Exclusive Interview: PlanSponsor’s Nevin Adams Says Plan Sponsors not Focused on Same Issues as Advisers & Regulators “Too Few 401k Plans” Annuities “Not Viable”
Last week Fiduciary News sat down (in a virtual way) with Nevin E. Adams, JD, Editor-in-Chief of PLANSPONSOR magazine and its Web counterpart, PLANSPONSOR.com, the nation’s leading authority on pension and retirement issues. He is also the creator, writer and publisher of PLANSPONSOR.com’s NewsDash, the industry’s leading daily source for information focused on the critical issues impacting benefits industry professionals – currently read each business day by nearly 53,000 readers worldwide.
Adams: That’s a long story, but my entry into publishing was only a bit less accidental than my start in the retirement plan industry. The bottom line is that I have been working with retirement plans ever since I got a job at Northern Trust as a college intern in 1977. I was a finance major looking to add some relevant experience to my resume, Northern Trust was a bank. Who knew – or cared – anything about pensions then? It was a JOB!
Well, as it turns out, I liked it, and was good at it. I was there about nine years in a variety of roles working with retirement plans, before leaving in 1986 to join Wachovia Bank to lead their defined contribution/recordkeeping businesses. In both institutions, I got a chance to do a lot of interesting things dealing with various aspects of retirement plans; pension, defined contribution, 401(k), and even non-qualified plans – I also got to work with hundreds of plan sponsors, and thousands of situations.
Now, I had always been a voracious reader, and, like I suppose many managers, I was in the practice of routing articles, magazines, etc. about interesting things in our business to the folks that worked for me. After law school, I also tended to underline the parts that I thought were really pertinent (a habit I picked up in law school) – and one day someone who worked for me asked if there was a way to just route those parts, since – well, since those were generally the important parts.
Well, at first that struck me as fairly lazy – after all, if I had taken the time to read and assimilate, why couldn’t everyone? But, as it turned out, that was also about the time that we gained access to email and, armed with a new “toy”, I began using it as a way to circulate those “clippings” to the folks that worked for me, rather than relying on the old routing slips. In no time at all word got around, and people first inside the bank – and then some outside the bank – began to ask to be added to my distribution list.
One of those folks was a colleague who was then consulting, and she suggested that I send a copy to Charlie Ruffel, who had founded Asset International, the company that published PLANSPONSOR. I did, and within a short time we were having discussions about my building out their web site content, and bringing the NewsDash to PLANSPONSOR’s readers. NewsDash goes to about 50,000 readers every day right now, by the way – it’s got a bigger distribution than the magazine.
FN: You created NewsDash. Can you tell us a little bit about it? Why you decided to launch it? In general, how you feel about the evolution of the media from print to internet?
Adams: If you go back to the reason I started doing it (and, mind you, this was before you had widespread access to the Internet), it was that it took a relatively long time to get information in hardcopy, and it could take an even longer time for folks to have the time to absorb it. I hear from readers all the time that they read a lot of different things to keep up – no mean feat in our business, by the way – but that even on the days when they don’t have time to read anything else, they try to get to “the Dash”, because they know that the really important stuff will be summarized for them there, with more information on the web site.
As for the evolution of print to Internet, what we try to do is let people know what’s happening as news on the web and via our newsletters, follow-up with more in-depth context in the magazine, and then follow-up with updates to those trends on the web. Some might call it a virtuous cycle – for us, it’s just the best way of helping people know what they need to know, in a way that helps them productively apply that information. I would also say that we were an early advocate for “push” communications. In fact, I have referred to NewsDash as a “push blog”; it’s my sense of what’s important for our readers. I would also say that it has remained true to its roots as a very personal means of communication. There are “fun” features in every issue that don’t have anything to do with our business, but have everything to do with us as human beings, and how we absorb information. I can proudly say that, even after more than a decade, it’s still vastly different from anything else out there. We’re all working hard in a tough business – but it doesn’t have to be all about work.
FN: As your magazine’s name indicates, you have your finger on the pulse of ERISA plan sponsors. What are their greatest concerns right now? Are they more worried about the health care side of benefits than the retirement plan side?
Adams: Like their workers, I find most plan sponsors are more worried about the here-and-now aspects of health care reform than they are retirement plans, per se. People are people, after all, and there is a strong sense that we have more time to deal with retirement than with health care, and there is a great concern about what the new law will require, and how that will impact existing programs, and what that will mean. Of course there is a lot going on with the retirement side as well, though I find that plan sponsors are more focused on the basic fundamentals of retirement plan design and administration that most experts want to acknowledge.
FN: The industry and the regulators seem fixated on plan fees and fee disclosure. How do you see the typical plan sponsor reacting to this issue?
Adams: I think most plan sponsors feel they are paying reasonable fees for the services their plan offers. I realize there is a lot of skepticism out there about how valid that perspective is, but my sense is that is what they think, whether they should or not. That said, I fully expect that new fee disclosures may shatter some of that complacency, but not as much as I think the industry pundits do.
FN: How about participants? Do you get a sense they’re in the same boat as the plan sponsors or do they have different issues?
Adams: Participants, I think, have different issues. Most who have a chance to save for retirement do, and most seem to have gotten the messages the industry has tried to impress upon them. However, mostly, they don’t have, or want to spend, the time managing these investments. I think they would like for someone to tell them how much they should be saving, tell them how to invest it (or better yet, do it for them), and then not have to worry about it. I get that, but I think it leaves them vulnerable, particularly post-retirement.
To me it’s sad that most participants have no more background or understanding about the stock market, investments, or mutual funds than they get in that 20 minute enrollment meeting. I wish we’d spend a tenth of the time we spend indoctrinating our kids about drug use and sex – that we’d spend a semester helping them understand the basics of money and investing. It’s a real failure of our educational system. You don’t have to be an investment expert to make respectable decisions about your retirement plan investments, but it’s tough when the first time you get any exposure to it is as a grown adult.
FN: Who do you think the plan participants trust more: Their own plan sponsors or the plan’s service providers and regulators? Why do you think this is so?
Adams: No question – plan sponsors. I think everybody understands that the plan service providers are there to make a buck. They don’t begrudge them that, but I think participants have a relationship with the plan sponsor that transcends that. As for regulators – well, that’s a broad swath of entities, and I don’t think participants really understand how they influence the whole dynamic. But you say “I’m from the government, and I’m here to help” in front of a participant meeting, and see what reaction you get.
FNL Both the DOL and the SEC have held public comment periods during this summer and it appears we’re only seeing comments from the usual suspects (although, this was true even for the spring DOL comment period). Does this suggest there’s a problem with the way the regulators are getting input from the public?
Adams: No “regular” person is going to offer his or her opinions on subjects as complicated as investments or retirement income, certainly not to the federal government and certainly not in a public forum. Most wouldn’t think they knew enough to offer an opinion, and most people are worried about other things. And, let’s face it, most people don’t even know the government is asking for their input (do you know any “regular” person who reads the Federal Register?).
On the other hand, when the American public saw that RFI on retirement income, and heard that it was a stalking horse for a federal government takeover of their 401(k), well they rose up in impressive numbers!
FN: At the end of last year, Time Magazine ran a cover story suggesting the 401k was a dead idea (“Time Magazine is Wrong!” FiduciaryNews.com, October 8, 2009). Are there any reasons to suggest they were right?
Adams: As I recall, they have also suggested that God is dead, and I’m not prepared to concede that point to them, either. Look, we all know that, “if it bleeds, it leads,” and it’s gotten to be very “in” for journalists to bash the 401k. After that Time story came out, I wrote a column on the subject, and I led off that column by noting “For the most part, the article was little more than a tired rehash of criticisms that continue to be trucked out with disappointing regularity by those who, IMHO, should, by now, know better.”
The truth is, there is a contingency out there that not only sees the 401k as a failure, but stands ready, willing, and, dare I say, able – to replace it with a different system. Articles like the one in Time, in my opinion, are at best “aid and comfort” to that point of view. At worst, they are simply propaganda for it. [Here’s Nevin’s column on the Time article: http://www.plansponsor.com/IMHO___“Myth”_Information.aspx]
FN: Aside from a falling market, what do you see as the biggest real problem faced by 401k plans today? If you were in charge of the DOL or had the votes in Congress, how would you solve this problem?
Adams: There are two big problems in my estimation: there aren’t enough of them (401ks); and, many participants aren’t saving enough.
You cure the first by making it easy, not just easier, for employers to sponsor them. What we know, from survey after survey, is that when participants get the opportunity to save via a workplace plan, they do. When they have to do it on their own, they don’t. So, we need to do really encourage these. But you don’t do that by incessantly threatening those who do with threats of litigation, audit, etc. I can think of reasons why this could be problematic, but I think most plan sponsors would really appreciate a little more guidance on what is a “reasonable” fee, what is a “good” target-date fund glide path, etc…
On the savings front, I think we spend too much time and energy worrying about investments and investment selection, and not nearly enough focused on saving the right amount. Part of that is we need to be clearer about the end goal – how much you need to save for retirement; and part of that is being more direct that a huge factor in having the right amount at the end is saving the right amount as you go along.
People think – and are being subtly encouraged to think – they can invest their way to a financially secure retirement. I also think that some of the recent focus on retirement income glosses over the reality that many participants won’t have saved enough to make annuitization a viable option.
FN: Can you tell us some of the big things you’re working on right now?
Adams: Well, retirement planning/saving is a worldwide issue, and I’m proud to say that we have just (May) launched PLANSPONSOR Europe (you can check it out at www.plansponsoreurope.com). It’s more than a little ironic that even as many here are questioning the sustainability of a defined contribution-only system, the leading European economies are, for what is admittedly mostly economic reasons, moving toward just that model. I don’t think anyone has the perfect solution yet, but we’re looking forward to taking a more active role in sharing ideas “across the pond.” Also, PLANSPONSOR Asia-Pac is already on the drawing board. Nearer term, we are about a month away from our annual PLANADVISER National Conference in Orlando, Florida (http://www.planadviser.com/PANC2010/) – and a week away from launching our eighth annual search for PLANSPONSOR’s Retirement Plan Adviser/Adviser Team of the Year.
FN: Thanks, Nevin. Do you have any final thoughts you’d like to leave our readers with?
Adams: Chris, I have a feeling that I have already taken advantage of the white page to expound too much. One of the great things about this job is that I get to say what I think – and for those who want to keep up with THAT, I would direct them not only to the newsdash and our websites, but to my “blog” at http://plansponsorinstitute.blogspot.com/ Thanks for the offer, and the invite.
FN: Thank YOU, Nevin, for your thoughtful and engaging comments. We look forward to continue to hear and read more from you in the future.