Episode 2: Retirement Plans Then and Now – Technology
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Hello and welcome to Revamping Retirement, a podcast brought to you by Cammack Retirement Group, where we tackle the retirement plan related issues plaguing fiduciaries and plan sponsors. Our host, Mike Webb, has more than 25 years of experience in the retirement plan industry and is a nationally recognized subject matter expert. We hope you enjoy Revamping Retirement.
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Thanks Kara and welcome once again everyone out there in our virtual audience to what promises to be another exciting episode of Revamping Retirement, episode 2 for those of you keeping score at home. My name is Mike Webb and we are going to take a little bit of an exploration into the Wayback Machine this podcast and stay with me, know that sounds like it has nothing to retirement but believe me it does.
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We’re gonna go way back to when I was first hired at Cammack Retirement Group back in December of 1991. Yes, I am old, I know it. That was 27 years ago. Michael Jackson’s Black or White topped the music charts. The most popular TV shows were Roseanne and Murphy Brown, not the reboots, but the actual original Roseanne and Murphy Brown, so way back when.
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Those were the most popular TV shows back in December 1991 and we were on Star Trek movie number six, I believe, was the most popular movie in the box office and there’s actually been seven Star Trek movies since then. So we’re talking way, way back here. And why am I bringing this up? Because I think there are some valuable lessons to be learned for retirement plan sponsors and participants for how different things were in the retirement world.
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when I first started in December of 1991 to what they are today. But before we get into that, we start every podcast, as you know, with our mandatory trivia question. While it’s not mandatory, you don’t have to answer it, but I think it’d be fun if you gave an answer off the top of your head and see if you were right at end of our podcast. Our trivia question is a little bit of a way back trivia question as well. Currently, the personal savings rate as measured by the FRED (Federal Reserve Economic Data) from the Federal Reserve Bank of St. Louis
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is 7.6 percent. Now that sounds like a lot, but back in December or 1991 the savings rate was different and I’m not going to tell you what it is, what it was, because that is the answer to our trivia question. keeping in mind that currently the personal savings rate is 7.6 percent. What was the personal savings rate way back in December of 1991? We’ll have that answer
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at the end of our approximate 10 minute podcast. Again, we always try to keep things short, but let’s dive right into the differences and I’m going to focus on the technology differences. Perhaps we’ll do another podcast on some of the other differences, but I think some of the most striking differences between 1991 and today are in retirement plan technology. Back in 1991, nearly all retirement plan transactions were done on paper. If you were lucky, if you were a really fortunate retirement plan participant,
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you could make investment changes over the telephone. Oh boy, what a modern device that was, huh? But that was about it. Everything else was done on paper. Computers? Not a chance. There was no going to your browser and looking up your retirement plan. There was none of that. Plan sponsors and their advisors were heavily involved in these transactions.
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As an advisor, my office was literally a sea of paper. I remember my first day coming in and there were stacks and stacks of paper. And I was an entry-level employee, of course, and I asked, what’s, who was my boss at the time? What was going, what was the purpose of those stacks and stacks of paper? And she’s like, oh no, don’t, don’t worry about those. You’ll find it sooner or later. And it turned out had a copy. Actually, they were enrollment applications for retirement plans. And I ultimately, they were these carbon awful copies. And I,
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ultimately had to make photocopies of each and every one of them and I think that took me like a year to do. So I’m glad that we’re not in that era anymore. Today most all retirement plan transactions are outsourced with little plan sponsor or advisor involvement. Many transactions are performed electronically. There are some paper ones but they’re really becoming a rarity.
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the current world compared to where we were back in 1991. Computers! Uh, 1991, no email, no internet, at least not in my office. Um, in fact we had two computers in my in our offices. One for the finance payroll folks and what was called at a time a state-of-the-art green dedicated terminal. was actually, it actually was a, it was a green, uh, it was actually, you looked at it — it was just this big
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lighted green terminal that was given to us by one of our record keepers so we could access participant information in an extremely complicated fashion. I was never able to quite figure it out. I was able to find certain things about participants but not very much and those were the extents of our computers. I did not have a computer in 1991 when I first started working for a chromatic retirement group. If I wanted to get things done I’d call people
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I sent faxes. Remember fax machines, huh? Or, oh my goodness, I wrote a letter on a typewriter. When was the last time you’ve actually seen a typewriter, huh? I wrote a lot of letters back then, actually. That was, I really liked to document my stuff, so the phone wasn’t the greatest for me to doing that. Now I can’t recall the last time I wrote a letter. I really honestly couldn’t tell you. The way we do business now is emails, internet research.
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maybe the occasional phone call to clarify something done over email or the internet, is now the way things get done. So how does that come back to plan sponsors? Well, because of these issues, the time that plan sponsors and their participants spent on transactions, on loans, withdrawals, on checking your account balance, on changing your investments,
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was tremendous, tremendous amount of time. There was almost no time at all back in 1991 to focus on plan-level fiduciary efforts. Ongoing due diligence was rudimentary back then. I mean, there was a participant focus, both in Commitment Retirement Group on the advisor level and on the plan sponsor level, just trying to keep things afloat in a sea of transactions for some of the largest plan sponsors.
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a sea of thousands of transactions that all had to be individually done on paper and monitored. And you’d get stuff lost in the mail, of course, and signature issues, and it was just a disaster. So that was the daily life of plant sponsors and participants. It was terribly, tremendously burdensome.
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I, calls, just participant calls. In 1981, I would get probably 20 calls from participants a day because, you know, they didn’t understand the forms any better than, any better than probably their plan sponsors did. So I would get calls about transactions, loans, withdrawals, enrollments, whatever, every day, hours upon hours of calls. Now,
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participants are able to conduct most transactions on the computer or smartphone and even able to do things like detailed financial planning, retirement readiness, via the Record Keepers website. The time has been freed up for us as advisors and plan sponsors in particular to handle a lot of the strategic stuff in plans to conduct regular due diligence meetings that focus on
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anything but transactional aspects of retirement plans. Things like reviewing retirement plan investments, assets, voluntary participation. That wasn’t done in 1981. It an extremely cumbersome process. To find out anything about investments, you had to rely heavily on fund prospectuses, to rely on things like to get a hold of reporting on assets or data on assets, you had to rely on these
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Voluminous employer level account statements. I remember we had file cabinets and file cabinets for a employer level account statements in our offices And I would spend hours trying to clean due diligence Items from them today Data is easily accessible often instantaneously via the internet to plan sponsors and us as advisors and And due diligence reports are created regularly often on a quarterly basis so
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How do we, again, how does this come back to plan sponsors and the participants? Well, technology has been a wonderful, wonderful thing as you can glean from what we’ve talked about. But some things haven’t changed all that much. Participant engagement. All these wonders of technology hasn’t really increased participant engagement all that much outside of auto-enroll plans, of course. Obviously, engagement has gone up in those plans.
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But even in those plans, you’re defaulted in automatically or you’re opted in by default. So really, that hasn’t improved much. And I think the lesson the plan sponsors can learn from that is technology is not a panacea. And it needs to be used strategically. A lot of times, and even participants who are listening, you’ve gone on to websites, and it’s been not a great experience trying to, even though you have all this wonderful technology, just to do things that you want to do like,
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Find out what you should be saving for retirement. And I think the lesson learned from this is that there needs to be a lot of thought as to the correct creative use of technology to help participants achieve their retirement goals. A lot of times we just throw a lot of technology out there and see what will stick. And that’s certainly not the proper approach. The other issue with technology and plan sponsors,
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is that we’ve had an issue coming to a head with plan sponsors is that there are still bottlenecks with certain record keepers for plan sponsors doing their best work and advisors doing their best work. And I think my message to plan sponsors here to wrap things up because we’re just about the 10 minute mark is if you are doing transactional work as a plan sponsor, you’re doing it wrong. All transactions should be off your plate.
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And you should work with your record keeper to really focus on the strategic technology has made it there should be no excuses for plan sponsors to have any transactional responsibilities within their offices. And we are at about 10 minutes. So get back to our trivia question. The personal savings rate back in December 1991 was, drum roll please, 9.7%. A little surprised that it wasn’t a lot higher. What you’re hearing, you know, we’re.
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personal savings rates are terrible now and they need to be a lot better. Well, really, they’ve only dropped by 2.1 percentage points since 1991. And we have come to the conclusion of what I hope has been an informative, entertaining, revamping retirement podcast for Kara McCauley and our entire production team. This has been Mike Webb and this has been Revamping Retirement. Goodbye everyone.
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The content in this podcast is for institutional investors and plan sponsors. The information is intended to be educational and is not tailored to the investment needs of any specific investor. All examples of investor gains and losses are hypothetical and intended to illustrate the importance of early saving and consistent retirement contributions over time. Investment decisions should be based on an individual’s own goals, time horizon, and risk tolerance.
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Nothing in this content should be considered as legal or tax advice and listeners are encouraged to consult their own lawyer, accountant or other advisor before making any financial decision. Thank you for listening to Revamping Retirement.