Episode 86: Choosing the Right Retirement Plan Advisor

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Revamping Retirement Episode 86

Intro: Covering the ever evolving retirement plan landscape to help identify the biggest opportunities for plan sponsors, CAPTRUST presents Revamping Retirement.

Audrey Wheat: Hello everyone, and welcome back to Revamping Retirement. I am Audrey Wheat and I am joined today by Matt. Patrick. Matt, how are you doing today?

Matt Patrick: Doing great, Audrey. It’s great to be podcasting with you again.

Audrey Wheat: It’s been a while.

So today we are joined by Jake Connors, who is the co-founder and head of business development for a company called cofi, short for co-fiduciary. So throughout this podcast, we’re gonna talk a lot about what Cofi does, as a search consultant and what that means for you as the plan sponsor.

Jake, welcome to Revamping Retirement. Thanks for being here.

Jake Connors: Thanks, Audrey. excited to be here.

Audrey Wheat: So for listeners that may not be familiar with what a search consultant is in the retirement space, can you take us through and explain what does Cofi do and why? plan sponsors increasingly have to turn to firms like yours when hiring an advisor?

Jake Connors: So at a very high level, we are hired by plan sponsors as co fiduciaries to run an independent, structured, process to evaluate candidates and select their retirement plan advisor. So in short, we’re brought in to run RFPs or requests for a proposal, for retirement plan advisors.

so employers turn to us because, most employers really only go through this, advisor search process every five to 10 years or so, if ever. so even though. It’s a very important fiduciary decision, maybe the most important fiduciary decision on the retirement plan side.

it’s really difficult to become an expert in something you do so infrequently. So our role is to help plan sponsors, look past the sales of the RFP process and focus on what actually matters. So the service model being offered, participant education. Vendor management, be transparency.

It’s a huge one. and accountability over the promises made in the proposals. so within our organization, we’ve sat on every side of these vendor relationships. So we really know where the true value is created and where things can sometimes be more presentation than substance or more sizzle than steak.

in these. Proposals. So at the end of the day, we like to say that we, even the playing field between vendors and the buyers to help plan sponsors make really well-informed and defensible decisions when they’re choosing their retirement plan advisors.

Matt Patrick: That’s great, Jake. a couple things to highlight in there, although you highlight in the fact that.

An advisor search isn’t something that’s done frequently, so hard to become an expert there. Also, we’ve talked a lot about, committees, turnover over time, people move in and out. So even within an organization, even if the organization has done a search for the plan at some point, maybe no one on the committee today was involved in the last one, or only a few people have.

So I can imagine. there really is a desire for someone who’s an expert in the space,and can help lead the way when it comes there. So that, that makes a ton of sense. maybe before we get into more specifically what you all do, what is your personal background? How did you, get into this and I guesswhy found Kofi?

Jake Connors: I grew up on the retirement plan side of the business. I say that because we also operate on the health and welfare plan side of the, business and run searches there. But for the sake of the Revamping Retirement podcast, I’ll stick to the retirement conversation.

so I grew up, working for a third party administrator with TPA, learning the ins and outs of. Testing plant compliance, plan operations. And then from there went on to work for, a large asset manager on their defined contribution team. and then from there I met a lot of really interesting people in the business.

Got to learn different sides of not just the. compliance vendor side, but also the investment side. And met some really interesting people and started our own firm, which was actually started as a very briefly, retirement plan advisory firm. I think CAPTRUST minus couple 10,000 plans.

Type of business. and while we were just getting started, we were very young business trying to keep the lights on. We started running these RFPs to,either drum up business with new plan sponsors or just to,generate revenue. and it ended up being something we.

Found we were very good at, very effective, with our clients, and it ended up being more lucrative than the retirement plan consulting business for us. So,we shut the doors on the RIA and then started doing this full-time and eventually started working on the health and welfare side also, and became employee benefit search experts and.

Here we are today.

Matt Patrick: it’s awesome to hear the evolution of the company and that story and how you got into this niche. So with that in mind, given your experience and the firm’s experience, now that you’re focusing on the search side, start talking to us about what does it look like?

Running a search, what actually differentiates great retirement plan advisors, from ones that just look good on paper, to the separating the sizzle from the stake, if you will. Sure. and then what should sponsors be paying closer attention to when they’re running these types of searches?

Jake Connors: I feel like it’s really easy to just look at the buzzy topics like. Investments in risk management and plan sponsors should absolutely expect strong investment management from their advisors. But at this point that’s really become table stakes. So pretty much any advisor in the business can.

Build an a prudent investment menu. Manage the investment process. show up four times a year to review their scorecard and show the committee how great they did at picking funds. And that’s important, but it’s usually not what separates one advisor from another in a competitive bidding process.

what really stands out and what plan sponsors are asking us about when we’re doing our needs analysis is support. It’s how well does an advisor support the HR team from day to day? How do they handle participant education? Are they taking ownership over the relationship with the record keeper?

And when real issues come up, do they step up and solve the problems or do they just put the problems right back on the HR staff? when it really comes down to it, a great advisor and a great decision is choosing someone who creates less work for the plan sponsor, not more. And they bring accountability, responsiveness, and just real operational support for the employer.

So at the end of the day, employers just want partner and someone they can trust and someone who makes their job easier and not just someone who looks good on paper and checks a lot of boxes in their fiduciary folder.

Audrey Wheat: That’s awesome Jake. And it just brings to light that the needs of each plan sponsor is probably very different. So I can imagine that your business, you probably don’t have a one size fits all search that you run for your plan sponsors. So can you walk us through the different types of advisor searches you conduct and how a sponsor, knows which approach is right for them?

Jake Connors: every time we engage with a plan sponsor, it starts off with, what we call the employer needs assessment. it’s a list of questions to get a feel for what they have, what they like about what they have, what they don’t like about what they have, if they wanna make a change, if they don’t wanna make a change.

And from there, the decision tree comes. To one of two directions, the first being, a full RFP, the other being what we call an incumbent review. so an incumbent review is basically something we created in the case that, you love your advisor, you don’t really wanna make a change, you don’t want to disrupt a relationship, but.

You’re a good fiduciary and you have good plan governance and you know you have to take a look. So what we do is we run one side of an RFP process. So we do the needs assessment, we create our questionnaire, we put your incumbent vendor through the ringer, do exactly what we would do in a competitive RFP process, but instead of them putting ’em out to bid and risking them, losing the business to someone else.

We take all the information that we’ve learned, all the data that we’ve acquired from running other RFPs in the past, and compare the proposal that your incumbent has provided to our database and what we consider to be, a complete illustration of what’s available on a competitive market.

So you’re basically fulfilling your fiduciary duty. Without putting a strain on a really good relationship. so decision tree, I need to check my advisor, but I love them and come to review. our advisor isn’t really working out. I’m willing to make a change full RFP.

Matt Patrick: appreciate you walking through that. It’s certainly an interesting approach. going back to what you were talking about,trying to suss out the support needs that are there, what’s gonna differentiate them, I guess, as you’re doing this needs assessment at the front end?

Do you actually have. Different questions that you’ll ask as it relates to that? Or is it more of you have a standard set of questions that you would ask and it’s just waiting the responses differently based off of that needs assessment?

Jake Connors: Yeah, so we start with a standard form that basically asks all the normal demographic information about the plan, the population, the employee pool type, and then we move on to a list of what we consider to be in scope services for a well-rounded service arrangement for an advisor.

If the advisor in place is doing a really good job, it can just be like, check, check, check. Yes, we want all this. Or you know what? We pay for that. We use that. we don’t need that on this, so don’t include it. It’s not a priority for us. But sometimes if the plan sponsor representative, that we’re talking to.

Hasn’t look at their advisor in 10, 15 years or so. there could be things on that list that they’ve never even thought was available to them, let alone available as an in scope option. So it is very much a consultation and not just filling out a checklist. so that’s why

I spoke very high level before about the decision tree. there are about. A dozen or so other decision trees within that first consultation. That gets us to a point where, okay, we really know what our client’s looking for. Let’s build out this custom questionnaire and find the best option for them.

Matt Patrick: That’s great. talking some about. Cases where you haven’t done a search in a while, things have changed. And what have been the biggest change that you’ve noticed, either in your own process or questions that people are asking, as the retirement industry has changed, what are the biggest areas of focus that have shifted over time?

Jake Connors: advisor searches have definitely evolved, in the past.

Five to 10 years, when all of the excessive fee cases were being filed and there was this huge focus on litigation risk. there was a very intense focus on bringing plan fees down as low as you could and making sure plans had prudent investment menus. And at the time, that made a lot of sense.

It makes a lot of sense now, but. That was such a huge focus then. And the result of that is the market that we have today where both of those things have become much more, an industry standard, that being strong investment management and reasonable transparent pricing, they’ve just become the baseline expectation, for an advisor.

And it’s given plan sponsors the opportunity to focus on other parts of the advisor relationship that really matter. like the things we discussed before, like HR support vendor management, participant education, the responsiveness to issues and just the overall service model.

And that’s where the conversations tend to go now. And honestly, every time we have a new client. Those are the focus areas. They’re not really asking us, okay, how do I find the best investment advisor to give us the best fund lineup?

Matt Patrick: so going back to, this HR support piece, ’cause that’s come up a few times. You’ve highlighted that’s a big differentiator. Now it’s evolved. that’s a focus and maybe a way that, people can differentiate between advisor firms.

I’m curious from your all then how you assess. That piece of it. When you’re doing a search, like are there specific questions you ask coming out of the needs assessment where you’re like, can you fulfill these certain roles? Are you looking for depth in the answer in the responses that you’re getting back?

what keys you all into the fact that this advisor firm might be the right fit for a certain plan sponsor?

Jake Connors: So like you said, it’s in that needs assessment. that’s why during the assessment, we really like to get an HR person on the phone, someone who’s in the weeds with employers and talking to vendors and it is part of their day to day.

so when you have that conversation and we kind of open with, okay, what is your interaction with? The record keeper on a day-to-day basis and how is this impact your life? How does it take away from other responsibilities you have? And if they come to us and say, oh man, I’m on the phone with Fidelity, or Empower or Voya four times a day, just dealing with an employee who can’t log in or has an issue with their loan

I always find myself in between the employees and the record keeper. That’s a problem ’cause the way these plans operate. Now part of the advisor’s job and their service package is record keeper management. And if they’re not doing that role, you can easily find someone who will do that in scope and do it really well and free you up to do other.

Parts of your job as an HR professional. So, if that’s an issue and that’s really important to the HR staff, we’ll add in a series of questions saying, give us examples of how you interact with record keeper on behalf of your plan sponsor clients, and. What is within scope, what’s outta scope, what is the special project?

And that gives you a really good idea not only of specific contracting terms that you can put in as part of the service agreement, but also what their philosophy is on vendor management and white glove service.

Audrey Wheat: That makes sense Jake. And it really just highlights the complexities and how every plan sponsor may have different needs. And is unbelievable that, some plan sponsors would try to go at this alone. ’cause there’s just so many different nuances. If you encounter a plan sponsor that maybe tried to go it alone or they went it alone last time, they didn’t have a search consultant, they didn’t hire you.

What are the most common mistakes that you see plan sponsors making when they try to select an advisor on their own without you, without a structured process in place?

Jake Connors: I’d say there are probably two. shortcomings. And the first being, taking responses at face value.

the first version of a proposal that you get from an advisor is I. gonna look great, but it’s gonna be full of hedging and ambiguity and language that sounds good, but doesn’t actually commit them to anything. And if you don’t do this on a regular basis or professionally, it’s really easy to miss the differences between a really good sales pitch and a real commitment to.

Service. and that’s where plan sponsors frankly get into trouble. They think that they signed up for, a certain level of service, and then six months later they find out that. Key projects are out of scope or there are extra costs for, support services or the advisor is not actually accountable for the things that they assumed were included in their contract.

and a structured search process really helps take that vague language and turn it into clear service commitments. it forces. Advisors to specify what is included in their service arrangement and who’s responsible and what the plan sponsors should really expect.

The second Mistake is underestimating how much work and how much time this actually takes. Running an RFP properly is an extremely heavy lift if you only do it every few years or so. and without the structure and experience, it is easy to spend a tremendous amount of time, for internal hours, probably 50 to a hundred hours to not really get.

Exactly what you’re looking for.

Audrey Wheat: And to just add onto top of that, it’s a fiduciary decision too, so they have that added pressure

Jake Connors:

Matt Patrick: Yeah, absolutely.

Jake Connors: Absolutely.

Matt Patrick:  I think you’ve highlighted well,

It’s a really important decision. and having something that feels a little more tangible that you can point to and not just like, oh yeah, we do that. It’s like, no, here’s our experience doing exactly what you’re asking for. I think that’s a really good takeaway for any plan sponsors listening.

So we’ve covered some of, experience with it so far, how things have evolved over the last five to 10 years. If we switch to forward looking, what do you think is going to change as it relates to your role as search consultants and what are you looking at in terms of how the industry is evolving, changing?

How do you think you all are going to evolve and change along with it?

Jake Connors: I think a lot of the changes we’ve talked about, right? So like the fee compression, more consistency around prudent investment lineups, broaderadaptation of best practices. These are all signs of the retirement plan industry maturing.

And because of that, I see our business, Kofi business moving in two directions. the first, more of this work, is going to move down market. historically the large and mega plans tend to be the early adopters of best practices, and, over time those expectations tend to, Work their way to the middle market.

So I think we’re gonna be spending a lot more time in that middle market with smaller employers that still want a prudent and efficient way to evaluate their advisor relationship. and then second.we will continue to do a lot more in the health and welfare space. I said earlier, I wouldn’t talk about that side of the business, but I think in terms of fiduciary governance and market maturity and best practices and all the things that we’ve discussed, where the retirement plan industries actually in a really good place.

health and welfare is at least a decade behind the retirement plan market. There is a lot of work to be done there. and I think a lot of the same forces that have shaped the retirement plan space will continue to move the health and welfare market in a similar direction. and I think a lot of that will come from firms like ours who are.

Focused on representing fiduciaries as co fiduciaries to make the right decisions at the right point, and by the right point, I mean that advisor or broker relationship is such a critical choice that determines the success of the entire plan and the entire program going forward.

Audrey Wheat: Absolutely.

That makes sense. And I know a lot of our listeners are responsible, obviously, for their company’s retirement plans, but in that mid-market, a lot of the HR professionals we work for are responsible for all benefits. So I’m, absolutely certain that resonates with them. Jake, thank you so much for coming on.

We appreciate you walking us through your business and how you can serve our plan sponsors. we always wrap up with the same question for every guest. And that question is, Jake,being in this industry, have you thought about your retirement and what does your retirement look like to you, Jake?

Jake Connors: Oof. I try not to think too much about. Retirement just because it’s like buying that one lotto ticket every year. You spend an entire day just dreaming about everything you’re gonna buy, which is just not productive use of time. But, so I think it’s pretty far off but for better or for worse, because I’m really enjoying what we’re doing.

I think that our work has. Such a huge impact on our clients and their employees. and it’s just from project to project, it’s been really fulfilling to see the changes and the impact we make. so I’m not in any rush to get there, but not to say that I don’t look forward to it. but my wife and I really love.

Audrey Wheat: Going out to dinner, going to the beach, skiing, all these things where living in New York City are weekend activities, and it would be really nice to turn those weekend activities into weekday activities so we don’t have to fight as many crowds or traffic or reservation robots as we have to do now. I love that. I like that from weekend to weekday activities. That’s such an interesting way to look at it.

thank you again, Jake, for coming on revamping Retirement. We appreciate your time and, thank you to our listeners and we will see you next month.

 

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