In a podcast with Ben D. Jones of Better Conversations Better
Outcomes, you talked about “Finding opportunity in tax-
exempt markets.” Can you tell us more about that?
KIDWELL: Opportunity is an apt description. Every day we hear
from an employer in charge of a workplace retirement plan who
says to us on a conference call or in a meeting, “Hey, we knew there
was a problem, we just didn’t know what that problem was. We just
felt uncomfortable, and we want somebody to take this problem
and help us fix it.” With approximately $2.4 trillion1 in tax-exempt
assets in the United States, there’s a lot to fix. And less than half of
tax-exempt organizations have an advisor or consultant.
Why is that?
KIDWELL: The non-profit world has historically been served
by a handful of direct providers. Advisors haven’t been involved
at any significant level. They should be, and my team focuses on
getting them to overcome their fear or resistance to getting into
this market. After all, there’s a large number of employers that
need help, and we have a large number of advisors who want to
grow their practice. And what the advisors have been doing on
the 401(k) side for 10, 20, 30 years, they can now take to the
nonprofit side, provide some genuine assistance and help some
good-hearted people be undistracted from their mission. It’s just
a perfect opportunity.
Why has the tax-exempt marketplace been slower than the
private market to adopt the use of consultants and advisors
when it comes to their retirement plans?
KIDWELL: When the 403(b) and its tax-neutral siblings came
into existence, all the employer had to do was act as a conduit
into an individual account for the participant. The employer’s
entire involvement was to withhold money from the participant’s
paycheck and forward it to the vendor. That was until 1974, when
the Employee Retirement Income Security Act [ERISA] came into
the picture. Fast-forward three decades and factor in a whole set
of revolutionary rules, a new tax law every other year, and it’s no
surprise the IRS started finding that non-compliant plans weren’t
the exception, but the norm. These nonprofits weren’t just non-compliant, they were woefully non-compliant. The employer is
now responsible for operating the plan cleanly and properly. They
need advisors who can help them do that and advisors who know
the (b) world as well as they do the (k) world.
What are the biggest areas that you see advisors being able
to add that value immediately when they get hired and then
KIDWELL: Optimization, first and foremost. They have to peel
back the layers of the onion. Where I see advisors be successful is
when they go in and just start asking questions: “Tell me about your
plan. What do you want the plan to do? Is it doing what you intended
it to do?” One of the greatest advisors I’ve ever worked with set the
tone for every meeting with, “Why do you have the plan?” Then he
would let each person, whether it be human resources [HR], CEO
or CFO, answer the question separately. By the way, a lot of times
you get three different answers if you ask three different people,
but they all have the best interest of the employees at heart. But
then you go back to okay let’s examine your plan, let’s look at the
plan document, let’s look at your investment lineup. We still see
multiple share classes of the same fund. We see operational issues
with the plan. Have they actually communicated to the employees
that they have a plan? Under 403(b), that’s a requirement; it’s not
optional. We still see plans that don’t have a loan policy; they don’t
document hardships. It’s just the “blocking and tackling” stuff. Plan
sponsors understand we’re striving to help their employees prepare
for a more secure financial future.
What are you doing?
KIDWELL: We’re out front both in the real world and the digital
world, talking to financial professionals in person and online. We
call this our “(b) informed” strategy. We’re harnessing the tax-exempt experience we’ve accumulated since 1964. n
1Source: Investment Company Institute, Quarterly Retirement Market Data, 2Q-2017
OneAmerica is the marketing name for the companies of OneAmerica.
Ben Jones and BMO Global Asset Outcomes are not affiliates of any OneAmerica company.
Get a link to the full transcript on our tax-exempt center of excellence website: www.oneamerica.com/tax-exempt
Products issued and underwritten by American United Life Insurance Company® (AUL), a OneAmerica company.
Administrative and recordkeeping services provided by McCready and Keene, Inc. or OneAmerica Retirement Services LLC, companies
of OneAmerica which are not broker/dealers or investment advisors.
Kevin Kidwell, vice president, national tax-exempt sales
Retirement Services, OneAmerica®