Looking back to 2009, we could hardly surf WebMD on our second generation iPhone, let alone call an Uber to take us to see our doctor while making a last-minute appointment through their mobile website. While we have enjoyed a nearly decade-long bull market, one of the lesser known recent financial breakthroughs is the creation of the “Participant Choice” platform within employer-sponsored retirement plans.
Participant Choice allows active employees to use the investment advisory services of their independent financial advisor to directly manage their retirement plan account. Early adopters (i.e. University of Iowa, including UIHC) have created an environment of employee empowerment, resulting in more employers, primarily in the health care industry, to engage in this important discussion.
The genesis of Participant Choice stemmed from employee demand that employers offer more options. Most plans allow for participants to manage their 401k/403b retirement account themselves or participate in periodic worksite and online education. Growing feedback from employees was that they didn’t feel equipped, nor have enough access to professional advice, to properly handle decisions on their retirement accounts.
Most working Americans don’t have the time to research, develop and implement a sound allocation or investment strategy. Many have a bulk of their wealth in retirement plans and were unsure about the impact fluctuating markets such as 2008 would have on their ability to retire. Traditionally, employees have been unable to work with an advisor during the years they were accumulating balances in their retirement accounts and would wait to engage professional help until they retired, missing out on years of personalized planning and preparation.
In 2014, Vanguard published a whitepaper titled “Putting a Value on Your Value: Quantifying Vanguard Advisor’s Alpha.” After more than 10 years of research, Vanguard provided a quantitative framework from which the authors concluded a professional advisor “could add about 3%, annually, in net returns” for their clients.* Areas that were studied included suitable asset allocation, cost-effective implementation, rebalancing, asset location, withdrawal strategies and (most valuable) behavioral coaching.
As an advisor, this research articulated a standard of care that my clients can directly quantify. Finally! Every day I read that past performance doesn’t guarantee future results. However, I am energized to know that the kind of work our team does has such measurable impact on our clients’ ability to retire in the manner they choose.
The resistance to more employers embracing this employee benefit generally comes from a lack of information, so it is incumbent on industry professionals to continue to introduce and educate. The best way to start this conversation is to ask your retirement plan provider or current financial advisor if they offer a Participate Choice platform. This conversation, paired with a growing population of financial professionals who carry the necessary licensing, certification and accreditation allow breakthroughs such as Participant Choice to create a community workforce that is better prepared to pursue their unique and personal financial goals.
*”Putting a value on your value: Quantifying Vanguard Advisor’s Alpha” – Distributed by Vanguard Research March 2014. Francis M. Kinniry Jr., CFA, Collen M. Jaconetti, CPA, CFP®, Michael A. DiJoseph, CFA, and Yan Zilbering
Eli Wynes is the Managing Director of UICCU Wealth Management and a Wealth Advisor with Commonwealth Financial Network. He holds a BA from the University of Iowa in Economics with an International Business Certificate, holds FINRA Series 7 & 66 Securities licenses, Life and Health Insurance Licenses through the State of Iowa, and is an Accredited Investment Fiduciary (AIF®) designee with FI360 Global Fiduciary Insights. In 2017, Eli was named one of Forbes Top 500 Next Generation Advisors**.
**The 2017 ranking of Forbes' Top 500 Millennials (1) recognizes advisors born in 1980 or later with a minimum of four years of experience. The advisor was rated based on a proprietary algorithm of qualitative and quantitative criteria: assets under management, revenues generated for their firms, client retention, industry experience, credentials, and compliance records. Shook Research also employs an opinion-based weighting system that prioritizes its preferred "best practices," which include business models, activities, processes, and structure. 2,356 advisers were considered and 500 (21 percent of advisors) were recognized.
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