I started my career in retirement plans inauspiciously. I had graduated from the University of Iowa, was engaged to be married to my soon-to-be spouse, and I had decided to move back to Seattle, where I had grown up. The job search process then was materially different than today. There were no bots screening out my resume, but also no collections of potential jobs for someone with a degree and no experience.
After graduation and before the wedding, I slept on the couch of a high school friend and applied everywhere I could find in the paper. I had some offers. Telephone debt collection, investment broker (door-to-door), and an account manager for a company selling commercial dishwashers. None of which excited me, but the pressure to find employment before our wedding was palpable.
Another of my high school friends, who was working as a parking attendant at an office building in downtown Seattle told me to print a few dozen resumes; he would then give them to the big wigs who could afford parking in building parking downtown. A few weeks later, I had a job working in that building as an investment support analyst for a small company providing recordkeeping, administration, investment services, and employee education to small businesses in the Seattle area.
I didn’t pick retirement plans as a career, but I grew to love it quickly. With business owners you could work through analyzing plan designs to optimize scarce employee benefits dollars. With committees, you could review investment performance and the intersection with participant behavior. And with participants, you would have an opportunity to interface directly with the people relying on these programs to secure their financial futures.
I believe the work we do is important. In providing independent oversight of qualified retirement plans, our work supports the financial needs of hundreds of thousands of participants. For most, these plans are their largest asset outside the equity in their home.
Since my earliest days, what has been true in the retirement industry is the longing for providers to be something more than what they are. My first employer had once been a third-party administrator that had extended into financial advice and participant counseling. Mutual fund managers have sought to be recordkeepers, and recordkeepers have sought to be attorneys and investment consultants.
When we founded the firm, we planted a solid flag as an independent firm aligned solely with our clients, taking every reasonable step necessary to ensure our independence. We are investment consultants, selecting and monitoring investment positions, and consultants tasked with continually reviewing the providers our clients’ contract with.
The stake we have placed is becoming more unique with each passing day as consultants move to become asset managers. The reasons seem clear, asset management carries higher revenues and margins, and with each passing day more institutional and private equity money has polluted the independent investment consulting space. Outside shareholders demand outsized returns on capital and asset management, custom managed accounts, and IRA rollovers are the shortest path to those margins.
However, this pollution of the investment consulting role leaves sponsors at greater risk for fiduciary breaches. Mutual fund companies are generally not permitted to monitor their own investments because they cannot do so objectively. So too is the issue with investment consultants who move from analyzers of investments to manufacturers.
Well-run retirement plans have complimentary professionals ensuring balance in the operation and oversight of the plan. Historically, when sponsors have allowed providers to do more than they should, balance is lost, and risk is created.
Retirement plans are likely to become even more important to employees over the next decade with proposed legislation allowing for retirement accounts to be used as emergency savings vehicles and with college debt being integrated as a matchable contribution. These changes will create new conflicts for your providers. Having a truly independent consultant to support in the evaluation and management of those conflicts will be more critical than ever.
Multnomah Group is a registered investment adviser, registered with the Securities and Exchange Commission. Any information contained herein or on Multnomah Group’s website is provided for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Multnomah Group does not provide legal or tax advice.