How Retirement Committees Can Review Retirement Income Products and Services - Part II

How Retirement Committees Can Review Retirement Income Products and Services - Part II (13:59) Retirementincome analysis and decion making can be complex, but the decisions don't have to feel unmanageableBroadcast Retirement Network's Jeffrey Snyder discusses how retirement committees can evaluate new retirement income products with Retirement Learning Center's Andy Larson and DoubleLine Group, LP's Daniel Long.Jeffrey Snyder, Broadcast Retirement NetworkThis morning on BRN, how retirement committees can review retirement income products and services, part two of our conversation, and we're going to welcome back to our program, Andy Larson of the Retirement Learning Center and Dan Long of Double Line Group. Andy, Dan, great to have you back on the program this morning.Daniel Long, DoubleLine Group, LPThanks for having us back.Jeffrey Snyder, Broadcast Retirement NetworkAgreed. Yep, always great to talk to you guys. Really appreciate the conversation.And Dan, when we left off, you hinted at this, and I want to set this back up, or have you set it back up. I don't want to do it. Let's talk about that fiduciary review process.I want you to get that analogy together that we talked about, you talked about yesterday. What does that fiduciary process look like to evaluate this evolving, this continuously evolving retirement income product set?Daniel Long, DoubleLine Group, LPYeah, each plan is unique, so each process will actually look a little different too, Jeff, depending upon, I think we said about your advisor you use, your consultant you use, the tools and resources that that company has and uses. So that's what's going to make it look a little different. It actually might look a lot the same though, because if you don't want to be too complicated and really keep things simpler, I think those simple processes, Andy, might look a lot similar.But regardless, any prudent process, Jeff, should follow a repeatable process. It should be aligned with the plan's objectives. It has to address participant demographics and needs.And that's where an advisor, an institutional consultant, an investment policy statement, those things help. But any process really has to start by dividing up all of these old products and services and these new products and services coming out every day. And you have to use consistent language too, right, Andy?Consistent language to evaluate these alternatives is important. That's why in the toolkit, we created that sample evaluation process by capturing all retirement income alternatives by making them purple. It's in-plan, out-of-plan.I think we spoke about that, a lot of different types. But to help committees, what that evaluation process might look like, we did the red products and two types, guaranteed, non-guaranteed. We did the blue services, two types, fiduciary, non-fiduciary.Once you start getting products and services into these buckets, and then you start analyzing them with the qualitative and quantitative metrics by all those tools that we're talking about that make them look different, I think that's what the next step or two in a fiduciary process is going to look like. I'd love to hear what Andy thinks as well.Jeffrey Snyder, Broadcast Retirement NetworkYeah, Andy, pick up on that, what Dan said. And then I just want to tee you up for this next question. Let's talk about that education.And I think to Dan's point, simplifying the retirement income message, because based on our conversations, I think it needs to be simplified.Andy Larson, Retirement Learning CenterAbsolutely. And again, if you look back since the inception of the 401k in the early 80s, you see a constant evolution of the messaging. And traditionally, the messaging has been accumulation.For years, we tried to teach participants to become their own financial investment advisors with pretty limited success. And we got past that in terms of the defaults and target date funds, etc. Now we're at a new epoch where the messaging has to get away from the accumulation side into this is going to be the pension for most of us.This thing is going to have to have enough income in it to support your needs going forward. So the messaging now has to, I think, shift away from accumulation, although that certainly would still be important to considerations. And then most importantly, tradeoffs.That's where participants have the greatest need in terms of education right now is understanding the tradeoffs with regard to retirement income products and services. And just to follow up on that.Daniel Long, DoubleLine Group, LPLet me jump in.Andy Larson, Retirement Learning CenterGo ahead, Dan.Daniel Long, DoubleLine Group, LPWe talked about that before, right, Andy, right? Everybody gets it around this tradeoffs of cash, bonds, stocks, right? This old school sort of accumulation mindset.People don't get the tradeoffs of guaranteed, non-guaranteed, right? Or fiduciary, non-fiduciary, right? So it's that new tradeoffs for allocation, for sure.Jeffrey Snyder, Broadcast Retirement NetworkYeah, and that's a good comment, Dan. And Andy, just let's talk about the balance a little bit. Because when you're a fiduciary, you get that hat on.You're trying to do what's in the best interest of the beneficiary, meaning the participant. But you also want to work in the best interest of the plan for everybody. So how do you take that message that you were talking about, that Dan was talking about, and pivot so that what you're communicating, you know, you can't necessarily give investment advice to people.You shouldn't. In most situations, you don't. So how do you balance the messaging there?Andy Larson, Retirement Learning CenterYeah, I don't think it's an either or. Again, if we go back to the tenet of ERISA, that you operate the plan in the best interest of the participant. If the bulk of the participants don't have pensions, in effect, the 401k becomes the de facto pension.That means putting participants on notice that this thing is going to be the vehicle that's going to create the accumulation and possibly provide the retirement income. And then the teaching moment becomes the notion about what's more important, access to your account balance or guaranteed retirement income. And maybe that's not an either or.Maybe it's some is still accessible, and another portion is put into a retirement income product. It's not an either or. It's satisfying our fiduciary obligations by alerting participants to the tyranny of the trade-offs that they'll have to make as they move into a retirement income mode.Jeffrey Snyder, Broadcast Retirement NetworkAnd Dan, just to kind of circle back, we had talked about with you at the very outset of yesterday's conversation in part one about the evolution. And do you foresee, just based on everything we're talking about today, as the industry continues to adapt with new products and the messaging that we're talking about, by the way, yesterday and today, do we see greater adoption of these products by retirement plan sponsors? That's my first question.Daniel Long, DoubleLine Group, LPYeah, I think absolutely. I think retirement income, it only goes up from here. Right, Andy?I mean, geez, the way we're all talking about it so much, it can only go up. But I do want to emphasize again that there is a ton of adoption already in place in plans right now, right? There's a ton of retirement income products and services that are already out there in CITs or funds or managed accounts or whatever.They're out there. And there's new ones coming every day. Adoption, to your question, will occur when we all start using the same words, right?We've been educated on the trade-offs around what we're adopting, right? Across plans, providers, participants, right? Everyone's using the same language.Going back to, again, that first question, that path, right? Adoption will increase. I think Andy will agree when people can see that path of where we need to go and they're not kind of paralyzed by all these different things.Again, I think it's a pretty good starting point. Makes it real simple. Participants can understand products and services.Oh, I get it, right? So it's a simple framework. And I think that's going to facilitate greater adoption.Whether you call it PRPL or not, right? I think you just have to follow a thoughtful, documented process. And I have to say, don't be over-influenced by products and services as well, right?There's a process. And picking those products and services is, I don't know where I'm pointing, but it's that way. It's down the line of the process.You know, you don't jump to buying products and services just because they're very nice looking and they've been presented to you. You have to be a good fiduciary and follow that before, right? Andy, we've talked about this before, this adoption question.You know, what's been holding it back? I think that path, people just don't see where it should go. What do you think?Andy Larson, Retirement Learning CenterYeah, you're absolutely correct, Dan. It's no different than 30 plus years ago when 401ks and the early 401ks were trustee directed. And then we started permitting self-direction, but then you had to curate an investment menu.Plan committees were clueless how to select mutual funds. They were clueless about cash, equity, debt instruments. They were uncomfortable with it.They're comfortable now. We've got the same thing. We're at the early stages of the same thing with retirement income products and services.You get your early adopters, they'll get industry attention. And in five years, eight years, this will be a common situation for most committees in terms of evaluating retirement income products and services.Jeffrey Snyder, Broadcast Retirement NetworkSo I want to circle back and I'll start with you, Dan, and I'll go to Andy. We've talked a lot about adoption and adoption of these products. You've got to have a process.You talked about the analogy to bucketing and having a thoughtful process. It's one thing to have plans adopt a retirement income product. The other part of this is getting participants to use the products.Talk about that, Dan. Do we need to do a better job of informing participants and getting them to actually use these products as well?Daniel Long, DoubleLine Group, LPYeah, absolutely. I think it comes from a combination of things, right? Obviously, the largest hammer is automatic.Automatic enrollment, automatic distribution. Who knows? There might be some sort of automatic distribution thing that's happening.There's a lot of people from EBRI, not EBRI, but some other folks working on qualified default rules for distribution, right? I think that safe harbor auto something will probably be the biggest adopting force that's out there. But that's only everybody that's automatically enrolled, right?I think providing a couple of two, three solutions and products and services in each plan will provide people enough alternatives. Because we talked about it. People really got cash bound stocks and then when they got it, they were able to build asset allocation with multiple products.Same thing for retirement income. It's multiple products of any retirement income allocation. It's guaranteed, non-guaranteed.It's social security, maybe annuity, maybe a pension. But it's definitely and could be the largest part of your retirement income soon is what's inside that workplace plan. So the diversification of all of those products, either through automatic enrollment or through individual selection and availability and understanding the products, that coming together, Jeff, I think will continue to drive adoption.Jeffrey Snyder, Broadcast Retirement NetworkYeah, good point. And Andy, just to kind of close out this segment, education I know is top of mind for you, because you're the retirement learning center. It's about learning, education.So building off of what Dan mentioned, how do you get usage by participants to continue to grow? Is it through the automated, the auto-enrollment, the auto-escalation, the auto-diversification, for lack of a better term? Or is it a combination of things?Andy Larson, Retirement Learning CenterClearly, it's a combination. Two quick points. Number one, I am very optimistic that participant behaviors will gravitate toward appropriate retirement income products and services once the messaging gets taken care of.But also, just from a default perspective, like target date funds being the accumulation default, surprisingly, we've already been down this path with the Retirement Equity Act in 1984. The original bill, even for defined contribution plans, the default disbursement option was a qualified and joint annuity. That has already been the default.And there's still a few old plans that still have that out there. Now, the IRS rules watered that down a bit. But we've been down the default route in this.And I think it's going to be back to the future in some respect as we move forward.Jeffrey Snyder, Broadcast Retirement NetworkYeah, well, it's been shown to work with the Pension Protection Act. And obviously, in 1984, which, by the way, I was told back then, just saying I wasn't working on retirement plans. But I don't want to date myself.But there's a lot more here. I think we're going to be having more and more of these conversations. And look, these are good conversations to have.Dan, Andy, so great to see you. Thanks for joining us. We look forward to having you both back on the program again very soon.Thank you very much. And don't forget to subscribe to our daily newsletter, The Morning Pulse, for all the news in one place. Details, of course, are at our website.And we're back again tomorrow for another edition of BRN. Until then, I'm Jeff Snider. Stay safe.Keep on saving. And don't forget, roll with the changes.