PLANADVISER - November/December 2017 - 33

ment information; certain hypothetical asset-allocation
models that are not personalized and make no recommendations;
and interactive investment materials. " The main
difference is that, for asset-allocation models and interactive
investment materials, it is generally not permissible
now to identify any specific investment alternative " without
crossing the line into fiduciary advice, he says.
Asked what advisers who want to sidestep giving participant-level
fiduciary advice can do, DeMatties says, " Make
sure what you're providing is generic education and not
tailored to the participant. Make sure you are just communicating
facts about the plan and its investments. "
A Range of Alternatives
If a plan adviser does not offer participant-level fiduciary
advice and his plan sponsor clients want it, they can turn
to a recordkeeper or third-party provider instead.
Even before the new fiduciary rule, some recordkeepers
offered participant-level fiduciary investment advice. " We
have historically provided advice to participants on in-plan
investments and how participants should allocate their
investments based on their particular circumstances
and risk tolerance, " says Jon Graff, director of participant
services at Wells Fargo Institutional Retirement and Trust
in Charlotte, North Carolina. " But now, with people starting
to stay in their plan longer instead of rolling their money
over into an IRA [individual retirement account], we've seen
the need to offer extended advice services to participants, to
also cover distribution issues. "
Wells Fargo Advisors' registered representatives give
this type of advice to participants. " With the new DOL rule,
distribution conversations have moved over to the fiduciary
arena, such as whether it's a better idea for a participant to
stay in the plan or move [his] money out of the plan, " Graff
says. Wells Fargo's distribution fiduciary advice goes beyond
rollovers to topics such as when a retiring participant should
take Social Security, and the rate at which he can safely withdraw
his balance in retirement. " When we think about distribution
consulting, we're thinking about it in a much broader
way than just, 'Should I do a rollover?' " he says.
Sponsor clients may have Wells Fargo give participants
fiduciary advice on investments, distributions or both.
Already, 82% of that firm's retirement plan clients utilize its
distribution advice offering, a higher percentage than utilize
its investment advice. " After all the years they have spent
helping employees save for retirement, sponsors want their
retiring participants to make good decisions, " Graff says.
Empower Retirement's participant-level fiduciary advice
package now covers saving, investing and distribution, says
Carol Waddell, senior vice president and head of the company's
retirement solutions group, in Denver. Ninety-nine
percent of Empower's ERISA [Employee Retirement Income
Security Act] plan clients utilize the fiduciary advice
package for their participants, she says. " It's not part and
parcel: It's one fiduciary service, " she adds.
Offering broader participant-level fiduciary advice " is a
big change for us, " Waddell says. Prior to the new fiduciary
rule, Empower offered participants investment advice via its
sub-adviser relationships with Morningstar Inc. and Financial
Engines Inc. Those managed account offerings continue,
but Empower itself also now gives participants fiduciary
investment advice on issues such as whether they fit into
the " Do it yourself " or the " Do it for me " investor category.
Further, reps in the retirement solutions group also
provide participants with distribution-related advice. " At
the point of termination, people want and need help to
understand the pros and cons of different distribution alternatives
and the fees associated with those alternatives, "
Waddell says. " So we put together a model that is nondiscretionary.
We ask participants a consistent set of questions,
collect a consistent set of data from them, use a feecomparison
tool to do an analysis, and then we present the
recommendations to [them]. "
Beyond recordkeepers, third-party providers such as
GuidedChoice Inc. also offer participant-level fiduciary
advice on investments and distributions. GuidedChoice can
serve as a 3(21) or a 3(38) participant-level fiduciary, and
about 75% of its plan clients work with a plan-level adviser,
says Sherrie Grabot, founder and CEO of the robo-advice
pioneer, in San Diego.
GuidedChoice will provide fiduciary accumulation
advice, decumulation advice or both. For accumulation, the
firm offers robo-style automated portfolio recommendations
to participants. " For decumulation, we have online
tools that will help [them] figure out the best place to put
their money when they leave, and the best way to take
their distributions, both in the plan and for their retirement
accounts outside of the plan, " Grabot says. " Our tools
also help participants discern whether they should take an
annuity, or self-annuitize by giving themselves a monthly
'paycheck' coming out of their retirement plan account. "
Retiring employees face complex distribution decisions,
Grabot notes. " I do think that's where we obviously all need
to go, " she says of giving fiduciary distribution advice to
participants. " For the average person, it needs to be spelled
out very clearly, so [he's] not overwhelmed by the decisions
[he has] to make. "
Morningstar's Blanchett says he expects to see steady
growth in robo-advice offerings to 401(k) participants,
particularly once plan sponsors have a wider choice of
options on their recordkeeper's platform. " Even before the
new fiduciary rule, I think there already was an overarching
desire by sponsors to provide participants with more tools to
engage them and help them achieve success, " he says. " One
problem with robo-advice adoption is that most platforms
offer sponsors only one robo-advice provider. It's effectively
a binary choice: You either use the one available or you don't
offer robo-style advice. I think sponsors would like to see
more options. "
Today, it generally costs between 10 and 60 basis points
(bps) to utilize a robo-advice offering in a defined contribution
plan, Blanchett says. " The cost of robo-tools has come
down considerably, and at some point that makes it worth
the consideration for plan sponsors, " he says. " At the same
time, the scope of services being provided to participants is
increasing. Today, many of these robo-tools are being positioned
more as a 'financial planner in a box' type of unconflicted
advice. " -Judy Ward
planadviser.com november-december 2017 | 33
http://www.planadviser.com
PLANADVISER - November/December 2017

Table of Contents for the Digital Edition of PLANADVISER - November/December 2017
