A Pivotal Point in Time for Retirement Plan Stakeholders

Retirement solutions need to adapt to a changing world—and that means meeting attendant challenges in order to meet the needs of retirees and those who serve them. 

“This is a pivotal point in time,” said SPARK Institute Executive Director Tim Rouse at the opening of the recent SPARK Forum. He noted that regulations and regulators are “telling us to expand coverage,” but at the same time because of the complexity that can entail he compared doing so to “being Indiana Jones on a quest.” 

“It’s a tall mountain to climb,” said Kourtney Gibson, Chief Institutional Client Officer at TIAA.

The Scope of the Problem

“How do we at a minimum say Americans at retirement will be able to secure their basic needs?” Gibson asked. 
Gibson observed that 55 million Americans lack retirement plan coverage, and that women have 30% less than men at retirement. Further, she said that in the past, 70% of Americans participated in defined benefit plans, but now 20% do. 

Gibson said that sometimes what is missed in addressing financial readiness for retirement is that finance can be hard for individuals. She said that 80% of plan participants use the default contribution rate, but asserted that “’set is and forget it’” hurts us. 

The Long Run  

There is value in keeping the long run in mind, Gibson suggested, and doing so demonstrates the value of discipline, as well as the need for guidance. For instance, she said that individuals don’t like having to pay into the Social Security system, but in time enjoy the dependable benefits of doing so. “You know what you like later? The consistency,” she said. “It’s not just about investing, it’s about saving,” said Philip Chao, Principal and CIO at Experiential Wealth.

Further, Gibson said, without guidance for savers, decisions people made in their young adulthood could set the plan for their retirement. 

“It’s also about education,” said Chao; Gibson struck a similar tone, arguing that not only is it important to educate employees and participants about what is provided, but also to educate legislators. 

Service Providers

Gibson discussed the relative conundrum surrounding running a practice, particularly regarding fees. 

She said that falling prices for retirement plan services is “something we’ve seen before.” The “push to zero” could hurt business, she suggested. “It is expensive to operate. You have to be able to run a business,” Gibson said. 

One of the keys, Gibson argued, is to stress the value of what one provides. She contends that if one presents the value of what one provides, people will listen. “Value is qualitative,” she said, continuing that what matters is not the amount of the fee but what a client gets for it. And she added that professionals must consider how they can innovate in order to add more value. 

Success 

What does success in addressing retirement readiness look like? Gibson suggested that industry professionals ask themselves, “How did I make sure that I helped build retirement security?” She also argued that progress in this vein should be measured. “What gets measured gets done,” Gibson said. 

“We have to protect the most vulnerable. We have to protect those who make less,” said Gibson. And she struck an optimistic tone, remarking, “We’re going to get through this.”