investment advisors are in a position to look further around the corner and take the position that tDFs should be dynamically managed over time based on market conditions.

Just as there has been a slow awakening to the reality that Dc investors prefer a do-it-for-me approach to investing, over the last 5 years or so, we are seeing plan sponsors espousing the same view through the adoption of the 3(38) advisor service structure.”



and did do poorly when prices were high at the beginning.”

The S&P 500 average real return over different 20-year periods has varied a great deal over time. The worst 20 years since 1920 was 1961-1981, a period in which the annual real return averaged -2%. The best 20-year period was 1979-1999, when the annual real return averaged +8.2%. (Source: New York Times, Creston Research.) One major difference between these two differ-ent 20-year periods of performance was the normalized S&P 500 PE ratio (Shiller P/E) at the beginning of the 20-year period. At the beginning of the best-performing 20-year period (1979), the P/E ratio was 9.26, while it was 18.47 in 1961, the beginning of the worst 20-year period. A more recent comparison is 2009, when the P/E was at 15.17, and April 29, 2014, when it was at 25.1 (52.1% higher than the historical mean of 16.5%).

It is perhaps telling that the difference in earnings between the beginning of the best-performing and the worst-performing 20-year periods of the S&P 500 since 1920 is 9.7 while the variance between 2009 and 2014 is 10.13. There are many variables that can impact what is considered a market top (e.g., interest rates, inflation). However, could the market (based on current valu-ations) be set up for an extended period of underperformance? Just as investment returns can enhance investor outcomes, prolonged periods of underperformance can greatly diminish investor outcomes, espe-cially for those DC investors who are close to retirement and have less opportunity to recover.

The next evolutionary step beyond providing participants with an asset allo-cation recommendation is to dynamically manage the asset allocation process based on “valuation-aware” portfolios (to use GMO’s term). This strategy, however, requires a long view given that the impact of valuations on returns is mostly experienced over the longer term. As the GMO white paper states, “Cheap valuations don’t guarantee that returns will follow particularly quickly: val-uations mean revert slowly, typically revert-ing one-seventh of the way back to normal every year, meaning that stocks can remain cheap or expensive for very long periods of time.” To adjust a TDF glidepath based in

asset class valuations requires a disciplined approach that is difficult for many money managers, much less plan sponsors, to prac-tice. However, this could change as more and more plan sponsors continue to outsource the investment selection process.

To the Rescue: Investment Outsourcing Just as there has been a slow awakening

to the reality that DC investors prefer a do-it-for-me approach to investing, over the last 5 years or so, we are seeing plan sponsors espousing the same view through the adop-tion of the 3(38) advisor service structure. Much is made of the fact that plan sponsors can share more of the liability with a 3(38) investment advisor; however, that may be missing the point. It may be somewhat of a moot fact from a liability standpoint given the plan sponsor is responsible for hiring and firing the 3(38) advisor. Plan sponsors can reduce their work and perhaps improve investor outcomes, but they cannot get rid of their responsibility for oversight.

What is important, however, is that the plan sponsor (the non-investment profession-al) is stepping aside and allowing the plan advisor (the investment professional) to do their work, which, ultimately should result in better investor outcomes.

In balancing returns against prudent practices, plan advisors are in a better po-sition to understand the importance of the latter over the former. Plan advisors are also:• not inclined to have an emotional at-

tachment to brand; • better able to separate luck from skill as

contributors to performance; and • better able to take a long view toward

investment outcomes, such as pulling back equity exposure when market valuations begin to become unattractive from a future return standpoint.

ConclusionBy 2018, target date strategies are pro-

jected to attract 63.4% of 401(k) contribu-tions and have 35% of total assets (Cerulli Associates, March 2014). As of year-end 2013, three firms — Fidelity, T Rowe Price and Vanguard — held 73% of the TDF mar-ket (Morningstar). On average, the retire-ment-date equity exposure is approximately 55%. The risk that these firms expose them-selves to if they pull back equity exposure is

that the markets could continue to climb for longer than expected. In that event, reducing equity exposure would negatively affect 1-year and even 3-year returns. That is why it may be preferable to take the hit to return downstream, and thus end up looking no better but no worse than the other main competitors. This is bit of a Catch-22 problem for all TDF providers.

The way forward — if these funds continue their high equity exposure in spite of what many consider to be a high market valuation — will not be for the plan sponsor to step in and make a change. Generally speaking, they are too attached to brand and hesitant to second-guess these highly regarded money management firms. Though many 3(38) investment ad-visors find themselves in the same boat as the fund firms and plan sponsors, they are at least in a better position to look further around the corner and take the position that TDFs should be dynamically managed over time based on market conditions. This, after all, would seem to be the more prudent approach. n

» Jerry bramlett was the founder, president and ceo of the 401(k) company, the ceo of benefit-street and the founder/ceo of nextstep. currently he is engaged in industry consulting.

given the bullet that many near-target investors dodged in the great recession if they remained fully invested, this issue of risk management within tDFs ought to be of growing concern.”

TDFs: Is it Time for Professional Intervention?


Explaining Participant Behavior via Prospect Theory

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a loss relative to their reference point of take-home pay.

“But wait,” we say, “the participant keeps the money and also receives a gain in the form of the match.” From the employ-ee’s point of view, this exchange may be considered a loss. Why? Because for the typical human, the pain of a loss is twice as powerful as the joy of a gain. (If you are wondering, yes, this has been measured by scholars.) So right off the bat, if the match is less than 100% of the contributed amount, the employee will see this, accord-ing to prospect theory, potentially as a loss and avoid it due to loss aversion. But there is another powerful force that is reinforcing this sense of loss. It is called “hyperbolic discounting.” What is this, exactly?

Hyperbolic discounting is a phenome-non where people typically intend to forfeit small immediate gains for larger rewards in the future, but often fail to make the op-timal choice at decision time. The decision maker values the small immediate reward more than the larger future reward. “Would you prefer a dollar today or three dollars next year?”

When combined with loss aversion, hyperbolic discounting can easily offset the incentive of a match. In effect, we are asking employees to receive less take-home pay and defer immediate gratification so they can fund the expenditures of a retired person (themselves) whom they may not be able to relate to today. In that the employee dis-counts deeply the future rewards (retirement income) relative to the immediate “loss,” the employee either declines the invitation to participate at all or minimizes the deferral

receiving nothing.In actual experimentation, the vast

majority select Option 1, a sure profit of $5,000. However, the rational (defined by economists as “reasonable”) choice would be an 80% chance to gain $7,000, which has an expected value of $5,600.

This simple thought experiment can tell us a great deal about the mind of the partic-ipant. When we look at participant behav-ior we often scratch our heads and conclude they are behaving irrationally. Why would they pass up guaranteed free money in the form of a match? But this is our view from the supply side of the DC industry. From the participant’s view, it runs counter to their psychology.

First, we need to consider whether making a contribution to their retirement account is seen as a gain or a loss. To assess if something is a gain or a loss, there needs to be a reference point or neutral point against which all outcomes will be assessed. In the employee’s mind, that reference point is their take-home pay before factoring in participation in a DC plan. Upon learning about the DC plan, the participant may see

hile preparing to teach a 2-day course in behavioral finance, I found myself more closely studying and reflecting on Daniel Kahneman’s Prospect Theory. As you may know, he was awarded a Nobel Prize for

this theory. What essentially is Prospect Theory and why would I be writing about it in column dedicated to the “Mind of the Participant”? Because I believe it provides great insight into participation and deferral rate decisions.

The essential ideas in Kahneman’s Pros-pect Theory are that:• People do not always behave rationally. • There are persistent biases motivated

by psychological factors that influence people’s choices under conditions of uncertainty.

• Prospect theory considers preferences as a function of “decision weights.”

• It assumes that these weights do not always match with probabilities.

• These decision weights tend to over-weigh small probabilities and under-weigh moderate and high probabilities.

• Investors tend to evaluate prospects or possible outcomes in terms of gains and losses relative to some reference point rather than the final states of wealth. A simple example serves to clarify

what this all means. Consider the following choice. Which of the two options would you choose?• Option 1: a sure profit (gain) of

$5,000; or• Option 2: an 80% possibility of

gaining $7,000, with a 20% chance of

exploring the true meaning of rationality and irrationality, and their application to participants’ decisions.

warren cormier

W For the typical human, the pain of a loss is twice as powerful as the joy of a gain.”

i N s i d E T h E P l A N P A R T i c i P A N T ’ s m i N d

trustworthy and knowledgeable source. However, most participants don’t trust themselves to pick the right advisor and inflate the probability (in their minds) of picking a bad one. They obviously need your help and need to feel that they made the right choice.

When trustworthy and knowledgeable advice is offered through the plan sponsor, why do so few participants take advantage of it? Prospect theory is at work.

Finally, keep in mind that participants are not acting irrationally. Economists typ-ically equate “rational” with “reasonable.” In his book, Thinking, Fast and Slow, Kahneman points out that, “The only test of rationality is not whether a person’s beliefs and preferences are reasonable, but whether they are internally consistent … rationality is logical coherence — reason-able or not.” n

» warren cormier is president and ceo of bos-ton research group, author of the DcP suite of satisfaction and loyalty studies, and director of the naPa research institute. he also is cofounder of the rand behavioral Finance Forum, along with Dr. shlomo bernartzi.

rate in an attempt to minimize the pain of a loss.

Furthermore, in that people tend to evaluate prospects or possible outcomes in terms of gains and losses relative to some reference point (their take-home pay) rather than the final states of wealth (the value of the DC account many years in the future), the DC plan doesn’t look as good as we believe it to be — especially if we compare it to a DB plan in which there is certainty of a gain and no probability of a loss.

Now let’s assume the employee enrolls anyway. Let’s also bring in the fact that investment decisions must now be made and that those decisions are made against a back-drop of warnings that the employee could lose all of his or her account balance. Loss aversion kicks in to do double duty. As the example above shows and the theory states, people tend to overweight the lower proba-bilities and underweight the larger probabil-ities. Although the risk of losing $7,000 in the example is only 20%, in order to make the two choices equal in value (i.e., for the person to be indifferent), the probability of winning was weighted down, emotionally, from 80% to 71% (or $7,000 X .71).

Throw in on top of that a healthy dose of regret aversion and ambiguity aversion (fear of unknown risks) on a lack of invest-ing experience/confidence and you have a dysfunctional investor. As a result, herding behavior appears, in which participants begin asking co-workers what they did or asking HR staffers what they should do. This often results in bad advice for the partici-pant.

Enter the advisor. A high percentage of participants say they want advice from a

investors tend to evaluate prospects or possible outcomes in terms of gains and losses relative to some reference point rather than the final states of wealth.”

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i N s i d E T h E P l A N s P O N s O R ’ s m i N d

The Unabashed Needs of Today’s Plan Trustee required reading for all plan trustees who take seriously the role of overseeing the company retirement plan.

he majority of plan sponsor trustees realize they have an unfulfilled need for an unbiased source of reliable and practical information upon which they can depend. The astute plan trustee has awakened to the fact that the stakes are significantly

higher than plan asset values alone. The all-in stakes of today’s plan sponsor trustee include the troika of real asset values: the sum of plan participants’ accounts, what has been referred to as the “future dignity” of the workforce, and the financial viability of the plan sponsor.

The Thirst for KnowledgeOutside of corporate counsel and

boutique ERISA law firms, there are only a handful of sources that one might consider unbiased and reliable. While the aforemen-tioned counsel options are clearly the most reliable sources of unbiased advice, those options may be inaccessible to many plan trustees due to expense alone. In some situ-ations counsel has little interest in educating plan trustees since the rewards (attorney fees) for litigation or VCR submissions far exceed the legal fees associated with a few hours of preventive education. Sheer eco-nomics provide the legal community with an inducement to litigate over the preference for counsel to educate.

Plan trustees do not possess the expe-rience and awareness of an industry pro-

fessional. Part-time plan trustees are at the mercy of their professional contacts, which are normally limited or, for the recently appointed plan trustee, virtually non-ex-istent. A dearth of industry contacts may lead the newly appointed plan trustee to an Internet search and a range of choices when seeking knowledge.

The Hunger for Talented ResourcesA retirement plan committee is a dy-

namic group; annual turnover rates among committee members generally range between 15% and 30%. The size of a retirement plan committee is normally directly proportional to the size of the plan asset base; higher asset bases equate to a larger number of plan com-

by steFF c. chalK

T

Great-West Financial® refers to products and services provided by Great-West Life & Annuity Insurance Company (“GWLA”), Corporate Headquarters: Greenwood Village, CO; Great-West Life & Annuity Insurance Company of New York (“GWLANY”), Home Office: White Plains, NY; their subsidiaries and affiliates. The trademarks, logos, service marks, and

design elements used are owned by Great-West Life & Annuity Insurance Company. ©2014 Great-West Life & Annuity Insurance Company. All rights reserved. PT189627 (01/2014)

The sTrengTh of 100 years for a brighTer Tomorrow.

Just like the lasting strength of the Rocky Mountains, Great-West Financial® has endured peaks and valleys

in the market to become one of the nation’s top-ranked retirement solutions providers. Guided by our

core values of Partnership, Commitment and Integrity, we provide a superior experience to help prepare

our clients for a brighter tomorrow. Find out why we are a trusted

financial partner to and through retirement at www.greatwest.com.

PROOFING: Lasers: # ______ Contone: # ______ Dot Proof: # ______

Lo-Res PDF Lo-Res JPG

DISPATCH: Hard Drive Group Disk (e.g. A, B, C): _____ Individual Disk

FTP To: ______________________________________

Slingshot To: __________________________________

FILE TYPE: Layered with Fonts Hi-Res PDF OFG JPG

Layered w/ Outline Type

DUE DATE / TIME: _________________________________

NOTES: Build Size: 20" x 6" • Built @ 100% • 300dpi • Proofed @ 100% Bleed: .25” • Safety: .25”Pub: NAPA Net

GWFR05715313_Great_West_2014 Campaign_Underwriters_No_Tag

05/07/14

CMYK 100k

GWFR05715313_AD_NAPANet

Marquis 3226

Gardner 3017

Moyle 3362

Great_West_APS_Work

Zumbro 3428

Whitney 3036

Awwad 3437

Blake -3087

Hultberg 3049

Great-West Financial® refers to products and services provided by Great-West Life & Annuity Insurance Company (“GWLA”), Corporate Headquarters: Greenwood Village, CO; Great-West Life & Annuity Insurance Company of New York (“GWLANY”), Home Office: White Plains, NY; their subsidiaries and affiliates. The trademarks, logos, service marks, and

design elements used are owned by Great-West Life & Annuity Insurance Company. ©2014 Great-West Life & Annuity Insurance Company. All rights reserved. PT189627 (01/2014)

The sTrengTh of 100 years for a brighTer Tomorrow.

Just like the lasting strength of the Rocky Mountains, Great-West Financial® has endured peaks and valleys

in the market to become one of the nation’s top-ranked retirement solutions providers. Guided by our

core values of Partnership, Commitment and Integrity, we provide a superior experience to help prepare

our clients for a brighter tomorrow. Find out why we are a trusted

financial partner to and through retirement at www.greatwest.com.

PROOFING: Lasers: # ______ Contone: # ______ Dot Proof: # ______

Lo-Res PDF Lo-Res JPG

DISPATCH: Hard Drive Group Disk (e.g. A, B, C): _____ Individual Disk

FTP To: ______________________________________

Slingshot To: __________________________________

FILE TYPE: Layered with Fonts Hi-Res PDF OFG JPG

Layered w/ Outline Type

DUE DATE / TIME: _________________________________

NOTES: Build Size: 20" x 6" • Built @ 100% • 300dpi • Proofed @ 100% Bleed: .25” • Safety: .25”Pub: NAPA Net

GWFR05715313_Great_West_2014 Campaign_Underwriters_No_Tag

05/07/14

CMYK 100k

GWFR05715313_AD_NAPANet

Marquis 3226

Gardner 3017

Moyle 3362

Great_West_APS_Work

Zumbro 3428

Whitney 3036

Awwad 3437

Blake -3087

Hultberg 3049

And so plan trustees are accepting of the status quo when it comes to preserving their co-workers’ retirement plan assets. First and foremost, the role of a plan trust-ee is to preserve the asset base with which he or she has been entrusted. Reasonable growth and appreciation are expected, but they should never come at the expense of imprudent practices or unnecessary invest-ment risk.

Each and every plan trustee is well advised to become familiar with the con-cepts of a book first published in 1975, Investment Policy, How to Win at a Loser’s Game, by Charles D. Ellis. It addresses the confluence of knowledge and talent as it relates to investing and the resulting out-comes that are attributable to both actions and inactions. Penned well in advance of the current wave of interest in behavioral finance, it should be required reading for all plan trustees who take seriously the role of overseeing the company retirement plan. n

» steff c. chalk is the executive director of the retirement advisor university and the Plan sponsor university.

mittee members. Larger committees normally experience turnover rates that are indirectly proportional to the size of the plan assets. Conversely, smaller plan committees (that is, two to four members) usually struggle with the higher turnover rate, while larger com-mittees will experience a lower turnover rate among the committee members.

Large plan committees can comfortably absorb losing a single committee member each year, even if the departing committee member is the strongest of a team of eight or nine, while a small plan committee of three can ill afford to sustain the loss of a single committee member.

The Desire to Be a Better TrusteeVery few individuals head for work each

day intending to do an average job. The vast majority of the U.S. workforce arrives at work each day intending to perform at a lev-el that exceeds the average performance level of their peers and co-workers. Regardless of the circumstances or measures, most workers feel that they do perform at a level that is above average.

One exception to that pervasive self- assessment is in the area of overseeing the

company retirement plan and its assets, both financial and intangible. Retirement plan trustees, with few exceptions, become satisfied with surviving another quarter without a major self-inflicted mistake. When entrusted with the oversight of the compa-ny’s retirement plan assets and the favorable outcome associated with a coworker’s ability to retire with dignity, avoiding such a foible is perceived to be a success. Retirement plan committees should and do consider such an outcome to be a resounding success.

retirement plan trustees, with few exceptions, become satisfied with surviving another quarter without a major self-inflicted mistake.”


i N s i d E T h E s T E w A R d s h i P m O v E m E N T

’d like to propose that we start with an exercise: Consider the following five words that we often associate with a fiduciary standard of care: stewardship, loyalty, leadership, gov-ernance and trust.

Like the steps of a building, how would you arrange these words in ascend-ing order? Which word would you put at the base, the top, and in between? What is the hierarchy of these five terms?

Not an easy task, is it? And keep in mind these are terms we use every day with staff, clients and prospects.

Before I give you my answer to the hierarchy, a little background: I credit the origins of this article to John Taft, the head of RBC Wealth Management in the U.S. and author of the book, Stewardship. (A must-read, by the way.) John and I have had a number of intellectual discussions about leadership and stewardship, specifi-cally how the terms affect our understand-ing of a fiduciary standard of care.

It was during one of these discussions that he talked about the “merely fiduciary” standard of care. The first time I heard him make the reference I remember chuckling. It was like someone saying that Peyton Manning is merely a quarterback. Howev-er, after some consideration, I began to see his point.

It is not the place of regulators to be defining the gold standard for our profes-sion. To the contrary, the role of regulators is to define the minimum standard of care one must meet in order to conduct busi-ness. With regard to the current debates about subjecting more advisors and service providers to a fiduciary standard, it is

hierarchy will further illustrate this point.To begin, let me offer a definition for

each of the five terms.Stewardship is the passion and disci-

pline to protect the long-term interests of others — it is what you are willing to go to the mat for. My favorite quote to illustrate this point is from Ken Melrose: What does the organization, my stakeholders, need me to be today: a coach, a teacher, a decision-maker, a supporter, a listener, a pilgrim, a servant, someone who makes waves?

Loyalty is to be faithful and steadfast to principles and commitments. David Greene, of Greene Consulting, shared with me this quote from Horst Schulze, the founding president of Ritz Carlton: You don’t want a satisfied client — you want a loyal client.

The first time I heard that quote I did a double-take, as I did when John Taft first talked about “merely fiduciary.” What do you mean, you don’t want a satisfied customer? The explanation is exquisite: A client who is merely satisfied can be easily swayed to work with another advisor who is offering the same service for less or promising to deliver more for the same price.

Leadership to me means the ability to inspire and the capacity to serve. I credit one of my coaches, Lance Secretan, with introducing me to the concept that leader-ship is the ability to inspire others. Lance talks about the importance of understand-ing the difference between inspiration and motivation. Motivation is almost always negative — it’s trying to convince someone to do something that actually benefits you

becoming abundantly clear that if such regulations are promulgated, they will like-ly be de minimis standards — bronze, not gold. They will merely be fiduciary stan-dards: Are you a fiduciary? Yep. Check. The

The ‘Merely Fiduciary’ Standard of Carethese attributes can be used to substantiate the duality of the roles we typically have with our clients, where we are both leader and decision-maker.

by DonalD b. trone

I it is through both words and observable actions that we inspire others to follow.”

what is the hierarchy of the following steps? • Stewardship• loyalty• leadership• Governance• Trust


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ably be out of sequence for many of you. You might actually have put trust at the top of the hierarchy. After all, isn’t our primary objective to be the trusted advisor with our clients? That’s true, but what you’ll discov-er is that the remaining terms all build on trust. If there is no trust, there can be no sense of stewardship, loyalty or leadership. Think of trust as the cornerstone — remove the stone and the rest of the structure will fail.

Stewardship is next. To be a good stew-ard, you must be a trusted advisor. No one is going to believe that you are passionate about protecting their long-term interests if they don’t trust you.

Loyalty follows stewardship — it’s demonstrating that you are being faithful and steadfast to your stewardship princi-ples. Again, if people don’t trust you, they will not be loyal. And finally, at the top, is leadership.

So where does a fiduciary standard fall within this hierarchy? Fiduciary is the alignment of governance with trust. A fidu-ciary’s procedural prudence is defined by governance, and the principle of the “best interests of the client” forms the basis for trust.

Note that if we define fiduciary as the alignment of governance with trust, then stewardship, loyalty and leadership can ac-tually define a higher professional standard of care. Remember one of my opening com-ments: It is not the function of regulators to define the professional gold standard; their function is to define the minimum stan-dard one has to meet in order to conduct business.

We should all want to broaden and deepen the relationships we have with key clients. Through the eyes of our clients, we should not want to be viewed merely as fiduciaries; we should want to be viewed as leaders. n

» Donald b. trone, gFs® is the president of the leadership center for investment stewards and the ceo/chief ethos officer of the 3ethos. Don was the first director of the newly established institute for leadership at the u.s. coast guard academy; founder and past president of the Foundation for Fiduciary studies; and, principal founder and former ceo of fi360.

more than it benefits the other party. This is certainly true on Wall Street, where our industry is driven largely by fear, greed and ego.

In the words of Winston Churchill: You have enemies? Good. That means you’ve stood up for something, sometime in your life.

Governance is communicating and exercising your policies and procedures — what one must do to be in compliance. I define governance this way:

Doing the right thing, with the right people; At the right time, at the right place; With the right resources, with the right processes; For the right intentions, and for the right reasons. Trust is defined as the alignment of

principles with policies and procedures that, in turn, nurtures reliability and builds confidence. Stephen M.R. Covey, the author of The Speed of Trust (and the son of Stephen R. Covey, who is credited with writing 7 Habits of Highly Effective People), defines trust as the new currency of Wall Street: The ability to establish, grow, extend, and restore trust with all stakeholders — customers, business part-ners, investors, and coworkers — is the key leadership competency of the new global economy.

With each term now defined, how would you complete the hierarchy? This is my answer:

It starts with good governance; with your ability to clearly communicate your policies and procedures. This is also the point of compliance, which elicits the lowest form of personal behavior. For a number of firms in the financial services industry, there is no observable hierarchy above governance. Firms can demonstrate that they are in compliance with rules and regulations, but they struggle with building trust with staff and clients. Again, quoting from Covey: Compliance regulations have become a prosthesis for the lack of trust.

Trust is the next step, which will prob-

it is not the place of regulators to be defining the gold standard for our profession. to the contrary, the role of regulators is to define the minimum standard of care one must meet in order to conduct business.”

leadership

Trust

Stewardship

Governance

loyalty

A fiduciary standard is the alignment of Governance with Trust}



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S U M M E R 2 0 1 4 • n a p a - n E t . o R g 25

pon learning that the New York Journal had published his obituary while he was still very much alive, Mark Twain famously remarked, “The reports of my death are greatly exaggerated.” In similar fashion, some have pronounced the aging and eventual demise of the plan advisor community. But like Twain’s ill-timed obituary, those laments are greatly exaggerated.

The face of the future of the financial advisor world is there to see. Or more accurate-ly, faces. It’s not the face of an aging avocation. It includes the freshness and vigor of new members and a new generation. It’s ready to take the profession into the future. In fact, it already is.

Here we provide a look at NAPA’s “Top 50 Plan Advisors Under 40” — the vanguard that is taking the profession into a new day. But first let’s take a look at why fresh faces are good news for this industry, and what is being done to bring them in and nurture them.

Falling Numbers, Graying Demographics Cerulli Associates, a Boston-based research and consulting firm that specializes in the

financial services industry, has reported that there were 334,919 financial advisors in 2004, and 320,378 in 2010. Says Deena Katz, Associate Professor at the Texas Tech University Department of Personal Financial Planning, “Realistically all [U.S. college and university] programs graduated only about 1,000 students a year. Considering the need for financial advisors, the lack of people entering the field is really astounding.”

Scott Smith, then a senior analyst at Cerulli and now its director, told Forbes in an in-terview that several factors are to blame for the lower number of young financial advisors. He cited a lack of awareness about the financial advice field and what advisors do; the hit the financial professions’ reputation took during and in the wake of the Great Recession; reluctance to do the heavy lifting of a sales-oriented job; and fewer training programs.

And as if the shrinking of the financial advisors’ ranks wasn’t problem enough, it’s also aging. Cerulli reported that in 2011, financial advisors’ average age was 49.6. Mark Elzweig, who heads the executive recruitment firm Mark Elzweig Company, also has ob-served that the financial advisor community is aging.

Fresh OpportunitySobering demographics may suggest that the financial advisor community is in decline,

but other research contains the seeds of hope and potential growth. Says Katz, “There is a huge demand now. In fact, a Pershing study released in January estimates that we are 235,000 planners short for the demand.”

Even better, younger adults need financial advisors. Those 18-39 years old evince a long-term view toward finances that is receptive to

saving. Northwestern Mutual in its Planning and Progress 2014 Study found that 59% of adults in that age group consider themselves disciplined financial planners. Even more interesting, that age group has the largest percentage of any who hold that opinion.

That includes the youngest segment of that group, those age 18-29. Northwestern Mu-tual found that 62% consider themselves to be at least disciplined, if not highly disciplined, about financial planning.

That’s good news for savings and suggests that the prospects are good that those under age 40 will actively prepare financially for retirement and already have established that as a habit. And that bodes well for an industry that fairly recent reports have argued is in decline and perhaps even doomed. If younger adults are interested in saving and financial planning, they’re going to need advisors.

There’s even better news for financial advisors. According to Northwestern Mutual, 68% of Millennials say they could do a better job managing their money. Not only that — 28% are not sure where to find help with financial planning, and only 13% have a financial advisor.


sponsor is contacted by an advisor asking for their business. The Practice Builder provides foundational knowledge, and importantly, in the same way advisors will have conversations out in the field,” she added.

Craig Garner of Eldridge Investment Advisors, who chairs NAPA’s Retirement Plan Academy Advisory Group and was one of the people who created Practice Builder, agrees with Allen. Says Garner, “Advisors can no longer be salespeople. Selling plans is no longer a commodity. Advisors must be experts in their field, and leaders in the retirement industry. They must know more than the general-ities of investments and investing. They are expected to have the knowledge to provide guidance and advice that will al-low plan sponsors to offer more effective retirement plans, and to help employees make better decisions that will translate into a more secure retirement.”

But is just training after hiring enough? Katz doesn’t think so. “Most of these career changers are older, and not so much younger than the average age of cur-rent advisors. The industry is not investing in human capital. The future advisors need mentoring, training and experience. Big broker dealers will ‘steal’ reps from each other, paying large dollar bonuses to get them to move assets over.”

Katz doesn’t think much of this prac-tice, commenting, “This is like rearranging the deck chairs on the Titanic. If the in-dustry took half that money and invested it in educating the next gen, we’d be

All this spells fresh opportunity to the financial advisor community.

Building the Ranks To increase the number of financial

advisors to meet the need for their services, firms are training and recruiting new ones. But they aren’t limiting themselves to only doing that in the traditional way of seeking newly minted college grads.

One way is to recruit professionals who are already in the workforce and in the jobs they held built and used the skills a financial advisor needs. “New advisors tend to be people who have demonstrated success in a previous career,” Elzweig notes.

Why would a financial advice firm want established professionals? For one thing, says Elzweig, they “have contacts whom they can approach for business.” He adds, “Some simply have the maturity and life experience to credibly approach investors many of whom are in their 40s and up.” Katz agrees, noting, “They want to hire guys with graying hair and a big rolodex.”

Cerulli’s Smith agrees, and identifies two more reasons. “Basically, firms see it as cheaper to recruit,” Smith says, adding that firms see “better results with career changers than recent college grads.”

Steff Chalk, Executive Director of The Retirement Advisor University (TRAU™) at the UCLA Anderson School of Management Executive Education (and NAPA Net the Magazine columnist), prefers to look beyond age, and sees experience as more important. “Experience is a phenomenal feature,” he says. Chalk argues that learning can — and should — occur independent of age. “If someone ceases to learn and ceases to seek out knowledge, that’s a problem.”

To Chalk, “client demand, legislation and the rapid speed of change” are “the real issues.” He added, “If an older advisor is still able to stay current on legislation, regulation and client needs, I don’t see age as a factor.”

Still, firms are not ignoring the more traditional route of recruiting young profes-sionals and making their own home-grown financial advisors. “Historical [financial] wire houses have excellent programs to educate their advisors,” says Chalk, noting that education can take place outside the classroom: “Individuals can achieve a des-ignation and gain knowledge by experience

and non-designation programs.” Elzweig confirms the existence of in-

house training programs. “Firms are hiring new advisors and putting them in lengthy 2-3 year training programs in which they work with a senior advisor team.” And big players are in on the act. Edward Jones, Raymond James, Johnson Financial Group and Merrill Lynch all seek new financial advisors for their workforces; Merrill Lynch alone hired 2,000 in 2010.

Katz sheds light on why financial plan-ning houses provide training. “For the most part, they are either hired without formal training in personal financial planning, or they take a certificate program to get their CFP. The curriculum of the certificate programs is what the CFP Board dictates ac-cording to their job studies.”

Employers also can turn to other parties to train future financial advisors or hone their skills. For instance, NAPA offers the NAPA 401(k) Practice Builder, an interactive online program that provides straightfor-ward explanations of complex industry topics in a way that relates it to situations students will encounter as advisors. Its stu-dents can work on the five program modules at their own pace.

“Today, advisors need not only sales skill, but expertise,” says Lisa Allen, ASPPA’s Director, Institutional Training Sales. “Plan sponsors are far more knowl-edgeable [today] and know what questions to ask, and advisors are expected to know how to answer. Competition for plans is pretty fierce — just look at the stats on how many times per year the average plan

Curricula that center on building the knowledge and skills students will need and use in order to be financial advisors are necessary in building the ranks of the advisor community.”


advisors, which it delivers onsite, as well as through e-learning and self-study. And it affords advisors and wholesalers the opportunity to earn certifications relevant to plan sponsor clients, prospects and the retirement industry itself.

TRAU is the result of a collaboration between UCLA’s Anderson School and financial advisors in the retirement plan in-dustry. As such, it follows an approach that centers on academic studies as well as their practical application. Ultimately, it seeks to empower financial advisors to help their clients have a financially secure retirement.

But of course, there are undergraduate programs. Says Chalk, “There are tracks in the university environment for those who want to be part of the financial advisor community.”

And changes in the industry itself may in the process help in enlisting new, young advisors. For instance, there is “movement among a significant percentage of firms” to change the way financial advisors are paid, according to Millennium Career Advisor President and CEO Ron Edde. “I don’t know that it’s tectonic movement,” says Edde; still, he notes, many firms seek to tie compensation to performance and add targeted bonuses.

“All the wirehouses would like to see compensation be decreased,” Edde says. “They would prefer to force advisors to accept salaries with bonuses” as opposed to a commission payment structure.

Wells Fargo Advisors is one. Rachelle

Of course, actual curricula that center on building the knowledge and skills students will need and use in order to be financial advisors are necessary in building the ranks of the advisor community. TRAU is a prime example.

TRAU is not an undergraduate pro-gram; it is a program that provides training to people who already are in the field. To carry TRAU’s C(k)P designation, an advisor must have three years in the retirement planning field and oversee at least 10 retire-ment plans with total assets of at least $30 million.

TRAU is the first retirement planning certification program associated with a nationally recognized institution of higher learning. It offers a comprehensive re-tirement training program for financial

solving this problem much sooner. As long as the industry is still looking for just good sales people instead of good advisors, it will be difficult to overcome the issues. One recruiter for a large BD told us that they aren’t interested in our kids and whatever education they are getting they don’t care about.”

And that is less than ideal, Katz indi-cates, since that approach may serve firms’ bottom line in the short run but ultimately does not serve clients well. She says, “My only thought on that is, as a consumer, do I want someone who knows how to sell me product or someone who knows how to help me solve my financial issues?”

So if Smith is right about why young people are less than enthusiastic about entering the profession, what can be done to change that? Katz offers some ideas. “I think we need to start proactively meeting with high schools and colleges, providing financial literacy programs and educational experiences that will demonstrate what a planner really does and how helpful we can be in the lives of families.”

In addition, she thinks that will help counter the bad reputation advisors, like many in the financial sector, have had in re-cent years. “Bad press paints all of us with the same brush. I don’t think students, and probably most people in this country, really know what to expect in a relationship with a financial advisor. True planners and not high-pressured sales guys, hot-shot stock jockeys or greedy cheaters.”

Firms are putting out the welcome mat for college grads with degrees relevant to the industry.”



Congratulations, Tim VerSchure of Lakeside Wealth Management, for earning a spot among the Top 50 Plan Advisors Under 40 by NAPA.*

Tim’s vision and determination make him a leader for all generations of fi nancial advisors who are dedicated to excellence in this industry. First Allied is committed to supporting growth-focused advisors like Tim who see the tremendous opportunity that exists in the retirement planning and rollover marketplace.

*Based on criteria including current and new defi ned contribution AUM, defi ned contribution plansfor past 12 and 24 months, and votes from National Association of Plan Advisors members.

First Allied Securities, Inc. – Member FINRA/SIPC

For additional information about First Allied, please call 855.846.9203 or visit our website at www.fi rstallied.com.

Tim VerSchureLakeside Wealth Management

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Alex Assaley Commonwealth

beau beaullieu CoSource financial Group, llC

Goran bojovski merrill lynch

Julie braun morgan Stanley

daniel buxton robert w. baird

mary Caballero lPl financial

brian Catanella UbS

rich Cawthorne Alpha Pension Group

michael Chisnell Sequoia financial Group, llC

Peter Ciovacco morgan Stanley Graystone

John Clark lPl financial

Jason Cohn raymond James

dominic Corleto wells fargo Advisors

luke Costello morgan Stanley

brady dall lPl financial

Jim detterick morgan Stanley

Stephen dopp Cafaro Greenleaf

Keith dressel morgan Stanley

michael duckett NfP

Stephanie Gallegos Commonwealth

Joel Gershon merrill lynch

Jeffrey Gratton Sageview Advisory Group

david Griffin lPl financial

Chad Gutner Commonwealth

TOP 50 PLAN ADVISORS UNDER 40


RETIREMENT & BENEFIT PLAN SERVICES

*For more information about NAPA’s “50 Top Plan Advisors Under 40,” please see the June 2014 issue of NAPA Net, or visit the website at www.NAPA-Net.org

The National Association of Plan Advisors (NAPA) is a nonprofit organization dedicated to providing a voice in Washington and beyond for the leading retirement plan advisors in America. NAPA is not affiliated with Bank of America Merrill Lynch.

Bank of America Merrill Lynch is a marketing name for the Retirement Services business of Bank of America Corporation (“BAC”). Banking activities may be performed by wholly owned banking affiliates of BAC, including Bank of America, N.A., member FDIC. Brokerage services may be performed by wholly owned brokerage affiliates of BAC, including Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPF&S”), a registered broker-dealer and member SIPC.

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We applaud you!

Bank of America Merrill Lynch congratulates the following Retirement Benefits Consultants for being recognized by NAPA in the category of Top 50 Plan Advisors under 40*.

Goran Bojovski Merrill Lynch Financial Advisor The Gsell Group Edison, NJ

Joel Gershon Merrill Lynch Financial Advisor The J & R Group Chicago, IL

Michael Ribich Merrill Lynch Financial Advisor The J & R Group Chicago, IL

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Austin Gwilliam 401(k) Advisors

Jamie hayes lPl financial

Jonathan houk valmark Securities

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Sarah Keibler lPl financial

Shawn Kersjes oppenheimer & Co.

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michael Palmore wells fargo Advisors

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Jeffrey Petrone Sageview Advisory Group

michael ribich merrill lynch

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Paul Sommerstad blue Prairie Group

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Craig Stanley Summit Group of virginia

melissa Stewart raymond James

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Timothy verSchure first Allied Securities

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TOP 50 PLAN ADVISORS UNDER 40


but also more unstable, commission-based compensation structure that has been the industry standard.

What is less clear, according to Edde, is how long such a payment approach would continue for a new advisor. “The interest-ing thing to watch is whether firms will insist on that being a permanent payment structure, or letting them go to the com-mission structure” later. At this point, he notes, firms are trying this to see how it’s received. “They’re all playing this by ear,” he observes.

But adjusting compensation packages is not all the industry is doing; it’s also devel-oping new ways to support young advisors. For instance, the National Association of Insurance and Financial Advisors has formed a Young Advisors Team (YAT). Its mission is to inculcate the value of mem-bership in the organization with new and young advisors. More importantly, YAT seeks to empower young financial advisors to, as it puts it, “survive their first years in the business” and become successful and

thriving advisors.

Hope Amid Change So there is hope for the industry after

all. Its members appear to be aware of the need to shift gears and do more to attract and build new advisors. And comments by TRAU’s Chalk indicate that there is some movement in adding younger people to the ranks of financial advisors; he said that “there are a lot of individuals that I would estimate to be about 55 [years of age] and over,” but he also said that there are “a lot of individuals 35 and younger.”

And firms are putting out the wel-come mat for college grads with degrees relevant to the industry. Katz says of the graduates who studied financial planning at Texas Tech, “We have no problem placing students. Our kids come out with a degree under one arm and four job offers under the other.”

So if there is not yet a new face at the water cooler, there very well could be in the not-too-distant future. n

Rowe, the firm’s VP of External Commu-nications and Corporate Communications notes that Wells is piloting such a program. She indicates, however, that the program “is in the early stages” and that at this point they “have not implemented any changes in the way we pay and train our financial advisors.”

Edde says that he “knew for a fact that plans were set up for this” at Bank of Amer-ica Merrill Lynch as well.

For some industries, for instance real estate, employees may more readily accept salary-based compensation due to the some-times unpredictable and unstable nature of their business and income-generating transactions, according to Edde. He did not number the securities industry among them, but coupled that observation with an important caveat: Young advisors are open to salary-based compensation, even if their more seasoned counterparts are not.

Edde confirms that younger advisors are attracted by the security of a consistent salary as opposed to the more lucrative,

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Interviews with leading providers, advisors and broker dealers discussing important topics and updates about them and their firms (5–10 minutes).

MAGAZINE

NAPA Net —The Magazine includes articles and columns focused on the practicing plan advisor published by their own association as well an industry resource directory. It features a mix of articles and regular columns by noted experts and advisors to help practitioners keep informed.



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The advisor firms referenced above are separate entities from LPL Financial.

CONGRATULATIONS TO THE LPL RETIREMENT PLAN ADVISORS NAMED TO NAPA NET’S LIST OF “50 TOP PLAN ADVISORS UNDER 40.” To learn why LPL has more advisors on this list than any other firm, call 1-800-877-7210, ext. 6128 or visit JoinLPL.com. Mary Caballero

HEESTAND COMPANY

John ClarkHEFFERNAN FINANCIAL SERVICES

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Brady Dall401K ADVISORS INTERMOUNTAIN

David GriffinATLANTA RETIREMENT PARTNERS

Trey JamisonCHASE DOMINION ADVISORS

Sarah Keibler CLEARPOINT FINANCIAL

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Does suitability equal Fiduciary?


by steVen sulliVan

Finra’s “reminder” that bDs consider and evaluate more than seven relevant factors to determine suitability when recommending a rollover looks a lot like the prudent process required of a fiduciary.

401k


Does suitability equal Fiduciary?

us and you roll that over … You know there are quarterly fees in a 401(k). They haven’t always disclosed that but there is just some legislation now where now it’s going to be requiring 401(k) administra-tors to disclose their fees. But, you know, our accounts have no fees.”

And another: “It makes no difference on our end. I’m just trying to let you know that if I were in your shoes, and you are not wanting to use the money for a loan, I would head the IRA route.”

So that’s it, right? Two choices: Roll the money into the new employer’s 401(k), or roll it over into the service provider’s IRA. Oh, and maybe a third: Take the money as a loan.

Well, no. Those are not the only choices, as any competent financial advisor knows. If a participant has more than $5,000 in her account, she can leave it in the old plan or roll the funds over to a sim-ilar qualified plan with her new employer. She could simply take the cash and pay the tax and whatever penalties might apply. Or she could roll it over into an IRA. Each of those decisions has its own advantages and disadvantages, and depends heavily on the participant’s own personal situation. Automatically rolling over to an IRA may not necessarily be the best move.

“If an employee of a 401(k) plan I’m an advisor for calls me and says she’s leaving the company and wants to roll it over, my response has always been to explain all her options,” says Jay Sims, president of Columbia Retirement and Investment Services, Clarksville, Md. “I’ll give her an objective evaluation of her options. If she likes the investments and expenses in her current plan compared to the other options, then she should stay there. A disadvantage may be a lack of consolidation — a 401(k) here, an IRA there. But whatever her decision, I will still be available to help her.”

To be fair, some feel that GAO inves-tigators weren’t talking to the right people — operators in retail call centers rather than specialists at a retirement desk. And

Generally speaking, automatic enrollment in 401(k) plans is considered a good thing. It bypasses employee inertia, increases partic-ipation and improves the overall retirement picture for millions of Americans. But when complex retirement decisions on the other end — like what a terminated employee should do with the balance in his 401(k) account — are made on autopilot, things can get tricky. Especially when sales commissions may be setting that autopilot.

Broker dealers (BDs) are interested in the 401(k) business, of course, but they’re also very interested in the rollover business because it’s much bigger. Rollovers are so big, in fact, that record keeper Charles Schwab was willing to walk away from $25 billion in business because the firm had been denied access to 401(k) participants. Why? Because the money isn’t in record keep-ing fees; it’s in rollovers. According to the Investment Company Institute, there’s $6.2 trillion in IRAs, much of which comes from DC plans.

It’s probably not surprising, then, that rollovers have attracted the attention of regulators. In March 2013, the Government Accountability Office (GAO) released a report, “401(K) Plans: Labor and IRS Could Improve the Rollover Process for Partici-pants,” that was commissioned by members of Congress who wanted to know why so many 401(k) participants were rolling over their account balances into individual re-tirement accounts (IRAs), and whether they actually understood what they were doing.

To find out, GAO investigators posed as 401(k) participants who were leaving their current employers and called 30 providers’ representatives to ask about their alterna-tives. And they recorded the conversations. Here’s a sample of what they were told:

“So [401(k)s] restrict your choices. But you know the reason why they have to re-strict your choices is because they can’t really provide much guidance. So what we have here is we open up … your choices, but we also have the resources to provide the guid-ance, so we can still act as fiduciary and you will not get hurt … So just open an IRA with


tion to invest the new IRA assets in one or more securities.”

Baffling BalloonsIt’s not surprising that investment pro-

fessionals, not to mention plan participants, may find this confusing. Especially when two of the major industry referees, the DOL and the Securities and Exchange Commis-sion (SEC), haven’t yet decided exactly how they’re going to call it. They’ve dropped hints and floated balloons, but so far no official pronouncements.

One of those balloons, floated by the SEC, is a proposed “uniform fiduciary standard” that would apply to both BDs and investment advisors. Which may sound good on the surface, but one major difference between a BD and an advisor is how they’re compensated. Broker/dealers are supposedly less objective because they’re paid com-missions and have no duty to monitor an investment once they sell it; it just has to be suitable. Advisors, on the other hand, are perceived to be more objective because they charge fees and are responsible for monitor-ing their clients’ investments. Yet the SEC proposal doesn’t intend to change any of that, just make them both fiduciaries.

That is only going to make things more confusing, not less. “Depending on what DOL comes out with, and depending on what it says about IRAs, this could very much affect the industry and the relationship of participants with their advisors,” says Ron Triche, NAPA’s director of government affairs. “Let’s say the DOL does change the rules and makes a person a fiduciary on the IRA side. As a fiduciary under DOL, unless there’s a prohibited transaction exemption (PTE), they can’t get commissions. On the DOL side, they’d be fiduciaries on both the pension side and the IRA side. But on the SEC side, they can still get commissions on the IRA side. So they’re caught in this conundrum: Because I’m a fiduciary now under the DOL rules, I can’t give you advice on your IRA rollover. Under the SEC rules I could, but as a fiduciary under the DOL rules I can’t. Depending on what comes out, you could very well have people in the investment industry who are not able to continue their relationships with their clients who’ve been relying on them for years.”

So FINRA holds BDs to a suitability

acknowledges their complexity, and asserts FINRA authority over any recommenda-tions a BD might make and any marketing information regarding IRAs. “Any recom-mendation to sell, purchase or hold secu-rities,” the Notice says, “must be suitable for the customer and the information that investors receive must be fair, balanced and not misleading.”

This is particularly important, the No-tice says, because any compensation a BD or advisor receives from a rollover recommen-dation constitutes a clear conflict of interest.

“It seems that FINRA is applying a fiduciary standard on the advisability of rollovers while using the word ‘suitability,’ says Chad Wilson, director of investment consulting for PSA Financial Services in Bal-timore. “But it doesn’t look or smell to me like a suitability standard. Telling somebody to roll over money to an IRA, whether it costs more or you’re getting a commission or there’s a conflict of interest, can very eas-ily meet a suitability standard. What FINRA is applying is a best-interest standard, which is a fiduciary standard. But they never use the word ‘fiduciary.’ The suitability standard seems like a fiduciary standard in sheep’s clothing.”

“I don’t think it’s fair to say that it’s a fiduciary standard,” counters Fred Reish, a partner with Drinker Biddle & Reath in Los Angeles. “It certainly isn’t a fiduciary standard in the ERISA sense, because there aren’t any prohibited transactions associ-ated with FINRA’s guidance, as there are in ERISA. However, it certainly sets a high bar for developing recommendations to participants to take rollovers. And, in some ways, FINRA’s expectations exceed those that were thought to be applicable to ERISA fiduciaries. In other words, I believe that, as a practical matter, the FINRA guidance effectively establishes greater responsibilities for ERISA fiduciaries also.”

That’s Groom Law Group’s position too. “In effect, FINRA uses the Notice to es-tablish the premise that a ‘recommendation’ not only includes the recommendation of what securities to purchase once the rollover occurs, but also includes the recommenda-tion to rollover in the first place. Apparently, FINRA’s basis for this conclusion is that the natural consequence of a rollover recom-mendation is a corresponding recommenda-

not every service provider representative contacted by the GAO conveyed misleading or incomplete information. But as many as half of the 30 representatives did.

“As a result of being allowed to market their IRAs and retail investment products in educational materials or in interactions with participants,” the report said, “providers are able to steer participants to their products without the participants clearly being aware that they are being marketed to instead of being advised about their options.”

The report also found that navigating the rollover policies of plan sponsors can be daunting because there seems to be no uniformity and many sponsors, through an overabundance of caution, actually create disincentives. Many qualified plan sponsors are afraid to accept funds from an unqual-ified plan because they fear they may lose their qualified status, even though IRA rules protect them from disqualification if they do so in ignorance. (On April 3, 2014, the IRS issued Revenue Ruling 2014-9, making this process much easier.)

The report also concluded that par-ticipants need to have clearly written and uniform explanations of their four choices for rolling over funds from a 401(k), and that service providers need to disclose any financial interest they may have in any of those choices.

Finally, the report made specific recom-mendations for addressing those problems. Among them was the notion that the DOL and the IRS work more closely together.

Fiduciary in Sheep’s Clothing?Less than a year later, the Financial In-

dustry Regulatory Authority (FINRA) — the industry’s independent, non-governmental self-regulator — issued Regulatory Notice 13-45, reminding broker/dealers (BDs) and service providers of their responsibilities when recommending rollovers and market-ing IRAs. “Reminding” may have been a dis-ingenuous term for FINRA to use because, according to a January 2014 Groom Law Group issue brief, many BDs and registered representatives “will be surprised by the breadth and depth of the challenging com-pliance requirements outlined by FINRA in the Notice.”

The Notice basically outlines the four choices for dispersing funds from a 401(k),


and the options, but the final decisions are up to the participant.

“We train our representatives to take a fair and balanced approach when educating our customers about their options for their employer plan assets,” says Sarah Walsh, vice president of rollover business for Fidelity Investments. “After FINRA issued the reg-ulatory notice, we took the opportunity to perform a review of how we deliver informa-tion on this topic to customers. As a result of the review, and to ensure we’re covering the considerations outlined in the notice, we’re reinforcing training in this area and making some changes to communications materials. Supervisors who have associates engaged in these types of conversations are provided with post-interaction reports to review. In addition, telephone calls may be reviewed and other testing techniques used to en-sure that our representatives are servicing customers in accordance with the FINRA notice.”

Some firms, like LPL Financial, offer both brokerage and advisory services. Bro-kerage services are handled by its Worksite Financial Solutions call center. Participants who contact the call center expecting advice are in the wrong place.

“When calls come to our Worksite Desk, we don’t provide advice to the participant on which distribution option is the best for them. Rather we educate each participant on all their options so they can make the right decision for themselves,” says David Reich, executive vice president of retirement platform development, LPL Financial. “We don’t compensate [Worksite Desk] represen-tatives for rolling over or referring a partic-ipant to the advisor, or making a ‘sale.’ All reps are paid a salary and can earn a merit bonus based on call efficiency, quality and thoroughness of information dispensed. But

standard, which is “a very lax standard,” according to Craig Draper, in-house counsel and retirement plan consultant, Lakeside Wealth Management Group, Chesterton, Ind. And the DOL holds investment advisors to a more stringent fiduciary standard, requir-ing them to act in the best interests of their clients. But the way FINRA is describing its “suitability” standard sounds very much like a fiduciary standard. And the SEC may be headed in the same direction.

Education or Advice?So what happens if you’re a BD and not

a fiduciary but you’re being held to a fiducia-ry standard? If your only job is to implement a transaction the participant has already decided to make, not much, according to Joan Neri, an attorney with Drinker Bid-dle & Reath. But BDs who have to answer the question: “What should I do with the money that’s vested in the 401(k) plan of the employer I no longer work for?” need to be very careful under Regulatory Notice 13-45.

“Many BDs will have a difficult time ob-taining the information that 13-45 requires,” she says. “The impact of the Notice is less clear for those BDs who are providing educa-tional information to participants to assist them in making a decision and then imple-menting the rollover (if the participant so decides). The issue here is that if the BD has a strong customer relationship, the education might start to look a lot like a recommenda-tion.”

Safer not to make any recommendation at all, says Groom. Stick to explaining the options and don’t even think about suggest-ing which option the participant should take, which seems to be the approach many BDs have already adopted.

“We saw this coming over a year ago,” says Jenny Kiffmeyer, director of educational content for the Retirement Learning Center (RLC) in Brainerd, Minn. “Fair and balanced is the pivotal phrase that must describe any rollover discussion.”

The RLC provides a worksheet and an information checklist participants can use when preparing to meet with an advisor about whether to do a rollover. One piece, called a “Retirement DNA Analysis,” helps the participant track down any past IRAs, SEPs, and 401(k)s that may still be out there. Again, the material provides the information

they’re not scored based on sales volume. We use written and approved scripting, and we record and review calls for quality and training.”

Reich adds, however, “Our advisors may act in either a fiduciary or non-fidu-ciary capacity, depending on their relation-ship with the plan and/or the participant. When acting in a fiduciary capacity to a plan, if requested by a participant, we en-courage our advisors to provide education on the appropriateness of rollovers, staying in the plan, moving their assets to another plan, or any other available options. If the advisor currently is acting as a fiduciary to a participant, we expect our advisors to provide the appropriate advice given the client’s individual circumstances. We believe this construct is consistent with the current regulatory guidance.”

But current regulatory guidance may not be the final regulatory guidance, so it’s difficult to draw any conclusions at this point. But investment professionals are concerned. Will DOL’s revised definition of fiduciary echo the standards set by FINRA? Will the SEC? Will the result be that both BDs and RIAs are held to the same standard?

“We approach this issue from an RIA’s perspective, even if it’s on the broker/dealer side, and focus not just on suitability but on whether it’s in the client’s best interest,” says Draper. “I think everyone should be held to a higher standard. Those who do are competing against people who are not always being fully upfront. We believe that being fully upfront and giving them the education they need to make informed de-cisions is really going to be best long-term. I think that’s what the disclosures were meant to do, and that’s what the FINRA notice is trying to do. If they go to the next step and make it a fiducia-ry standard, you’re going to have more qualified people providing this service to participants rather than people who are just in it for their own benefit. Suitability is very easy to meet; fiduciary is very difficult. I think everybody should be held to a fidu-ciary standard. I think participants should expect that.” n

steven sullivan is a freelance writer in baltimore, md.

so what happens if you’re a bD and not a fiduciary but you’re being held to a fiduciary standard?”

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View from the summit

by John ortman anD John ieKel PhotograPhy by James tKatch


about 25% of employees don’t have access to a workplace retirement plan; and (2) the take-up rate in a 401(k) plan with an auto-enrollment feature averages in the mid-80% range. Instead of encouraging employers to offer a retirement plan to connect those dots, he said, “Democrats in Congress, and many Republicans as well, say: ‘Mandate it.’ It’s time to have that discussion,” he said.

Turning to the political climate in Washington, the staffer noted that is-sues affecting retirement saving and the retirement industry have grown a lot more partisan since EGTRRA was enacted on a broad bipartisan basis in 2001. Pro-gressives would like to move to a govern-ment-run, taxpayer funded retirement sys-tem, he believes, via a three-phase process:1. Government-mandated plan. The

first example of this approach is the auto-enroll IRA solution that can be found in several legislative proposals in Congress, and in proposals being considered in numerous states as well.

2. Make the Saver Tax Credit refund-able. A bill to make this change may be introduced in Congress soon, he believes.

3. Government chooses the investment vehicle. This approach is a foundation-al element of the president’s MyRA accounts. Federal staffers are now developing a new government bond for this purpose, with the intent of launching a pilot program in 2015. Additionally, an RFP is already out for record keeping monies in the MyRA program, he noted.

DOL's Definition of Fiduciary Rule“These are watershed times,” re-

marked Pentegra Retirement Services’ Pete Swisher of the now-years-long Department of Labor effort to change the definition of fiduciary. The Department of Labor first issued proposed regulations on this matter in 2012, but the release of the regs in final

he NAPA 401(k) Summit coNtiNueS oN itS PAth of growth ANd ASceNdeN-cy. thiS yeAr’S eveNt — AlreAdy the lArgeSt ANNuAl gAtheriNg of 401(k) AdviSorS, thought leAderS ANd iNduS-try iNSiderS — grew to NeArly 1,500 AtteNdeeS drAwN by the Summit’S geNerAl SeSSioNS, workShoPS ANd NetworkiNg oPPortuNitieS. And three days of pleasant late March weather allowed for plenty of out-and-about activities in New Orleans, putting a welcome exclamation point on the end of one of the harshest win-ters in recent memory.

Let’s take a look at some of the high points of this year’s Summit.

Do 401(k)s Only Benefit the Wealthy?It didn’t take long for the politically

charged issue of income inequality, especially as it pertains to 401(k) plans, to take center stage at this year’s NAPA 401(k) Summit. At the always-popular Washington update general session less than an hour into this year’s Summit, NAPA’s executive director/CEO Brian Graff raised the issue.

Graff, who shared the stage at the Summit’s kickoff general session with a high-ranking staffer for the Senate Finance Committee, cited remarks made by President Obama in the wake of this year’s State of the Union address urging Congress to join his efforts to “fix an upside down tax code that gives big tax breaks to help the wealthy save, but does little or nothing for middle class Americans.”

“Income inequality will get fixed when more jobs are created and wages go up,” said the staffer. He noted that Section 401(k) “is the only part of the tax code with a built-in provision that says that lower-paid workers have to kick in to the plan before highly compensated ones are allowed to. “That’s the opposite of ‘upside down,’” he declared.

On the issue of boosting coverage, and thereby retirement savings, the key is to focus on the employer, he said, not the employee. He cited two data points: (1)

TKeynoter Seth Godin, author of 17 bestselling books on marketing, exhorted a packed hall to “connect, lead — and leap.”


401(k) system.Ghilarducci took issue with the degree

to which individuals in the United States have responsibility for their retirement com-pared with citizens in other advanced econ-omies. She said the 401(k) system “has been mostly a failure,” an experiment she believes has gone wrong for the middle class. “You’re blaming the drought on the well,” countered Graff, observing that the real problem with the 401(k) system is that not enough people have access to a workplace retirement plan.

Ghilarducci backpedaled somewhat, saying later that putting “5% in 401(k)s is fine” and that she does not want to “blow up” the 401(k) system. But there is more to the problem than 401(k)s themselves, according to Ghilarducci. She contends that even if accountholders have done everything right, many of them have “no clue how to handle their funds.”

Graff and Ghilarducci shared a convic-tion that the recent finding by the Employee Benefit Research Institute that a large per-centage of the population has saved very lit-tle is, as Graff put it, “very significant.” How to address that, however, engendered lively debate. Ghilarducci is a strong proponent of

The reason? The November congres-sional elections. But some believe that the political implications go beyond this fall. “Some folks say it’s so political, it will never see the light of day,” said Swisher, adding, “but I don’t think that will happen.”

Reish was not quite as optimistic, and remarked, “I hope I live long enough to see the Republicans and Democrats get along, but I’m not optimistic.”

The Status Quo Is Not Acceptable“It’s not just about a decision to save,

it’s about saving more.” NAPA executive director/CEO Brian Graff captured the heart of the discussion over retirement readiness at a packed general session. Graff debated Teresa Ghilarducci, Chair of Economic Policy Analysis and Director of the Schwartz Center for Economic Analysis at the New School — and well-known critic of the

form have been delayed. “The best bet is that the final regs will

look like the proposed regs,” said Drinker Biddle & Reath partner Fred Reish. Re-ish also expects that the final form of the regulations will expand the definition — and that that will change the way people do business.

Swisher agrees. He said that clients need help in this area because “many don’t realize they are fiduciaries in the first place. That a plan sponsor can delegate is “hard-coded in the statutes,” he said, but they can’t delegate all responsibilities.

Reish noted that the DOL is conducting an economic analysis concerning the regs, which he said suggests that they expect litigation.

But when will the DOL even issue the final regulations? At this point, they’re scheduled to be released in January 2015.

TOP: NAPA Executive Director Brian Graff and industry critic Teresa Ghilarducci faced off on the virtues and criticisms of the retirement system.

LEFT: In a workshop on committee meetings, Compass’ Kathleen A. Kelly and Moreton’s Chad J. Larsen outlined their firms’ goals and approaches.


• More detailed analysis, and benchmark-ing requirements.

• Metrics: As TDFs develop track records over time, we will be better able to mea-sure their success.

• Risks to bond portfolios in TDFs in a low interest rate environment.

• Addition of an annuity option.• Movement away from all proprietary

products.• Risk management in TDFs.• Continuation of the to-versus-through

debate.• Providers will offer different strategies

(e.g., low, moderate and high risk) with-in a single product.

• Does it really make sense for equity allo-cation to decline throughout retirement?

Developing a Sound Rollover StrategyThere’s good news and there’s bad news

on the IRA rollover front. The good news: The regulatory agencies and industry groups with jurisdiction over IRAs — the DOL, the SEC and FINRA — seem to be getting on the same page, diminishing the likelihood of conflicting mandates from multiple regula-tors. The bad news: They seem to be moving in the direction of the DOL’s approach to rollovers, increasing the likelihood of yet another participant disclosure mandate.

Moderator Patrick J. Rieck, executive director of Morgan Stanley Wealth Man-agement, characterized the issue facing plan advisors as “educate versus recommend” — that is, if you choose to recommend an IRA rollover, you must follow FINRA’s directions. That will require collecting pertinent infor-mation from the individual. “The gist of the issue is to function as a retail financial ad-

mandates to increase saving rates and retire-ment plan participation. She argued that the government should mandate that individuals save 5% of their income for retirement “be-cause people should not have to decide with each paycheck whether to save.”

Graff did not join her in supporting such a mandate. “Part of the challenge,” he said, “is getting people covered by a work-place plan.” Graff noted there may be room for exploring a different policy. “It may be that the only way we move the needle is to require employers to do something. But what is that something?” He and Ghilarducci found common ground in an idea that may be worth exploring: a “soft mandate” that would require employers to provide employ-ees with access to a retirement plan.

But Graff reiterated his support for a voluntary system, asking Ghilarducci if it wasn’t a good idea to focus tax benefits in a way that would encourage those with lower incomes to save more. “There is no incentive in the tax system for those not paying in-come tax” to participate in a 401(k), he said. He suggested that a refundable savers’ credit would help address that, an idea with which Ghilarducci agreed.

As Target Date Funds Turn 20, What Does Their Future Hold?

The target date fund concept, which celebrates its 20th birthday in March, is still growing in popularity and complexity. Wells Fargo and Barclay’s debuted the first TDFs in March 1994 — followed by Fidelity in 1996, The Principal in 2001, T. Rowe Price in 2002 and Vanguard in 2003.

With a warning that those who try to predict the future in the retirement busi-ness are nearly always wrong, Mark Pfeil, managing director of investment research at SageView, shared his perceptions at a work-shop about what the future may hold for TDFs after the birthday party is over:• Active vs. passive: This debate will con-

tinue, driven by a focus on fees.• More alternative asset classes in TDFs;

a trend to keep an eye on as fees come down.

• Customization may move down market.• Convergence of the investment manager

and the consultant.• An increase in tactical approaches

to allocation.

viser would,” explained Pension Resource Center founder and CEO Jason Roberts. “Imagine yourself as not having a rela-tionship with the individual, and having to fulfill the duty to educate that person and explain the pros and cons.”

Roberts indicated that the DOL’s focus on IRA rollovers is still at the policy level. Rollovers are not a high-profile issue among DOL examiners at this point — though that may change, he said.

As sometimes happens, Rieck noted, the industry is responding to issues raised by the DOL, and adjusting their best prac-tices to be more in line with what regula-tors are seeking. “The marketplace tends to do the right thing,” he observed.

The panel offered these best practices for IRA rollovers:• educate participants about all distribu-

tion options;• discuss the tax implications (e.g., Roth

IRA, indirect rollover, age 55, age 59-1/2, NUA, etc.);

• disclose fees and any conflicts of interest;

• compare investment options and services; and

• engage in long-term financial planning discussions. n

The 2014 401(k) Advisor Leadership Award winner Kathleen A. Kelly, representing the team at Compass Financial Partners, was joined by NAPA executive director/CEO Brian Graff; fellow award nominees T. Henry Yoshida representing the team at Maresh Yoshida 401(k) Group, and Bradley K. Arends representing the team at Alliance Benefit Group Financial Services; and NAPA President Steven Dimitriou (left to right).

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as the Dc market matures, a power struggle is emerging between record keepers and advisors.

rumbleJungle

by FreD barstein

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Ithey want to play in.

DCIOs, who had seemed immune to the consolidation bug because margins were so high, are starting to feel the pinch. As the cost of distribution and value added tools soar, more firms are rethink-ing their strategies for the DC market. Jim Brockelman, head of mid-market sales for John Hancock and formerly national sales manager for Putnam’s DC efforts, quipped, “There’s a big question about the distribution model of DCIOs. Mutual funds had a record sales year but revenue was down because of the cost of distribu-tion.” As a result, look for more deals like TIAA-CREF’s purchase of Nuveen and the merger of Victory and Munder, with other firms pulling back from the traditional DCIO model, like Lord Abbett, who is re-lying more on retail wholesalers eschewing a dedicated DCIO field staff.

Meanwhile, broker dealers are con-solidating, with RCAP buying five IBDs including Cetera and creating an entity with almost 9,000 advisors promising to provide enterprise scale and clout rivaling LPL. Likewise, more advisor teams are forming as advisors struggle with fee com-pression, sophisticated buyers and more experienced competition. “It’s difficult not to be part of a team as margins shrink forcing advisors to service more plans. Advisors need the efficiencies that a larger team offers,” says Jim Hageney, a principal at Centurion Group outside Philadelphia with 13 advisors and $9 billion in DC assets.

Fee CompressionThere seems to be an obsession with

fees, driven by fee disclosure rules and the press, but as LPL advisor Jim Sampson notes, “Fees are only high in the absence of value.” Until the industry, especially advisors, can show improved outcomes or “DC Alpha,” we will be stuck focused on inputs, which can be easily commod-

t wASN’t thAt loNg Ago thAt 90% of dc PlANS were Sold by bliNd Squirrel AdviSorS PAid through 12b-1 commiS-SioNS. how the world hAS chANged, right? Not exActly. while AN eStimAted 50% of New PlAN SAleS ANd A greAter PerceNtAge of ASSetS Are Sold by Ad-viSorS with five or more PlANS, thAt Still leAveS 75% of PlANS with bliNd SquirrelS, mANy commiSSioNed bASed. leSS thAN 10% of PlANS Are with the So cAlled “elite” PlAN AdviSorS — thoSe with more thAN $100 millioN of dc Aum. but the world iS moviNg towArd fee-bASed, fiduciAry PlAN Advi-SorS who Are formiNg teAmS.

Some providers are adjusting, while others are stuck in pre-recession world even as all signs point to a new paradigm where power is shifting to advisors facilitated by DCIO firms.

Consolidation As we move away from a post-

recession mentality to a new world where workers, companies and the government are placing an ever-increasing importance on participant-directed corporate retirement plans, there are signs of dramatic change. The Putnam merger, followed quickly by the acquisition of JP Morgan’s large market record keeper by Great-West earlier this year herald a world where there will be four to five dominant providers in each of the three major markets: • mega plans, or those over $500 million; • advisor sold, or those with $1 mil-

lion-$500 million; and • micro plans dominated by blind squir-

rels and payroll vendors. Sure, there will be other players, most

attached to large insurance companies, but will they matter? Smaller, independent, open architecture record keepers using innova-tive technology will thrive while buying up smaller rivals. In this new world, record keepers will have to decide which sandbox


the record keeper is. There’s plenty of data on record keeping systems that can deter-mine which type of managed investment a participant should use based on salary, age, account balance, deferral rates and whether there’s a DB plan. So why use off-the-shelf, proprietary TDFs where the advisor has no input on not only which funds should be used but also which strategies, never mind the allocation? Isn’t the advisor at risk for recommending funds or strategies with which they are not comfortable?

More and more advisors are moving to customized managed investments, whether it’s through managed accounts, collective trusts (CITs) or customized glide paths where funds and strategies can be switched out. Fielding Miller’s CAPTRUST bought Freedom One, which provides record keep-ing services, but, perhaps more importantly, has a 10-year track record on almost a $1 billion of CITs. Centurion has $500 million of CITs managed by a separate division using their own glide path but is also look-ing at using third parties like BlackRock or Legg Mason if the conflict becomes too significant.

Though PensionMark is shying away from creating and managing their own investments due to fiduciary concerns, they are looking to work with larger indepen-dent firms like BlackRock, which gives PensionMark an advantage with pros-pects. Worried that off-the-shelf TDFs use assumptions that are too broad, Hammond said, “We are rolling out customized in-vestments to better serve participants with the message about the assumptions we are making. We then ask participants to contact us if these assumptions are not accurate and we are getting a good response.” Customi-zation follows guidance by the DOL which seemed to favor the movement encouraging the market to look beyond current TDFs.

But not everyone is looking at custom-ized investments concerned about conflicts, costs and complexity. SageView’s Randy Long is evaluating, noting “We are early in our evaluation of CITs and 3(38) solutions but we’re concerned for a number of rea-sons. If we’re the portfolio manager, who’s evaluating us? And what happens if our in-vestments have relatively poor performance. Do we fire ourselves?” Ralph Haberli at BlackRock asks, “Where should advisors

itized. Similarly, there is a prodigious move to index funds as costs are lower and many active managers, especially in certain asset classes like large cap value, struggle to beat their benchmarks. Dave Reich at LPL’s home office uses the dreaded airline analogy for record keepers, noting, “Air-lines struggled after deregulation as prices dropped below infrastructure costs for what was considered to be a commodity. Record keepers, like airlines, have to find new profit pools as old ones dry up, like the arlines charging for bags, food and premium seats.”

So with a smaller pie to fight over, what’s the proper allocation between record keeping, advisory services and money management? Should that change when one group provides the other’s services like record keepers managing money or advisors providing more administrative services? Should record keepers charge the same for plans sold and serviced by elite advisors part of a team who do not need the same sales support or some client services?

Record keepers struggle with this question, notes Troy Hammond, CEO and

founder of PensionMark. “We’re subsidiz-ing record keeper costs for plans sold by blind squirrels. Our attempts to get record keepers to provide different pricing have not gone well.” On the other hand, while CAPTRUST’s Fielding Miller wants to be treated differently, he is not looking for better pricing. Says Miller, “I need record keepers to share data so I can integrate with my systems and processes to better serve clients. Record keepers are acting differently with us in that regard.”

So where’s the greatest value created? Some would say that the advisor, especially the elite ones, provides the most value and therefore should get the greatest share of the revenue. Merrill Lynch’s Bruce Gsell

claims, “There is going to be a shift in splitting revenue, especially for advisors that do employee education, workshops and one-on-one meetings.” So if record keepers are reluctant to give up their share, some will look to the money managers using more low-cost index solutions, like Jim O’Shaunessy is doing at Sheridan Road. “Historically, brokers couldn’t sell index funds because there were no 12b-1 fees. Now, we are regularly reducing fund costs by over 80% while charging a flat fee for our services and saving the client money,” says O’Shaunessy.

CustomizationWill the DC world ever catch up with

technology that knows where you are, what you like to buy and makes recom-mendations based on what your peers are doing? Does one glide path for all people born within five years for all companies regardless of size or industry really make sense? According to the DC industry, the answer is a resounding yes. And it seems like the choice can be mostly based on who

smaller, independent, open architecture record keepers using innovative technology will thrive while buying up smaller rivals. in this new world, record keepers will have to decide which sandbox they want to play in.”


long as there are blind squirrels, the record keeper will reign over those plans.

Morgan Stanley’s Ed O’Connor does necessarily believe that there will be a power shift, noting, “I don’t believe that this is a zero sum game. Expert advisors like our CRDs have taken a more active role manag-ing client relationships in partnership with record keepers.” O’Connor’s biggest concern is not sharing power with record keepers. “My biggest concern is what the govern-ment will do, specifically a takeover of DC plans,” he says.

So as teams grow and more plans move to elite advisors and focused BDs, all of whom will control more of the assets and plans, how will the inevitable power shift take place? Whether it’s through custom glide paths, CITs or 3(38) services, advisors are taking a more active role in managing the money and asset allocation, which is where most of the returns lie.

Helping participants stay the course is also an important role played by advisors. As Fielding Miller notes, “It’s not about be-ing a fiduciary or picking the best funds. It’s about helping participants whose average return is 2% while their investments return an average of 8%.”

So will record keepers adjust and be willing to take more of a back seat, share data and provide rational pricing for elite advisors and teams? The answer to that question will determine which markets they want to participate in. Blind squirrel plans

spend their complexity budget? Some start with customized solutions and end with off-the-shelf funds depending on the client or market. You have to determine if the payoff is worth the cost.”

Outcome-based SolutionsThere’s a race going on among record

keepers and advisors over who can claim to improve outcomes. Those that can will not only be able to charge more, but will win more (or lose fewer) clients. But before we get too excited, there are a few fundamental questions. First, do our clients really care as much about outcomes as we think? Of course, some do, depending on their culture and size, but not at the expense of increased cost, liability and work. The HR department cares about people and outcomes but the finance group is concerned about costs — whether out-of-pocket or staff — and the CEO at a smaller firm cares about risk. So if you get clients comfortable that you are not raising costs, liability or work, then — and only then — can you have discussions about outcomes.

Secondly, how do you measure out-comes, which may be as simple as income replacement rates? Measuring participation and deferral rates as well as asset allocation is good for effort, but the real question is: How much income is being replaced by DC plans? What’s the benchmark? Should it be for firms of the same size and industry? Should advisors just show increases made when they take over a plan but then, how much is good? Do we need 80% replace-ment from our plans – what about Social Security and outside assets? Is 40% or even 50% more reasonable? What percentage did DB plans really replace?

And who has the greatest impact on outcomes? Record keepers don’t really need advisors to design the ultimate auto-plan with auto-enrollment at 6% escalating to over 10% using a stretch match and man-aged investments as the QDIA. But advisors can customize, educate, advise and get those numbers even higher. And remember who sold the plan to begin with.

Power ShiftSo does anyone doubt that the power

is shifting from record keepers to advisors? The question is when, where and how. As

might cost more to service and sell and might be more at risk, but they also enjoy more attractive pricing because the buyer is not so savvy. In fact, many elite advi-sors said they have just two or three firms they use regularly, though they will show four or five firms at finals. The success-ful record keeper might have two-tiered pricing and service models to effectively court the elite advisors while serving the blind squirrels.

While some advisors like Fielding Miller think the record keepers are much more important to his operation, others, like PensionMark’s Hammond, differ: “DCIOs are adding more value that record keeping wholesalers enabling us through value added tools and services.” Matt Gannon, formerly an executive at MFS and now with Cohen and Steers,

notes that, “When MFS exited the record keeping business in 2008, we focused on record keepers to generate sales but even-tually shifted to teams and experienced advisors. At the beginning, 70% of sales came from record keepers, but that shifted entirely as advisors took a more active role in selecting the funds and managing the plans.”

More advisors are looking to their DCIO partners to enable and guide them while keeping out of the limelight, some-thing that many record keepers have a hard time doing. For example, BlackRock has set their focus on teams looking to enable them leveraging their institutional risk management systems that has $14 tril-lion either under management or advise-ment. Says BlackRock’s Haberli, “We are comfortable being the partner behind the scenes for both the record keepers and the advisors segmenting our services based on their core value proposition realizing that each may be different.”

For those that are able to show increased DC Alpha, consolidation, price pressure and navigating the power shift will be not be problems — they will be opportunities to separate themselves. Until then, there will continue to be a somewhat cordial but combative dance among ad-visors, record keepers and broker dealers, with the DCIOs playing the music and the record keepers writing the lyrics as long as they keep tight control over the data. n

For those that are able to show increased Dc alpha, consolidation, price pressure and navigating the power shift will be not be problems — they will be opportunities to separate themselves.”

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PARTNER CORNER

The NAPA Partner Corner connects plan advisors with leading record keepers and DC Investment Only (DCIO) �rms, highlighting their services, resources and positioning in the market, as well as business metrics and contact information for their sales and support people. Currently, only NAPA Firm Partners at a certain membership level have the opportunity to publish a basic (one-third page) or enhanced (full page) listing in the Partner Corner. The sameinformation that is provided in the pages that follow is also available in enhanced online form on NAPA Net, at http://www.napa-net.org/.

C

M

Y

CM

MY

CY

CMY

K

Partner Corner New 5.30.14.pdf 1 5/30/14 11:04 AM

NAPAPARTNERCORNER


Firm Profile American Century Investments® is rooted in building relationships — the kind of long-term relationships that can only happen when there’s trust … when there’s a consistent track record of delivering results … and when the ultimate measure of our perfor-mance is our clients’ success.

At American Century Investments, our com-mitment is rooted in focusing on delivering superior investment performance and developing long-term relationships with our clients. Our track record of performance, our business model and the legacy of our founder set us apart in the industry.

Performance Focus for More than 50 Years• Founded in 1958 by Jim Stowers, Jr., we relent-

lessly focus on delivering superior investment performance and building long-term relation-ships with our clients.

• Our headquarters is in Kansas City, MO, with offices in New York City; Mountain View, CA; and London, England.

• We take an active team-based approach to man-aging equity and fixed income investments.

Pure Play Business Model• Money management is all we do. • No ancillary businesses distract our focus,

stretch our resources or compete with our clients.

Privately Controlled and Independent• Our owners maintain a long-term view when it

comes to investing and our company. We are not beholden to quarterly earnings pressures. This enables us to stay true to the long-term objec-tives of our investment strategies, offer reliable diversification and align with the best interests of our clients.

• We’re from Main Street, not Wall Street. We take an independent view, guided by our commit-ment to do the right thing for our clients. We’re one of the few major asset managers untainted by ethical lapses.

Profits With a Purpose• Through our ownership structure, more than

40% of American Century Investments’ profits support research to help cure genetically-based diseases including cancer, diabetes and dementia.

• With their personal fortune, American Century Investments founder Jim Stowers Jr., and his wife, Virginia, founded and endowed the Stowers Institute for Medical Research, a world class biomedical research organization dedicated to improving quality of life by researching and uncovering the causes, treatment, prevention and cure of genetically-based diseases. Both Jim and Virginia are cancer survivors.

Investment Strategies for Retirement PlansOur management teams are guided by

well-defined, repeatable investment processes and are dedicated to fully invested, active management approaches. American Century Investments offers a full menu of investment options ideal for a variety of retirement plans.• Team-based investment management approach • Proven long-term risk-adjusted performance in

all asset categories• A variety of pricing options and flexibility to

meet your needs• Availability through most major record keeping

platforms

QDIA OptionsProviding broad diversification through asset

allocation options that qualify as QDIAs, American Century Investments has investment options to meet your retirement plan needs:

One ChoiceSM Target Date PortfoliosThe One Choice Target Date Portfolios from

American Century Investments are a series of nine target date funds and one objective-based fund that offer evolving strategic allocations that are optimized for the changing risk profile as an investor nears retirement.

A One ChoiceSM Target Date Portfolio’s target date is the approximate year when investors plan to retire or start withdrawing their money. The principal value of the investment is not guaranteed at any time, including at the target date. Each target-date One ChoiceSM Target Date Portfolio seeks the highest total return consistent with its asset mix. Over time, the asset mix and weightings are adjusted to be more conservative. In general, as the target year approaches, the portfolio’s alloca-tion becomes more conservative by decreasing the allocation to stocks and increasing the allocation to bonds and money market instruments. By the time each fund reaches its target year, its target asset mix will become fixed and will match that of One ChoiceSM In Retirement Portfolio.

One ChoiceSM Target Risk PortfoliosFive static target-risk funds offer instant

diversification. These portfolios are built using up to 15 underlying mutual funds to help balance risk and return. Each target-risk One Choice Portfolio seeks the highest total return consistent with its asset mix.

Balanced FundAmerican Century Balanced offers a consis-

tent, risk-managed approach through a classic 60/40 mix of stocks and bonds.

Strategic Allocation FundsThe Strategic Allocation Funds are designated

Conservative, Moderate and Aggressive so investors can choose a portfolio that is aligned with their risk tolerance.

American Century Global AllocationAmerican Century Global Allocation fund casts

a wide net across regions, countries, currencies and asset classes in search of opportunities to expand return potential while managing volatility. Tactical adjustments take advantage of opportunities and adjust to changing market conditions.

You should consider the fund’s investment objectives, risks, charges and expenses carefully before you invest. The fund’s prospectus or summary prospectus, which can be obtained by visiting americancentury.com, contains this and other informa-tion about the fund, and should be read carefully before investing.

business metricswww.americancentury.com

number of external wholesalers

dC: 14

retail: 43

Dc aum:

Total: $35.2 billion

total aum:

$139 billion

investments:

mutual fund

Group Annuity: variable portfolios for annuity products

Collective Trusts

SmAs

asset allocation Funds:

Tdf: “To” – one ChoiceSm Target date Portfolios

Target risk: one Choice Target risk Portfolios

Passive/active/both

Active

capital Preservation Funds:

money market

Fixed income

fixed income mutual funds

bonds

bond mutual funds

top 5 Funds within american century investments by Dc assets (as of 6/30/2013)

American Century one ChoiceSm Target date Portfolios

American Century Strategic Allocation

American Century Growth American Century heritage

American Century equity income

NAPAPARTNERCORNER NAPAPARTNERCORNER


Firm Profile A Global Investment Management PowerhouseBNY Mellon is a premier global investments company dedicated to helping clients manage and service their financial assets throughout the investment lifecycle. Whether providing financial services for institutions, corporations or individual investors, BNY Mellon deliv-ers informed investment management and investment services in 35 countries and more than 100 markets.

The firm’s insight is backed by a unique perspective that comes from having $27.6 trillion in assets under custody and administration, and $1.6 trillion in assets under management (as of 12/31/13). Whether clients are looking to create, trade, hold, manage, distribute or restructure investments, BNY Mellon can act as a single point of contact for their investment needs. An uncertain market that has affected so many financial institutions, clients have confidence in BNY Mellon because of its size, strength and stability.•#4SuperregionalBank(U.S.)(Fortune “World’s Most Admired Companies, 2013”)•#7SafestBankintheU.S.(Global Finance “World’s Safest Banks,” April 2013)•Stronginvestment-gradecreditratings**CreditratingsarelistedforMoody’s,S&P,FitchandDBRS.

A security rating is not a recommendation to buy, sell, or hold

securities. The rating may be subject to revision or withdrawal

at any time by the assigning rating organization. Each rating

should be evaluated independently of the other ratings.

Current ratings for The Bank of New York Mellon Corporation

and its principal subsidiaries are posted at

www.bnymellon.com/investorrelations/creditratings.com.

BNY Mellon Investment Management

Building World-Class Investment Performance Takes

the Right Architect

BNY Mellon Investment Management is one of the world’s leading investment management organizations, offering:•Financialstrength•Amulti-boutiquemodelthatencompassestheinvestment skills of world class asset managers: — Each has its own unique investment philosophy and proprietary investment process— Each is a leader in its field with depth and breadth of expertise in every major asset class and sector— Specialists focused on generation of returns•Centralizeddistributionandmanufacturingsolutions

We know that specialization and focus are essential to investment management. Each of our independent asset management companies pursues its investment strategy with a passion and commitment that keeps them ahead of changing investment landscapes.

BNY Mellon Investment Management combines the scale of a full service investment manager with the focused expertise of autonomous investment boutiques, each with its own style, strategy and

management team. All together, we have the skill to deliver uncorrelated alpha and the scale to deliver diversified beta.•16independentinstitutionalassetmanagerswith $1.5 trillion in assets under management (as of 9/30/13)•7thlargestglobalassetmanager(Pensions & Investments, October 2012)•7thlargestU.S.moneymanager(Institutional Investor, July 2013)•5thlargestmanagerofendowmentandfoundation assets (Pensions & Investments, May 2013)

BNY Mellon Retirement

Dedicated to Helping Our Clients SucceedBNY Mellon Retirement is a team of experienced

retirement professionals representing all of BNY Mellon’s retirement-oriented investment solutions for DC and insurance VA businesses.

Solutions That Work for YouWe will work with you to develop and deliver

appropriate investment strategies and to provide the ongoing servicing required. We deliver these strategies to you in multiple vehicles:•Retailmutualfunds•Zerorevenueshareinstitutionalmutualfundshare classes•ERISAqualifiedbankcollectivefunds—multiple share classes with and without revenue share•Institutionalseparateaccounts•Customizedapproaches

In a highly competitive environment, growing your business is an increasing challenge — one that is further complicated by the evolving nature of the retirement marketplace. With BNY Mellon Retirement, you benefit from our wide range of investment strategies, our marketplace expertise and support services from a trusted business partner.

BNY Mellon Investment Management is one of the

world’s leading investment management organizations and one

ofthetopU.S.wealthmanagers,encompassingBNYMellon’s

affiliated investment management firms, wealth management

services and global distribution companies. BNY Mellon is the

corporate brand of The Bank of New York Mellon Corporation.

This document is of general nature, does not constitute legal,

tax, accounting or other professional counsel or investment

advice, is not predictive of future performance, and should

not be construed as an offer to sell or a solicitation to buy

any security or make an offer where otherwise unlawful. The

information has been provided without taking into account

the investment objective, financial situation or needs of any

particular person.

For more information, please contact your BNY Mellon

Retirement Consultant or call 1-800-992-5560.

Investors should consider the investment objectives,

risks, charges and expenses of the fund carefully before

investing. Contact your financial advisor and obtain a

prospectus, or a summary prospectus, if available, that

contains this and other information about the fund, and

read it carefully before investing.

Equity funds are subject generally to market, market

sector, market liquidity, issuer and investment style risks,

among other factors, to varying degrees, all of which are

more fully described in the fund’s prospectus.

Bond funds are subject generally to interest rate,

credit, liquidity and market risks, to varying degrees, all of

which are more fully described in the fund’s prospectus.

Generally, all other factors being equal, bond prices

are inversely related to interest-rate changes, and rate

increases can produce price declines.

The funds are not a deposit of, and are not insured or

guaranteed by, any bank, financial institution, the FDIC or

any other governmental agency, and participants may lose

money. Also, a fund unit’s principal value and investment

return will fluctuate, so that when a unit is redeemed, it

may be worth more or less than the original investment.

Key Contacts:margie massaro, 212.922.7610, [email protected]; Caitlin loesch, 212.922.5243, [email protected]

business metricswww.bnymellonretirement.com, www.dreyfus.com

number of external wholesalers:

dC: 5

Dc aum:

$37 billion

total Firm aum:

$1.5 Trillion

investments:

retail mutual funds

Zero revenue Share institutional mutual fund Share Classes

eriSA Qualified bank Collective funds - multiple share classes with and without revenue share

institutional Separate Accounts

Customized Approaches

top 5 Dreyfus/bny mellon Fund Products by Dc assets

dreyfus research Growth fund

dreyfus Appreciation fund

dreyfus opportunistic midCap value fund

bNY mellon Stable value fund*

dreyfus international bond fund

NAPAPARTNERCORNER


Firm Profile ItisthemissionofCUNAMutualRetirement

Solutions to recognize the powerful human story of the service and accomplishments of hard-working Americans, and help them meet their challenge in achievingasecureretirement.Todothis,CUNAMutual Retirement Solutions provides an array of practical retirement solutions that deliver the personal attention, customer-focused resources and guidance needed to help real people save for the future andliveretirementontheirterms.CUNAMutualRetirement Solutions offers record-keeping and plan administration services needed by organizations in order to simplify plan management and help ensure participants’ success.

ServicesprovidedbyCUNAMutualRetirementSolutions include plan design, plan conversion, investment management, compliance testing, reporting, legislative updates, distribution services, audit and fiduciary support, and plan health reports.

CUNAMutualRetirementSolutionshascreateda new focus on participant outcomes, emphasizing the retirement aspirations of hard-working Americans nationwide and reinforcing the value of our expertise.

At the center of its outcome-focused approach is a comprehensive educational platform. When it comes to adequately saving for the future, many plan participants need some form of guidance or other educationalassistance.That’swhyCUNAMutualRetirement Solutions equips them with the right knowledge and tools to help them set and stay on target with their goals.

The company’s tools, products, expertise and resources are geared toward improving retirement outcomes for its target market. This includes new retirement plan offerings that are designed for flexibility for plan sponsors, as well as an online participant tool set, known as RetireOnTarget®.

RetireOnTarget is an online tool that makes it easier for participants to make informed investment decisions and create a targeted plan for a secure retirement.

AtCUNAMutualRetirementSolutions,astrongfinancial foundation is behind every product and service. It means that a relationship with them is one backed by their straightforward service satisfaction guarantees.

In 2009, CPI Qualified Plan Consultants was acquiredbyCUNAMutualGroup,andisnowpartofCUNAMutualRetirementSolutions.PaulChong,senior vice president of retirement plan services for CUNAMutualGroup,theparentcompany,statedina March 2014 news release that the arrangement helps realign the overall purpose of the company to support small-market clients’ retirement outcomes. CUNAMutualGroupcontinuestoservethefinancial

needs of credit unions and their members, including the provision of qualified and non-qualified retirement plans for credit union employees.

CUNAMutualRetirementSolutionsisbuildingon the reputation of its parent company within the small-plan market, focusing on business with plans that have between $500,000 and $7 million in assets. The new focus drives collaboration between CUNAMutualRetirementSolutionsandfinancialadvisers to help small business owners and their employees achieve retirement readiness.

The company is not trying to be all things to all people. Its focus is on helping Main Street, not Wall Street. That means serving small businesses that care about their employees and want to help them build and enjoy a successful retirement.

CUNAMutualRetirementSolutionshasconsistently ranked as a top performer in the annual Boston Research Defined Contribution Plan Sponsor &Loyaltystudy(BostonResearchGroup,2013DCPPlanSponsorSatisfaction&LoyaltyStudyforPlanswith assets up to $5 million). Some of the notable attributes outlined in the study include: offering innovative solutions to difficult problems; easy to do business with; and effective in helping participants reach their financial goals for retirement.

About CUNA Mutual GroupCUNAMutualGrouphasbeenidentifiedasone

of the world’s most ethical companies, according to Ethisphere Institute, an international organization that rates companies’ business ethics and corporate social responsibility. The methodology for the World’s Most Ethical Companies includes reviewing codes of ethics, litigation and regulatory infraction histories, evaluating the investment in innovation and sustainable business practices, looking at activities designed to improve corporate citizenship, and studying nominations from senior executives, industry peers, suppliers and customers.

MoreinformationonCUNAMutualRetirementSolutions is available at http://www.cunamutualrs.com.

Securities distributed by CUNA Brokerage Services, Inc., member FINRA/SIPC, a

registered broker dealer.

CUNA Mutual Retirement Solutions is the marketing name for CPI Qualified Plan

Consultants, Inc. a member company of CUNA Mutual Group. CUNA Mutual Group

is the marketing name for CUNA Mutual Holding Company, a mutual insurance

holding company, its subsidiaries and affiliates. Life, accident, health and annuity

insurance products are issued by CMFG Life Insurance Company. Each insurer is

solely responsible for the financial obligations under the policies and contracts it

issues. Corporate headquarters are located in Madison, Wisconsin.

CMRS-917348.1-0514-0616

business metrics

Key Contacts:To talk to a CUNA mutual retirement Solutions repre-sentative, please call us at 800.491.7859, or email us at [email protected].

website: www.cunamutualrs.com

www.cpiqpc.com


25

Dc aum:

Total: $13 billion

retirement aum:

$17.8 billion

total aum:

$17.8 billion

Dc Plan um:

6,100

retirement Plans um:

6,900

Dc Participants um:

307,000

retirement Participants um:

338,000


Tdf Proprietary/outside: outside

Tdrisk Proprietary/outside: outside

Custom Glide Path: No

service model(s): (bundled/unbundled/both):

both

Distribution model(s): (advisor/direct/both):

Advisor

Primary market(s) served:

micro (<$1 million): Yes, but not primary

Small ($1-$10 million): Yes, primary

mid ($10-$100 million): Yes, but not primary

large ($100-$250 million): Yes, but not primary

mega (+$250 million): Yes, but not primary

Plan type(s):

dC

db

Non-eriSA 403(b)

457

Taft hartley

Non Qualified

irA

Fiduciary services offered:

3(21)

3(38)

3(16) (Same Plan Types)



business metricswww.f-squaredretirementsolutions.com


dC: 4

retail: 15

Dc aum/aua:

Total: $1 billion

total aum/aua:

$23.3 billion*

investments:

mutual funds: Subadviser through virtus investment Partners

Collective Trusts

SmAs

Asset Allocation funds

Tdf: Subadviser through reliance Trust

Target risk

managed Accounts

Passive/Active/both

Active

fixed income

Yes

top Funds by Dc assets:

AlphaSector US equity funds: $481 million

reliance Trust risk managed Target date funds: $458 million

AlphaSector Target risk funds: $43 million

* total assets tracking F-squared indexes

Firm Profile

F-Squared Retirement SolutionsF-Squared Retirement Solutions offers down-side-risk-managed investment solutions to the defined contribution marketplace. We seek to align our invest-ment strategies with the goals of plan sponsors and their participants, targeting relative returns in healthy markets and providing risk controls in down markets. TheproductarrayincludesacoreU.S.equitystrategy,a fixed income option, a series of target risk funds and a tail-risk overlay strategy, all designed to reduce overall portfolio volatility and the risk associated with significant market drawdowns.

Collective Investment Trust Funds Offered Through

Reliance Trust Company

F-Squared AlphaSector® U.S. Equity FundTheF-SquaredAlphaSectorU.S.EquityFund

uses a disciplined quantitative model to make a probabilistic projection of expected returns for each oftheninemajorsectorsoftheU.S.economy.Themodel has the flexibility to allocate to any combination of the nine sectors, and may invest up to 100% in a cash equivalent for defensive positioning. The model’s objective is to remove those sectors that present risk while preserving exposure to the healthier sectors.

F-Squared AlphaSector® Fixed Income FundThe F-Squared AlphaSector Fixed Income Fund

represents an actively managed portfolio that seeks to provide a full-market fixed income solution. It is designed to participate in healthy markets and provide downside risk controls in adverse market conditions, including rising interest rate environments. The AlphaSector Fixed Income Fund may invest up to 100% in cash equivalents when the model indicates the need for defensive positioning.

F-Squared AlphaSector® Target Risk FundsThe F-Squared AlphaSector Target Risk Funds

are designed to achieve long-term capital appreciation by limiting the magnitude of drawdowns in declining market environments while offering participation in rising equity markets. The series consists of five different portfolios constructed to meet various risk and return profiles: Conservative, Moderate Conservative, Moderate, Moderate Aggressive and Aggressive.

To meet the unique needs of our retirement clients, F-Squared products are available as collective trust funds through a partnership with Reliance Trust Company, separately managed accounts and custom tail-risk overlays. F-Squared Retirement Solutions will partner with advisors, plan sponsors and consultants to integrate downside risk management into retirement plans, giving these fiduciaries the ability to construct investment menus that better meet the needs of participants and offer the opportunity for a successful retirement outcome.

The AlphaSector PhilosophyThe AlphaSector investment philosophy is

simple. We believe that severe market drawdowns are the greatest threat to achieving a desired investment outcome. We further believe that there is a “psychological cost” to severe drawdowns and a “psychological benefit” to avoiding them. We depart from the conventional approach of closely tracking a benchmark.

To achieve this goal, the AlphaSector investment strategies are designed to avoid or reduce severe losses in declining markets while participating in rising markets. An AlphaSector investment strategy may closely track a benchmark index portfolio during a rising market, but when our quantitative models indicate an increased risk of loss, the strategy is designed to diverge from the benchmark to achieve defensive positioning.

About F-Squared InvestmentsF-Squared Investments, based in Wellesley,

MA and Princeton, NJ, is a manufacturer of next-generation investment indexes based on the proprietary AlphaSector and PoRT capabilities. F-Squared seeks to provide investment indexes that align with the real needs of the marketplace, delivering on well-defined expectations. The firm serves clients in the advisor, institutional and retirement markets.

By starting with the needs of the investor, F-Squared has developed a fundamentally different approach to risk and return. Every day we challenge ourselves, our industry colleagues and the investors we serve to break from convention and reset expectations. F-Squared is committed to “Rethink Investing” based on the needs of the investor. For more information, please visit www.f-squaredretirementsolutions.com.

F-Squared Investments® Rethink Investing™

NAPAPARTNERCORNER


Firm Profile It’s hard to think about the retirement industry without thinking about Fidelity, which has 60% of its $1.7 trillion of assets under management in retirement-related accounts. But it’s not as easy to associate Fidelity with the investment-only business — since their 20,000-plus qualified plans (with 12 million participants) are on their fully integrated, bundled platform — until recently, that is. With 75% of the marketplace record kept on non-Fidelity platforms, along with the movement toward open ar-chitecture and the increasing reliance on consultants and advisors, Fidelity changed its model to reenergize their DCIO business.

Fidelity Financial Advisor Services (FFAS), as its name implies, concentrates on selling and servicing advisors. In addition to making their funds available, they had been selling their DC record keeping and administrative services to advisors. In 2011, when sales of record keeping services were moved under WI, FFAS shifted their attention to building an inte-grated DCIO group — expanding resources, creating specialized thought leadership and developing a focused product and pricing approach.

That division, under the leadership of Jordan Burgess, a long-time FFAS veteran, employs 10 field wholesalers selling to advisors (under Derek Wallen) and five institutional reps selling to consultants (un-der Matt Gannon, a long-time MFS executive who was instrumental in building their retirement business). Thegroupoverseesnearly$70billionDCAUM—making FFAS a top-tier DCIO provider.

Fidelity enjoys a number of important and unique advantages as a DCIO provider, including:• Industry Leadership — They combine retirement

expertise and knowledge with investment and technical wisdom.

• Comprehensive Investment Menu — With more than 140 advisor funds, multiple share classes includingmanyZshares(likeR6)andinsti-tutional CITs and SMA managed by Pyramis, Fidelity understands the types of investments that appeal to retirement plans and participants.

• UnparalleledResourcesandBrand—With800investment professionals and many more techni-cal experts, Fidelity has money to keep investing in the business as well as a strong retail and institutional brand.

FFAS has always worked with and understood the needs of advisors. The DCIO group is leveraging their expertise and Fidelity’s resources, including their rich database of plans and participants, to help advisors, record keepers and plan sponsors with their goal of ensuring participants achieve better retirement outcomes. They focus a number of resources and research on:• What plan sponsors want from their advisors and

what their major concerns and issues are• Participant behavior patterns when making

investment decisions and attitudes about retire-ment readiness

• Investment trends, especially those affecting retirement plansWhite papers following up on their research cov-

er important topics like how to restore confidence in investors, whose allocations are becoming too conser-vative just as they are increasingly concerned about their ability to retire. FFAS also makes available to advisors a dedicated team of investment professionals to help construct optimal investment fund lineups and perform customized mapping with supporting investment analytics.

Fidelity funds, which have some of the greatest depth as well as sensitivity to the retirement market, include:• Fidelity Advisor New Insights, covering large cap

growth• Fidelity Advisor Growth Opportunity Fund• Bond funds such as Fidelity Advisor Strategic

Income and Fidelity Advisor Total Bond • Large value with their Fidelity Advisor Equity

Income fund• Fidelity Diversified Stock, a large cap blend fund• Fidelity’s popular Fidelity Advisor Freedom

Funds, which is the market leader in target date fundsFidelity’s DCIO group works with all major record

keepers, so advisors have access to their broad array of funds. Now, with the recently formed, dedicated DCIO team and resources, plan advisors using Fidelity funds will have access to their people, research and brand from the retirement industry’s clear leader.

business metricswww.advisor.fidelity.com/dcio


retail: 15

Dc aum:


total aum:

$1.7 Trillion

investments:

mutual fund

Collective Trusts

SmAs


Tdf (To/Through/both): Through

Target risk

Passive/active/both:

Active


Stable value

money market

GiCs

Fixed income

Yes

top 5 Funds by Dc assets

fA freedom funds (12 Target date funds) fA Small Cap

fA New insights fA balanced

fA leveraged Co Stock

Key Contacts:Sales: derek wallen, SvP, division manager, 401.292.5615, [email protected]

Service: Tom restivo, SvP, operations and Services Group, 401.292.5596, [email protected]

(DCIO)



Firm Profile Invesco is and has been a leader in the DCIO market with a long history in retail and institutional money management and an emphasis on working with DC plan advisors to help create value for their clients. Having exited the DC record keeping market in the mid-2000s, Invesco’s focus on investment manage-ment makes them a popular choice for plan advisors and leading broker dealers, with many of their funds available on all major platforms.

Led by industry veteran Terry Kelly, the DCIO group includes 10 external and 10 internal whole-salers as well as six senior account executives as of 10/31/2013. The group flowed more than $10 billion in 2010 from plan advisors. Once a prominent player in the DC record keeping market through outsourced solutions as well as a proprietary system, the company decided to exit that side of the business in 2003. In-vesco sold their proprietary platform to Merrill Lynch, which eventually flipped it to The Hartford. The expe-rience helped Invesco develop a good understanding of the market and the needs of plan advisors, making their transition seamless as more platforms were forced to offer outside investments. Their sales people who had sold record keeping services developed a solutions-based approach that attracted plan advisors.

Providing impactful and unique value-adds has become a real challenge for DCIOs. Many firms seem to make available off-the-shelf third-party tools that are also offered by various competitors. Invesco has always developed their own tools and services, howev-er. Those capabilities were augmented in 2010 when the company purchased the retail asset management business of Morgan Stanley, including Van Kampen Investments — a leader in value added materials for plan advisors.

Invesco employs a dedicated internal group of 12 practice management and marketing consultants that also serves retail advisors. This group has helped develop industry leading programs such as “The Final Word,” focused on using the right words to make effective finals presentations to boards, and “New Words for the New Economy” to help participants understand and maximize benefits. These programs were developed through extensive research with plan sponsors and participants. Their newest program draws from the lessons of Hollywood screenwriters. “Tell Me More” helps advisors create a “logline” that previews their benefits to clients in 15 words or less, and prompts prospects to say “tell me more.” For strategic relationships, Invesco will send in a team to review an advisor’s pitch book and materials.

Invesco is well known in the DC market for its large-cap value funds and mid-cap value strategies, including some that were part of the Van Kampen purchase. With competitive fees, Invesco’s value complex includes distinct strategies focused on deep value, relative value and companies that pay divi-dends. In their core strategies, Invesco will combine passive and active strategies to keep fees low. Though nascent, Invesco’s TDFs have been cited as one of the fastest growing in the DC market by Morningstar, and they also offer a risk parity strategy called Invesco Balanced-Risk Allocation Fund.

Invesco offers strong support for plan advisors with a robust and deep group of external wholesalers supported by internal professionals, industry leading value-added tools and a strong investment line-up, making them a valuable partner for the focused plan advisor.

business metricswww.invesco.com/us


dC: 10

retail: 103

Dc aum:


total aum:

$745.5 billion

investments:

mutual funds

Collective Trusts

SmAs


Tdf (To/Through/both): both

Target risk

managed Accounts


Stable value

money market

bonds

Yes

top 5 Funds by Dc assets (with asset total & last year new flow):

ivZ international Growth: $5 billion

ivZ Comstock: $3.6 billion

ivZ Growth and income: $4.7 billion

ivZ Small Cap Growth: $2.4 billion

ivZ equity and income: $4.1 billion

Key Contacts:Sales: Jeffrey hemker, CimA® 630.258.6931, [email protected] Accounts: matt foster 832.814.8775, [email protected]: invesco retirement division Sales desk 800.370.1519

NAPAPARTNERCORNER


Firm Profile John Hancock Investments provides asset manage-ment services to individuals and institutions through a unique manager-of-managers approach. We operate as an independent and well-resourced investment advisor. This structure enables us to be highly respon-sive, develop funds based on investor need, and then search the industry to find the portfolio management teams with the best skill set, track record, and experience to manage those funds. Our funds provide access to specialized portfolio teams at some of the best managers in the world. Our independence and experience as one of the longest-tenured manager of managers enable us to achieve what we believe is an exceptional level of oversight. Our approach to in-vesting has led to a diverse set of investments deeply rooted in investor needs, along with strong risk-adjust-ed returns across asset classes.

business metricswww.jhinvestments.com


dC: 7retail: 70

Dc aum:

Total: $5 billionNew 2012: $1.4 billion

total aum:

$60 billion

investments:

mutual funds

Group Annuity - Through John hancock retirement Plan Services

SmAs



Target risk


Active


money market

Fixed income

Yes

bonds

Yes

top 5 Funds by Dc assets

John hancock disciplined value fund

John hancock Classic value fund

John hancock disciplined value mid Cap fund

John hancock rainier Growth fund

John hancock lifestyle Portfolios (Asset Allocation Strategies)

Key Contacts:Sales: Aaron esker, [email protected], 617.663.4281

Service: Aaron esker, [email protected], 617.663.4281



Firm Profile John Hancock has more than 150 years of experience and is a member of the Manulife Financial Group of Companies.

John Hancock knows what goes into making a healthy, successful retirement plan. We are one of the nation’s largest providers, meeting the needs of partici-pants across a wide range of industries and plan sizes.

As your efficient provider, John Hancock gives you the innovative tools, resources and the people power to help you build and maintain a profitable retirement plan business and meet your clients’ needs.

The company has two offerings in the 401(k) marketplace: JH Signature™, our small market solution; and JH Enterprise®, our open architecture solution for the mid-market.

JH SignatureTM

JH Signature is a fully-packaged solution, offering a multi-class structure, local compliance and ERISA expertise, as well as a team of investment specialists who help research, select and monitor the asset managers on the platform.

JH Enterprise®

JH Enterprise is John Hancock’s open architec-ture retirement plan offering, providing plan sponsors with $10 million or more in assets with access to more than 18,000 investment options and a robust, real-time, proprietary record keeping system.

The company’s two commitments to their busi-ness partners and clients: We are easy to do business with, and we make plans work.

For more information, visit www.jhrps.com. (For plans domiciled in New York, visit

www.jhrps.com/ny.)

Key Contacts:Sales: 1.877.346.8378

Data as of June 30, 2013

business metricswww.jhrps.com, www.jhrps.com/ny


65

Dc aum:


total aum:


Dc Plans um:

44,972

Dc Participants um:

1,645,894


Tdf Proprietary/outside: Proprietary subadvised 1) To retirement 2) Through retirement

Tdrisk Proprietary/outside: Proprietary subadvised

Custom Glide Path

service model(s): (bundled/unbundled/both):

bundled and Unbundled

Distribution model(s): (advisor/direct/both):

Advisor


micro (<$1 million)

Small ($1-$10 million)

mid ($10-$100 million)

Plan type(s):

dC

db

457

Taft hartley

irA


3(21)

NAPAPARTNERCORNER


Firm Profile Legg Mason has a rich history in the DC market and is making strong moves to become more prominent in the DCIO arena. Though Legg Mason has never owned a record keeper as other well-heeled DCIOs have, they did own a brokerage firm and created private-label services with other record keepers for their advisors looking to access their funds. In 2005, Legg “traded” their advisors for Smith Barney’s funds to focus on managing money. (Those advisors are now part of Morgan Stanley.)

While Bill Miller is Legg’s most renowned port-folio manager, the firm is comprised of eight different independent money managers which have access to shared services like the DCIO group headed by in-dustry veteran and thought leader Gary Kleinschmidt. The network of independent investment managers includes:

Batterymarch Financial ManagementAn equity specialist focused on bottom-up stock

selection, integrated risk control and cost-efficient trading. An early entrant into overseas investing, too.

Brandywine Global Investment ManagementPursuing value since 1986 across equity and

fixedincome,globallyandintheUnitedStates.Historically institutionally focused, the firm has both a boutique’s agility and a leader’s stability and resources.

ClearBridge InvestmentsEquity manager with more than 45 years of

experience and long-tenured portfolio managers who build income, high active share or managed volatility portfolios.

Legg Mason Global Asset AllocationOffers global expertise in strategic and tactical

asset allocation and custom risk management. Solu-tions-focused, the firm combines asset allocation with Legg Mason’s independent manager expertise.

Legg Mason Global Equities GroupA collection of specialty firms dedicated to

global equities. Each pursues its own strategy while benefiting from Legg Mason’s global scale. LMGEG includes: Esemplia Emerging Markets, Legg Mason Poland and Legg Mason Australian Equities.

The Permal GroupA global pioneer in multi-manager, multi-strate-

gy alternative investing. The firm has made invest-ments in new and established hedge fund managers across strategies, asset classes and regions since 1973.

Royce & AssociatesKnown for its disciplined, value-oriented

approach to managing small caps. An asset class pio-neer, the firm’s founder is one of the longest tenured active mutual fund managers.

Western Asset ManagementOne of the world’s leading global fixed-income

managers. Founded in 1971, the firm is known for team management, proprietary research and a long-term fundamental value approach.

The firm focuses on 1,200 plan advisors who specialize in the DC market, providing a con-cierge-like service which gives the advisors access to Legg’s fund managers, their ERISA help desk pow-ered by Ascensus, white papers (many of which are by ERISA expert Marcia Wagner) and other value-added services focused on the use of social media and building a pipeline of prospects.

While Legg Mason “checks all the boxes” need-ed to make it one of the 14 Tier 1 DCIO providers, what distinguishes Legg (and very few others) is their senior management and thought leadership. Gary Kleinschmidt started in the DC business in the 1980s, moving to Ascensus (then BISYS) in the 1990s and then to Van Kampen, which was a pioneer in the DCIO market, in the 2000s. He moved to Legg in 2007 to gain access to a firm that was comprised of eight different managers and because of their focus on DC plans after the 2005 advisor trade with Smith Barney. Gary serves on the NAPA Leadership Council, the group’s governing board.

Thought leadership is important for Legg Mason, which is why they created the Legg Mason Retirement Advisory Council comprised of leading professionals from various record keepers, advisory firms and broker dealers. Following a recent expansion, the Council now includes Brian Graff, Executive Director/CEO of ASPPA and NAPA. The Council supports research and thought leadership on a variety of topics, including auto-IRAs, creating undergraduate programs to attract more people into the retirement industry, and aFirst&10whitepaperencouragingAmericanstofirst contribute to their retirement plan and then to contribute 10%.

The DCIO market is getting more competitive and the stakes will get much higher, with fewer than 50 providers focused on the advisor-sold market and fewer than 15 who are considered in the top tier based on sales, the number of wholesalers and value-added services, as well as the quality and depth of their investments. In the future, two factors will distinguish firms within the top tier: quality of senior management and thought leadership to help clients (advisors, record keepers and broker dealers) to distinguish themselves and improve participant outcomes. Legg Mason’s DCIO group enjoys great support from the firm and will continue to be a leader in this market.

This description was written by Fred Barstein on behalf of the National Association of Plan Advisors (NAPA). It was not written by Legg Mason.

NAPA is not associated with Legg Mason.

9/13 FN1312984

Key Contacts:Sales: Gary Kleinschmidt, head of legg mason retirement 215.872.1317

Service: Ursula henry, vice President, Account Service manager

business metricswww.leggmason.com


dC: 8

retail: 60

Dc aum:

Total: $20 billion

non-ira retirement aum:

$92 billion

total aum:

$654 billion as of may 31, 2013

investments:

mutual fund

Group Annuity

Collective Trusts

SmAs




Active


money market

Fixed income:

Yes

bonds:

Yes

top 5 Funds by Dc assets:

royce Pennsylvania mutual fund: $507 million Gross Sales, $2.3 billion AUm

royce Total return fund: $381 million Gross Sales, $1.5 billion AUm

western Asset Core bond fund: $487 million Gross Sales, $1.2 billion AUm

Clearbridge Appreciation fund: $275 million Gross Sales, $484 million AUm

western Asset Core Plus bond fund: $444 million Gross Sales, $1.9 billion AUm



Firm ProfileMassMutual employs state-of-the-art technology to provide comprehensive record keeping services to our clients. Our innovative technology provides a strong foundation of industrial processing strength on a plat-form that is scalable and flexible enough to meet the ever-changing and unique needs of our client base.

Our record keeping services go beyond providing efficient benefit processing, financial integrity and on-demand access to information. By combining our powerful record keeping system with client data, we can provide prescriptive solutions to our clients and their participants that promote plan health and participant retirement readiness. Our flexible data requirements make it easy for our clients to share data with us, experience simplified year-end testing and provide innovative solutions to help drive employee action. This combination of data and technology also allows us to measure the true outcomes of our clients’ plans (employee replacement income in retirement) and help our clients and their advisors make key plan design decisions.

Our powerful technology provides the foundation that supports our local service teams and empowers them to provide our clients with high-touch, personalized service. MassMutual is committed to providing quality, highly personalized service and innovative, technology-rich solutions to our clients so their participants can retire on their own terms.

business metricswww.massmutual.com/retire/intermediaries


81

Dc aum:

Total: $118 billion

retirement aum:

Total: $133 billion

total aum:

$613 billion

Dc Plans um:

34,700


37,100

Dc Participants um:

2.5 million


2.8 million


Target date: retireSmArT Target date Series (in retire-ment, 2010, 2015, 2020, 2025, 2030, 2035, 2040, 2045, 2050, 2055)

Target risk: retireSmArT Target risk Series (Conservative, moderate, moderate Growth, Growth)

Custom Glide Path

service model(s): (bundled/unbundled/both)

both

Distribution model(s): (advisor/direct/both)

Advisor, Consultant


•Start-Up($0-$250,000)•Micro($250,000-$1million)•Emerging($1-$5million)•Small($5-$15million)•Mid($15-$75million)•Large($75-$150million)•Institutional(+$150million)

Plan type(s):

dC, db, Non-erisa, 457, Taft hartley, Non Qualified, irA


3(16) Yes- via mesirow financial



Key Contacts:Sales: 800.874.2502, option 4

NAPAPARTNERCORNER


business metricswww.thornburg.com


dC: 5

retail: 14

Dc aum:

Total: $9.4 billion

New 2012: $3.7 billion

total aum:

$93.9 billion

investments:

mutual funds

Group Annuity

Collective Trusts

SmAs


Active

Fixed income:

Yes

bonds

Yes


international value: $8.5 billion Assets2012 flow: $3,013 billion

international Growth: $72.4 million Assets 2012 flow: $48.9 million

value: $142 million Assets2012 flow: $85.5 million

limited Term income: $87 million Assets 2012 flow: $49.4 million

Core Growth: $171 million Assets2012 flow: $49.6 million

Key Contacts:Sales: rocco dibruno, managing director, Thornburg retirement Group, [email protected] office 877.215.1330 ext. 7150 Cell 609.405.4810

Service: Julie Geraci, retirement Plan manager, [email protected], 505.467.7214

Firm Profile Thornburg Investment Management was founded in 1982 and is headquartered in Santa Fe, New Mexico. Thornburg manages fixed income funds, equity funds, and separate accounts for high net worth and institutional investors. Assets under management are approximately $94 billion (as of 9/30/13). We focus on preserving and increasing the real wealth of shareholders after accounting for inflation, taxes, and investment expenses.

History of StewardshipThroughout Thornburg Investment

Management’s 30-year history, our focus on investors has been the cornerstone of our investment management business. Instead of directing attention towards marketing and gathering assets under management, our efforts have been focused on two things – generating strong investment returns and servicing our clients. We believe that if you do those things well, the rest will take care of itself. This commitment to investors has enabled Thornburg to earn an enviable reputation for strong historical performance and responsible stewardship.

Retirement GroupThe Thornburg retirement group provides a

series of share classes specifically designed for the retirement plan market; our mutual funds are available as an investment option on many leading open-architecture and bundled-service 401(k) platforms. Thornburg’s team of retirement plan professionals is dedicated to helping sponsors follow judicious decision-making processes based on industry best practices. Via educational seminars, books, and investment tools, Thornburg strives to be a leader in providing the resources for plan sponsors to identify and fulfill their fiduciary responsibilities.

Thornburg Equity FundsThornburg’s equity management approach

is bottom-up, focused on the fundamentals, and comprehensive. Each Thornburg equity portfolio is focused on a limited number of securities, so that a single holding can have a positive impact on performance. The management teams search for firms they believe will have a promising future, and seek to buy shares of those companies at a discount to their true, intrinsic values.

Thornburg Value FundShare Classes: R3 (TVRFX), R4 (TVIRX), and R5

(TVRRX)

Thornburg International Value FundShare Classes: R3 (TGVRX), R4 (THVRX), R5

(TIVRX), and R6 (TGIRX)

Thornburg Core Growth FundShare Classes: R3 (THCRX), R4 (TCGRX), and

R5 (THGRX)

Thornburg Investment Income Builder FundShare Classes: R3 (TIBRX), R4 (TIBGX), and R5

(TIBMX)

Thornburg Global Opportunities FundShare Classes: R3 (THORX), R4 (THOVX), and

R5 (THOFXx)

Thornburg International Growth FundShare Classes: R3 (TIGVX), R4 (TINVX), R5

(TINFX), and R6 (THGIX)

Thornburg Developing World FundShare Class: R5 (THDRX), and R6 (TDWRX)

Thornburg Bond FundsSince the launch of our first fund nearly 29

years ago, Thornburg has applied a disciplined, bottom-up, credit-research-focused strategy to fixed-income management. We view ourselves as organic in our approach, avoiding leverage or complex strategies which could backfire in periods of market uncertainty.

Thornburg Limited Term U.S. Government FundShareClass:R3(LTURX),andR5(LTGRX)

Thornburg Limited Term Income FundShare Class: R3 (THIRX), and R5 (THRRX)

Thornburg Strategic Income FundShare Class: R3 (TSIRX), and R5 (TSRRX)

Vision, Mission & Values

Vision StatementOur vision is to be a trusted partner for our

clients and a respected leader in global asset management.

Mission StatementOur mission is to add value with active portfolio

management to help our clients reach their long-term financial goals. We achieve this through our investment strategies, adhering to our values and investment principles, and offering employees a challenging and rewarding place to build a career.

Thornburg Values• We do the right thing.

We act with integrity and put our clients first.• We think for the long term.

We engage in thoughtful decision making and believe that investment excellence should drive our decisions.

• We work together to achieve common goals. We show respect and humility towards each other and our clients. We believe in creating a supportive work environment that fosters teamwork, collegiality, and effective communication.

• We strive for excellence. We make the extra effort, practice continuous improvement, and stay flexible to adapt to changing circumstances.

• We are committed to employees.

We foster an environment that provides flexibility and opportunity for growth, while also requiring accountability.

• We are independent. We will remain a privately owned, independent firm to ensure that we act in the best interest of our clients and employees.

• We are community minded. We support philanthropic giving and encourage employee volunteerism.



Firm ProfileTransamerica Retirement Solutions is a leading provid-er of customized retirement plan solutions for small to large organizations.

Transamerica partners with financial advisors, third party administrators and consultants to cover the entire spectrum of defined benefit and defined contri-bution plans, including 401(k) and 403(b) (Traditional and Roth); 457; profit sharing; money purchase; cash balance; Taft-Hartley; multiple employer plans; nonqualified deferred compensation; and rollover and Roth IRA.

Transamerica helps more than 3 million retirement plan participants save and invest wisely to secure their retirement dreams.

Our ServicesWe partner closely with our clients and their advisors or consultants to tailor our services to meet their specific needs, including:•Plan-levelrecordkeepingandadministrative services•Participantcommunicationsandeducationservices — with a clear focus on retirement readiness and improving outcomes•Fiduciaryriskmitigationservices•Openinvestmentarchitecture•Complianceguidanceandregulatorysupport

Our MissionAt Transamerica Retirement Solutions, we help people save and invest wisely to secure their retirement dreams.

Our BeliefsWe believe in an exclusive focus on retirement. We fo-cus all of our resources, expertise, energies and atten-tion exclusively on retirement plans and participants. We make it easier for organizations to extend valuable benefit programs to their employees by streamlining administrative responsibilities and easing fiduciary obligations; and we make it more appealing for em-ployees to take full advantage of all their program has to offer by simplifying the message. We collaborate with financial advisors and consultants to customize our retirement plan solutions to best meet the needs of their sponsors’ participants.

We believe in our people. We have created a dynam-ic workplace that rewards people who demonstrate initiative. Our workforce is diverse and we encourage a free-flowing exchange of ideas. Our people are adaptable, flexible and open-minded in their interac-tions with one another and with our clients and their advisors or consultants. We provide a supportive work environment that allows us to focus on performing our

jobs to the very best of our ability. What’s more, we werenamedonPension&Investments’annuallistof “Best Places to Work in Money Management” for the second consecutive year, placing second among organizations with over 1,000 employees.

We believe in retirement readiness — we believe that everyone should have access to a secure retire-ment. It’s been said that one of the absolute hallmarks of a civilized society is the ability of a citizen, after decades of work, to retire with financial dignity. We’re fully dedicated to improving and promoting retirement readiness throughout our country.

Our LocationsTransamerica Retirement Solutions serves national and regional clients through an integrated network of offices. Localized sales and client service are managed throughout our regional offices all across the country.

Our Parent CompanyTheTransamericaCorporationisaUnitedStatessub-sidiary of Aegon N.V., a diversified global financial ser-vices firm headquartered in The Hague, The Nether-lands. The Transamerica group of companies operates the Aegon N.V. investment and pension businesses in theUnitedStates.

For more information about Transamerica Retirement Solutions Corporation, please visit trsretire.com

business metricswww.trsretire.com

Dc aum:


retirement aum:


total aum:

$102.9 billion

Dc Plans um:

20,345


21,257

Dc Participants um:

2.4 million


3 million +


Tdf: outside

Tdrisk: outside

Custom Glide Path


both


Advisor


•Micro(<$1million)•Small($1-$10million)•Mid($10-$100million)•Large($100-$250million)•Mega(+$250million)

Plan type(s):

dC, db, Non-eriSA 403(b), 457, Taft hartley, Non Qualified, irA


3(21)

3(38)

Key Contacts:Sales: 888.401.5826

NAPAPARTNERCORNER


business metricswww.americanfunds.com


dC: 22

retail: 74

Dc aum:


New: $47.8 billion


$242 billion

total aum:

$1,019.9 billion

investments:

mutual fund

Group Annuity

Collective Trusts

SmAs


Tdf (To/Through/both): Through

Target risk: Yes

Passive/active/both

Active


Stable value

money market

Fixed income:

Yes

bonds:

Yes

top 5 Funds by Dc assets(with asset total & last year new flow)

The Growth fund of America: $122.1 billion, $11.7 billion

fundamental investors: $58.2 billion, $5.3 billion

euroPacific Growth fund: $108.6 billion, $18.9 billion

New Perspective fund: $47.6 billion, $3.6 billion

American balanced fund: $61.7 billion, $7.3 billion

American Funds (DCIO)

Key Contacts:Sales: brendan mahoney, retirement Sales managerService: Chris Guarino, retirement Plan Services operating director, 1.800.421.9900

business metricswww.adp.com/401k


7

Dc aum:


retirement aum:

$49.9 billion

total aum:

$49.9 billion

Dc Plans um:

40,559


$49.9 billion

Dc Participants um:

1,461,000


1,461,000


Tdf: outside

Tdrisk: outside – 43 unique Td risk series


bundled


both


micro (<$1 million)



Plan type(s):

dC

Non-erisa 403(b)

457

Taft hartley

Non Qualified

irA: SimPle irA


3(21) — Through mesirow financial

ADP

Key Contacts:Sales: AdP Sales Support desk at 877-218-0415 Service: AdP Client Service at 800-929-2170

business metrics

Allianz Investors

Key Contacts:Sales/Service: Glenn dial, managing director, head of US retirement distribution, [email protected], 212.739.4275Kilie donahue, vice President, manager, internal retirement Consulting Team, [email protected], 212.739.4278

www.allianzinvestors.com


dC: 5

retail: 21

Dc aum:


New funds: $2.8 billion


$12.7 billion

total aum:

$43.8 billion

investments:

mutual fund

Group Annuity

Collective Trusts

SmAs



Target risk

managed Accounts


Active


money market

Fixed income

Yes: Part of a Portfolio

bonds

Yes

top 5 Funds by Dc assets : (with asset total & last year new flow)

AllianzGi Small-Cap value: $983 million, $2.3 billion AUm

AllianzGi retirement funds: $115 million, $200 million AUm

AllianzGi dividend value: $678 million, $2.6 billion AUm

rCm Technology: $75 million, $100 million AUm

NfJ international value : $463 million, $1.0 billion AUm



business metrics

American Funds (Record Keeper)

Key Contacts:Sales: brendan mahoney, retirement Sales managerService: Chris Guarino, retirement Plan Services operating director, 1.800.421.9900

business metrics

www.dailyaccess.com


dC: 8

Dc aum:

Total: $8.5 billion

retirement aum:

$8.5 billion

total aum:

$8.05 billion

Dc Plans um:

1,595


1,595

Dc Participants um:

194,987


194,987


Tdf Proprietary — Custom interServ model Asset Portfoli-os/outside —1,325 Tdfs

Tdrisk Custom interServ model Asset Portfolios/ Unable to determine if any of the 1325 Tdfs are risk adjusted

Custom Glide Path: Yes — Custom interServ model Asset Portfolios/Unable to determine if any of the 1325 Tdfs incorporate custom glide paths

service model(s)

Unbundled

Distribution model(s):

Advisor only


micro (<$1 million): exception



large ($100-$250 million)

Plan type(s):

dC

db

457

Taft hartley

Non Qualified


3(21): Through wholly-owned subsidiary, interServ, llC

3(38): Through wholly-owned subsidiary, interServ, llC

3(16): Not in-house; third party availability

DailyAccess Corp.

Key Contacts:Sales: [email protected]: [email protected]

www.americanfunds.com


dC: 22

retail: 74

Dc aum:


retirement aum:

$379.5 billion

total aum:

$1,109.9 billion

Dc Plans um:

36,051


36,051

Dc Participants um:

900,000


900,000


Tdf Proprietary/outside: Yes, proprietary — American funds Target retirement Series

Tdrisk Proprietary/outside: Yes, proprietary — American funds Portfolio Series

service model(s):



Advisor


micro (<$1 million)


mid ($10-$100 million): dCio only

large ($100-$250 million): dCio only

mega (+$250 million): dCio only

Plan type(s):

dC

db: dCio only

Non-eriSA 403(b)

457: dCio only

Taft hartley: dCio only

Non Qualified: dCio only

irA


3(21)

3(38)

NAPAPARTNERCORNER


business metrics

www.fidelity.com, www.Advisor.fidelity.com


38

retirement aum:

Total: $1.2 billion

Dc Plans aum:

22,660

Dc Partcipants um:

16.3 million


20.7 million


Tdf Proprietary/outside: fidelity freedom funds and several outside fund families

Tdrisk Proprietary/outside: fidelity Asset manager funds and several outside fund families

Custom Glide Path

service model(s):

bundled


Advisor & direct


micro (<$1 million): exception




Plan type(s):

dC

db

457

Taft hartley

Non Qualified

Fidelity Investments (RK)

Key Contacts:Sales: 800.684.5254, option 1Service: 866.444.4015

business metrics

www.federatedinvestors.com


dC: 6

retail: 52

Dc aum:



total aum:

$375 billion as of 3/31/13

investments:

mutual fund

Collective Trusts

SmAs

Passive/active/both

both


Stable value

money market

Fixed income:

Yes

bonds:

Yes


Total return bond fund: $3,762 dC Assets, $7,524 Total Assets

institutional high Yield fund: $1,045 dC Assets, $2,090 Total Assets

Strategic value fund: $3,379 dC Assets, $6,758 Total Assets

Ultra-short bond fund: $958 dC Assets, $1,916 Total Assets

Kaufmann fund: $2,661 dC Assets, $5,322 Total Assets

Federated Investors, Inc.

Key Contacts:Sales: bryan burke, SvP, National Sales manager-retirement/insurance, 412.491.1066Service: wally Jones, Platform Specialist, 412.720.8567Jason Kessler, Platform Specialist, 724.720.8503



business metrics

www.ingretirementplans.com


50

Dc aum:

$316 billion

retirement aum:

$316 billion

total aum:

$461 billion

Dc Plans um:

47,547

retirement Plans:

47,547

Dc Participants um

5.1 million

retirement Participants um

5.1 million


Tdf Proprietary & outside

Tdrisk Proprietary & outside


bundled & Unbundled


Advisor


micro (<$1 million)




mega (+$250 million)

Plan type(s):

dC

db

Non-erisa 403(b)

457


3(21)

3(28)

ING

Key Contacts:Sales: 1.866.481.3653, option 4Service: 1.866.481.3653, option 3

business metrics

www.jpmorganfunds.com/retirement


dC: 9

retail: 92

Dc aum:

$101.8 billion

total aum:

$1.5 Trillion

investments:

mutual funds

Collective Trusts

SmAs


Tdf

Target risk

managed Accounts

Passive/active/both

Active


Stable value

money market

Fixed income:

Yes

bonds:

Yes


JPmorgan Smartretirement:$17.9 billion$3.3 billion

JPmorgan mid Cap value fund:$5.4 billion$1.1 billion

JPmorgan large Cap Growth fund:$5.1 billion$2.6 billion

JPmorgan Core bond fund:$1.9 billion$429 million

JPmorgan US equity fund:$1.4 billion$445 million

JP Morgan Asset Management (DCIO)

Key Contacts:Sales: mike miller, (727) 204-7825 [email protected]: Jason Colarossi, (212) 648-0060 [email protected]

NAPAPARTNERCORNER


business metricswww.mfs.com


dC: 9

retail: 84

Dc aum:



total aum:

$353.7 billion as of 6.30.13

investments:

mutual fund

Group Annuity

Collective Trusts

SmAs


Tdf (To/Through/both): To

Target risk

Passive/active/both

Active

Fixed income

Yes

bonds:

Yes


mfS value fund $7.9b, $6.5 billion

mfS international value fund $1.5 billion, $1.1 billion

mfS research international fund $1.7 billion, $1.6 billion

mfS Growth fund $1.5 billion, $1.2 billion

massachusetts investors Growth Stock fd $1.6 billion, $1.3 billion

MFS

Key Contacts:ryan mullen, Senior managing director, National Sales, 617.954.6914mike Schwanekamp, managing director, 513.604.6421

business metricswww.jpmorgan.com/retirement


17

Dc aus:

$163 billion

retirement AUS:

$165 billion

dC Plans Um:

919 plans

retirement Plans Um:

1,025 plans

dC Participants Um:

2.1 million

retirement Participants Um:

2.3 million


Tdf: JPmorgan Smartretirement® funds and several outside fund families.

Tdrisk: J.P. morgan Asset management proprietary funds and several outside fund families.

Custom Glide Path:

Yes




Advisor and direct






Plan type(s):

dC

db

Non-eriSA 403(b)

457

Taft hartley

Non Qualified


3(21)

JP Morgan Asset Management(RK)

Key Contacts:Sales: 800.988.9084Service: 800.345.2345



business metricswww.oppenheimerfunds.com


dC: 12

retail: 89

Dc aum:



non-retirement aum:

$50.5 billion

total aum:

$215.3 billion

investments:

mutual fund

Collective Trusts

SmAs


Target risk


Active


money market

Fixed income:

Yes

bonds:

Yes


developing markets fund:$9.4 billion, $3.2 billion

international bond fund: $2.0 billion, $508.6 million

Global fund: $4.5 billion, $774.8m

main Street: $1.3 billion, $274.1 million

international Growth fund: $2.9 billion, $915.8 million

OppenheimerFunds

Key Contacts:Sales: James howard, 212.323.5016 [email protected]

business metricswww.oneamerica.com


32

Dc aum:


retirement aum:

$23.1 billion

total aum:

$23 billion

Dc Plans um:

9,700


10,000

Dc Participants um:

514,000


620,000


Tdf Proprietary/outside: outside (Alliance bernstein, Allianz Global, American Century, fidelity, russell, T.rowe Price, and wilmington Trust)

Tdrisk Proprietary/outside: outside (American Century, dfA, manning & Napier, russell)

Custom Glide Path: custom models and glide paths are financial Advisor driven

service model(s):


Distribution model(s): advisor/direct/both):

Advisor


micro (<$1 million)



large ($100-$250 million): limited

mega (+$250 million): limited

Plan type(s):

dC

db

Non-erisa 403(b)

457

Taft hartley

Non Qualified

irA


3(21)

3(38)

OneAmerica

Key Contacts:Sales: National Sales desk: 1.866.313.7355Service: National Sales desk: 1.866.313.7355

NAPAPARTNERCORNER


business metricswww.Putnam.com/advisor/full-service-401k/


9


Tdf: open architecture platform Putnam retirementAdvantage and retirementready series

Tdrisk: open architecture platform Putnam dynamic Asset Allocation funds

Custom Glide Path:

Putnam model portfolios


bundled; can also support unbundled with TPA


Advisor/Consultant






Plan type(s):

dC

Non-eriSA 403(b)

Non Qualified

irA


3(21)

3(38)

Putnam (Record Keeper)

Key Contacts:Sales: 800.719.9914Service: 888.411.4015

business metrics

www.Putnam.com/dCio


dC: 13

retail: 50+

Dc aum:

Total: $14 billion


$17.1 billion

total aum:

$140 billion

investments:

mutual funds

Collective Trusts

SmAs


Tdf (To/Through/both): To (retirementAdvantage and retirement ready)

Target risk: Putnam dynamic Asset Allocation Portfolios

managed Accounts : full-service plans only

Passive/active/both

Active


Stable value

money market


Putnam equity income –$4.7 billion

dynamic Asset Allocation Portfolios –$3.7 billion

Putnam income fund – $1.2 billion

Putnam international equity – $1 billion

Putnam retirement Advantage (CiT)- $610 million

Putnam (DCIO)

Key Contacts:Sales: Putnam retirement Sales, 1.800.719.9914Service: dCio operations, 1.800.648.7410



business metricswww.ridgeworth.com, www.planadvisortools.com


dC: 6

retail: 9

Dc aum:

Total: $2.6 billion



$2.6 billion

total aum:

$48.1 billion

investments:

mutual fund

Collective Trusts

SmAs


Target risk

Passive/active/both

Active

Fixed income Funds available

Yes

bonds

Yes


mid-Cap value: $655 million AUm, $221 million 2012

Total return bond: $152 million AUm, $68 million 2012

large Cap value: $504 million AUm, $169 million 2012

moderate Allocation: $149 million AUm, $38 million 2012

Small Cap value: $294 million AUm, $98 million 2012

RidgeWorth Investments

Key Contacts:Sales: brandon Shea, dCio National Sales manager 615.364.1603, [email protected]: James Kish, internal desk manager for the retirement & investment Specialists 404.845.7625, [email protected]

business metrics

www.troweprice.com/fi


dCio: 9

Dcio aum:


total Firm aum:

$614 billion

investments:

mutual funds

Collective Trusts

SmAs


Tdf: “Through” glide path: 1) retirement funds 2) Target retirement funds

Target risk: Personal Strategy funds

Passive/active/both

Active


Stable value

money market

Fixed income:

fixed income mutual funds


T. rowe Price retirement funds

T. rowe Price Growth Stock fund

T. rowe Price equity income fund

T. rowe Price mid-Cap Growth fund

T. rowe Price blue Chip Growth fund

T. Rowe Price

Key Contacts:Sales: mark Cover, director, distribution Services 410.345.4956 800.371.4613 [email protected]


DC World — In Transition

i N s i d E T h E m A R k E T P l A c E

that have been driving record keepers since the Great Recession. Prices have dropped due to the competitive nature of a mostly commodity-like service, while government regulations have shined a spotlight on fees.

At the same time, the cost of running a record keeping operation has not dropped — and might have even gone up as the bar keeps getting raised and providers struggle to keep up with each other. Leveraging fixed costs across a wider base of assets and participants becomes more critical, which means that serving one market or one plan type, no matter how big you are in that

for generations to come. Each group affects the others, and

unique forces are driving each one. How-ever, one driver affects us all: the need to provide greater retirement income for plan participants through their DC plans. Let’s take a closer look at what it all means for record keepers, DCIOs, broker dealers, plan advisors and plan sponsors.

Record KeepersThough stunning, the pending sale of

JP Morgan to Great-West and the merger of Putnam are symptomatic of the forces

ehind the radical changes that are happening on the surface of today’s retire-ment plan industry — re-cent mergers and acqui-sitions affecting record keepers, DCIOs, broker

dealers, plan advisors and plan sponsors — there are subtler forces that have been building up for years, if not decades. What we are experiencing is the beginning of the maturation of a market and an industry. How we react will determine the fate not only of our industry but how people retire

Powerful forces are affecting the five pillars of the industry — record keepers, Dcios, broker dealers, plan advisors and plan sponsors.

by FreD barstein

B


than 5% of their advisors have five plans or more, so why spend much resource or attention? With margins lower than they are for wealth management and financial planning, and liability higher, it’s clear why fewer than 50 BDs even pay atten-tion to the DC market.

For most BDs, retirement means IRA rollovers — a business that could get harder if the DOL’s redefinition of fiduciary rule requires their advisors to be fiduciaries on IRAs or if FINRA follows through with threatened action to require suitability standards applied to whether the rollover should even be made (see our feature story on page 36). Many BDs would like to just give up on the DC market, but that’s a tough message for the advisors playing in it — which makes RCAP’s roll-up of independent firms like Cetera make more sense.

Plan SponsorsThe reality of the DC world has hit

home with most employers, with very few willing to extend or even maintain DB benefits. They also realize that their par-ticipants are ill equipped to make sound and long-term financial decisions. So they need to help them (or not) without crossing a line that would increase their fi-duciary liabilities. They also need to limit costs and work.

While plan design can get them part-way to where they need to go, employing an unbiased, skilled, experienced advisor increases the likelihood of success for the company and for its employees. Why is that important? If employees cannot retire, health care costs rise and workers stressed about their financial future are less productive. n

segment, is limiting and futile unless you are in the very largest or the smallest markets — for now, that is.

Few record keepers have been able to make money without leveraging proprietary investments, mostly in the form of TDFs, capital preservation or managed accounts. And providers who built their business on blind squirrels will have to adjust to the new paradigm, especially in the mid-market and eventually in the small market.

So the dire predictions that we could end up with just four or five record keepers actually seems likely if you segment the market by institutional and retail or consul-tant versus advisor-driven. The over-$250 million or perhaps over-$500 million mar-kets will look and act differently than the markets below that line. For providers to be successful in the retail market, they had bet-ter be able to service all types of plans from $1 million to $250 million. Currently this includes only Fidelity, Great-West, Mass-Mutual, Transamerica and Principal. Oth-ers, like T Rowe, Schwab, Voya, Vanguard and Prudential, are close but each has work to do or issues to overcome. The others are likely to buy smaller players or each other. There isn’t enough time for organic growth.

DCIOsFor the first time in their short history,

DCIOs are feeling the pinch and have begun to consolidate, as evidenced by the acqui-sition of Nuveen by TIAA-CREF and the merger of Victory and Munder. In the DC market, long only, active managers without a viable TDF or managed investment strat-egy or ownership in a major record keeper are fighting over a piece of a shrinking pie while under constant margin pressure.

Though absolute prices have re-mained relatively stable, costs have risen for DCIOs as they hire more wholesalers in the field, working directly with advisors while shouldering most of the cost of value added services. Meanwhile, many of the DCIOs’ parent companies are experiencing their own mid-life crises. It’s doubtful that mergers or sales of parent companies will be driven by the DC market, but it’s also likely that only a few will be able to actively serve and support plan advisors, record keepers and broker dealers. The others will do what they can to get what they can.

Plan AdvisorsA more detailed description of the

changes affecting plan advisors is described in our cover story on page 24, but the bottom line is that advisors who regularly service plans over $25 million need to be part of a team. Long gone are the days of a blind squirrel landing a whale. But also diminishing are the chances that an expe-rienced advisor without support, clout and infrastructure can compete with the big teams, whether they are part of CAPTRUST, SageView, Sheridan Road or within wire houses. With advisor RFPs becoming more common, a sole practitioner has little or no chance of winning these mid and large market plans even if he or she has a strong relationship with the company. This phe-nomenon will undoubtedly continue to migrate down-market soon, reaching plans with $3 million or more.

Advisors who want to focus on serving qualified plans really need to start looking at their team and support structure for many reasons, mainly the need for capital. And not just dollars to invest in growing and managing a retirement practice — advi-sors need intellectual capital and customized support that very few if any broker dealers can provide, at least not at the level that teams can.

But neither is the demise of blind squir-rels imminent. They will continue to serve the under-$3 million market where relation-ships do matter, the competition is weaker and the buyer is less sophisticated. We also need a market to grow the next group of plan advisors to serve the enormous need to help companies and their fiduciaries manage their retirement plans as well as work with participants. In addition, as margins decline for each plan, advisors need to either grow their base to leverage fixed costs or expand the relationship with their retirement plan client to sell other services like wealth man-agement, financial planning, health care and even P&C.

Broker DealersBDs are in a very interesting spot. While

everyone talks about the importance of retirement and a growing pool of DC assets that is likely to increase as state and local pension plans migrate to DC plans, only a few advisors focus on the DC market. Fewer

i N s i d E T h E m A R k E T P l A c E

how we react will determine the fate not only of our industry but how people retire for generations to come.”


i N s i d E T h E N u m b E R s

million for retirement. At the other extreme, 17% of those who have done a calculation, compared with 37% who have not, think they need to save less than $250,000 for retirement. Moreover, workers who have done a retirement savings needs calculation are more likely to feel very confident about affording a comfortable retirement (25% vs. 13% who have not done a calculation in this year’s survey) — despite having set higher savings goals. Moreover, workers reporting that they, or their spouse, have an IRA, DC or DB plan are more than twice as likely as those who do not have these to have done a calculation (56% vs. 25%).

It seems, therefore, that those more likely to have made a plan are more likely to have access to a plan. And advisors can be instrumental in both. n

» nevin e. adams, JD, is the employee benefit re-search institute’s director of education and external relations, co-director of ebri’s center for research on retirement income and director of the american savings education council.

Those who obtained investment advice did not always follow it, however. Among workers who obtained advice, 27% say they followed all of it, but more followed only most (36%) or some (29%). Retirees were more likely to report following all of the advice (38%).

The reasons most often offered for not following all of the advice include:• Not trusting it (34% of workers and

31% of retirees).• Having other ideas or other plans or

goals (16% of workers and 29% of retirees).

• Not being able to afford it (20% of workers and 6% of retirees).

• Circumstances changing so advice was no longer applicable (4% of workers and retirees).

• Getting better advice somewhere else (4% of workers and 9% of retirees).That so few sought professional advice

— and that so few acted fully on the advice they did receive — is surely not encourag-ing news for advisors. But the retirement confidence findings could also have implica-tions for employers.

As you might expect, workers who are not confident about their financial security in retirement plan to retire later, on aver-age, than those who express confidence. And, according to the RCS, many workers are adjusting their expectations about retirement, perhaps in recognition of the fact that their financial preparations may be inadequate. This at a time when employ-ers are increasingly concerned about the implications of these trends on workforce management.

Note also that in this year’s RCS, 29% of workers who have done a calculation, compared with 15% of those who have not, estimate they need to accumulate at least $1

he 24th edition of EBRI’s annu-al Retirement Confidence Survey (RCS) found that Americans’ confidence in their ability to afford a comfortable retirement rebounded somewhat from the record lows of

the past five years. However, not everyone was feeling more confident.

A closer look at the numbers uncov-ered no increase in confidence among those who didn’t have some kind of retirement account. On the other hand, we found a strong correlation between those who had some kind of retirement account — a 401(k), IRA or DB pension. In fact, that group saw an increase in those who said they are very confident go from 14% to 24%. Consider as well that nearly half of workers without a retirement plan were not at all confident about their financial securi-ty in retirement, compared with only about 1 in 10 who participated in such a plan.

However, employee respondents to this year’s survey were no more likely to have done a retirement needs calculation, to have saved for retirement or to report savings amount(s) significantly larger than that captured in last year’s survey. Indeed, only 44% report they and/or their spouse have tried to calculate how much money they will need to have saved by the time they retire so that they can live comfortably in retirement, a level that has held relatively consistent over the past decade.

Nor, as it turned out, were respondents more likely to have obtained investment advice from an advisor. Just 19% of work-ers and one quarter of retiree respondents reported they have obtained investment advice from a professional financial advisor who was paid through fees or commissions, well off the 33% of workers and 32% of retirees who did as recently as 2010.

Tby neVin e. aDams

Account ‘Receivables’matching tDFs’ various attributes to the needs of the plan, and the participants who are increasingly defaulted into them, is a significant and growing challenge for plan advisors.

Just 19% of workers and one quarter of retiree respondents reported they have obtained investment advice from a professional financial advisor.”

More than 140 firms have stepped up with their check books, business intelligence, and “can do” attitude to support NAPA, the only organization

that educates and advocates specifically for plan advisors like you. NAPA is grateful for its Firm Partners. We hope you appreciate them too.

Should your firm be on this list and enjoy the benefits of NAPA Firm Partnership? To learn more contact Lisa Allen 703-516-9300 x127 · [email protected]

Care about You and Your Practice

(k)ornerstone 401k Services401(k) Advisors — Arizona401(k) RekonADP Retirement ServicesAlliance Benefit Group — NationalAlliance Benefit Group — North

Central StatesAllianceBernsteinAllianz Global Investors

DistributorsAmerican Century InvestmentsAmerican FundsAmerican National Bank of Texas

TrustArgentus PartnersAspire Financial ServicesAXA EquitableBank of America Merrill LynchBenefitsLink.Com, Inc. /

EmployeeBenefitsJobs.comBlackRockBlue Prairie GroupBlueStar Retirement ServicesBNY Melon Asset ManagementBoston Research GroupBoulevard RBPASCapital Analysts of the Midwest,

Inc. (CAMI)Capital Innovations, LLCCAPTRUST Financial AdvisorsCenter for Fiduciary Management

/ FiRMCharles Schwab & Co.Cohen & Steers Capital

ManagementColonial SuretyCommonwealth Financial NetworkCompass Financial PartnersCooney Financial Advisors

CoSource Financial Group, LLCCUNA Mutual Retirement

SolutionsDailyAccessDeane Retirement Strategies, Inc.Dice Financial Services GroupDirect Retirement SolutionsEaton VanceEHD Advisory Services, Inc.Envestnet Retirement SolutionsF-Squared InvestmentsFederated InvestorsFerenczy & Paul, LLPFi360Fidelity InvestmentsFiducia Group, LLCFiduciary BenchmarksFiduciary Consulting Group at

PSAFiduciary Consulting Group, LLCFinancial TelesisFranklin TempletonGalliard Capital ManagementGoldman Sachs Asset

ManagementGordon Asset Management, LLCGreat-West FinancialGreenspring Wealth ManagementGross Strategic MarketingGROUPIRAGuardian Retirement SolutionsHearts & Wallets, LLCHighTower Advisors – ArizonaHutchinson Financial, Inc.iJoin Solutions, LLCINGInspiraFSInstitutional Investment ConsultingIntegrated Retirement InitiativesInvesco

Jensen Investment ManagementJohn HancockJP MorganJuly Business ServicesKarp Capital ManagementLAMCO Advisory ServicesLatus Group, Ltd.LeafHouse Financial AdvisorsLegg MasonLincoln Financial GroupLongview Financial Partners, LLCLPL FinancialMaresh Yoshida 401k GroupMassMutual Retirement ServicesMatrix Financial SolutionsMayflower Advisors, LLCMCF AdvisorsMFS Investment Management

CompanyMillennium Investment &

Retirement AdvisorsMillimanMorgan StanleyMutual of Omaha Retirement

ServicesNAPLIANationwide FinancialNFP Securities, Inc.Nicklas Financial CompaniesNorth American KTRADE AllianceNuveen InvestmentsOneAmericaOppenheimerFundsPAi (Plan Administrators Inc.)Parnassus InvestmentsPenchecks, Inc.Pension Resource Institute, LLCPentegra Retirement ServicesPIMCOPioneer Investments

Plexus Financial Services, LLCPrecept Advisory GroupPresidium Retirement AdvisersPrincipal Financial GroupPrincipled AdvisorsPrincorPutnam InvestmentsRaymond JamesRetirement Fund ManagementRetirement Learning CenterRetirement Resources Investment

Corp.Retirement RevolutionRidgeWorth InvestmentsRPS Retirement Plan AdvisorsSageView Advisory GroupShea & McMurdie FinancialShoeFitts MarketingSoltis Investment AdvisorsStonegate Wealth ManagementStrategic Wealth ManagementT.Rowe PriceThe 401k Coach ProgramThe Retirement Readiness

InstituteThe StandardThornburg Investment

ManagementTransamerica Retirement SolutionsTRAUTsukazaki & Associates, LLCUBS Financial ServicesUpTick Data TechnologiesVantage Benefits AdministratorsVigilant Financial PartnersvWise, Inc.Wealth Management Systems, Inc.Wells Fargo AdvisorsWisdomTree Asset Management List as of 6/2/14

NAPA FIRM PARTNERsi N s i d E T h E N u m b E R s

YOU WOULDN’T PAY FOR YOUR CO-WORKER’S PARKING EVERY DAY,

WHY WOULD YOU PAY FOR THEIR 401(K) RECORDKEEPING COSTS?

John Hancock Life Insurance Company (U.S.A.) and John Hancock Life Insurance Company of New York are collectively referred to as “John Hancock”.

Both John Hancock Life Insurance Company (U.S.A.) and John Hancock Life Insurance Company of New York do business under certain instances using the John Hancock Retirement Plan Services name. Group annuity contracts and recordkeeping agreements are issued by: John Hancock Life Insurance Company (U.S.A.), Boston, MA 02210 (not licensed in New York) and John Hancock Life Insurance Company of New York, Valhalla, NY 10595. Product features and availability may differ by state. John Hancock Investment Management Services, LLC, a registered investment adviser, provides investment information relating to the contracts. Plan administrative services may be provided by John Hancock Retirement Plan Services LLC or a plan consultant selected by the Plan.

NOT FDIC INSURED | MAY LOSE VALUE | NOT BANK GUARANTEED | NOT INSURED BY ANY GOVERNMENT AGENCY © 2014 All rights reserved.

How retirement plan providers allocate plan costs matters. It matters to you and it matters to your participants. Do

you know if you are paying for someone else’s recordkeeping costs? At John Hancock, we offer a new way of pricing

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