Shawn McCoy is the owner of Federal Employee Benefits Advocates, an educational company for both financial advisors and federal employees based out of Louisiana. With over 20 years as an advisor and being successful in the federal market place for about a decade now, he has a wealth of knowledge on navigating the obstacles and seizing the opportunities that come with this market. In this podcast get a glimpse of what he offers as a trainer and how he brings clarity to a complicated retirement system.
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Ed Dressel: 0:04
This is Ed Dressel again with RetireReady Solutions with another great podcast. I'm excited to interview Shawn McCoy, a trainer in the federal marketplace and kind of talk a little bit about it. Shawn, Welcome. Nice to have you here today.
Shawn McCoy: 0:16
Well, Ed, thanks. Great to be with you here.
Ed Dressel: 0:18
As we get started, why don't you tell everybody a little bit about yourself.
Shawn McCoy: 0:22
Yeah, Ed. The name of my company is Federal Employee Benefits Advocates. We're an educational company based out of Shreveport, Louisiana. We've been working in the federal space now for about a decade. The programs that we offer are geared towards both financial advisors as well as federal employees. Previous to getting in the federal market, I spent about 20 years with MetLife. I did a variety of programs with them. I was started off as an agent in Carrollton, Texas, way back in 1988. And then by the time I left, I was the senior vice president for the MetLife broker-dealer group, which encompassed four of their broker dealers, which included MetLife, New England Tower Square on Walnut Street, as well as had a team of four people that were wholesalers and then was a player coach myself with four different states that I covered. After that, I went and worked with a company called Curian Capital, a random professional development department for about a year and a half until we had that slight market downturn in 2008. And then, from there I went and worked with a small startup company that worked in the closed in mutual fund space as their senior marketing director and wholesaler. After that, kind of by a fluke, I got into the federal market by an acquaintance of mine and was an instructor with another company. And after working there for a couple of years, I kind of decided that I wanted to venture out on my own. I felt like I could build a better mousetrap. And so, for about the last oh, let's say, 7 or 8 years I've been working on my own with the company, Federal Employee Benefits Advocates.
Ed Dressel: 1:51
What attracted you to the federal marketplace?
Shawn McCoy: 1:54
Well, it's kind of interesting. Early in my career, I had had some exposure to the federal marketplace through the pension max concept, except at the time there really wasn't a comprehensive training program that kind of gave you all the nuances. I really wish, you know, back in the day, back in 1988/89 I would have known what I know now. And it probably would have made a tremendous impact on how I would have moved forward with my career. And then the getting involved as the instructor for the firm was kind of a fluke just because I was looking for something after I got laid off from Curian as an opportunity to kind of fill the gap. And once I got involved with it, I realized that there was a big need for this types of programs to help federal employees because, unlike private sector companies, they just don't get the training and the assistance they need. And there's a lot of things that they're just not simply aware of that, you know, that we try to bring to light to help them both through the benefit briefings that we offer and through our educational process with financial advisors.
Ed Dressel: 2:53
So you talk about understanding the benefits for federal employees. How is that different from state employees or the general working public? I mean, why does somebody need to be trained specifically on federal benefits?
Shawn McCoy: 3:06
Well, Ed, you know most of the programs that people interact with on the advisor side, and the employees are covered under the ERISA program, which has been around since 1974. Several employees are not governed by ERISA. They're governed by federal statutes, and those statutes have been in place since 1920. That's when they first put in place the very first pension plan. So as of this year, employees have had a pension plan for over 100 years. And the different nuances that they have with their plan--plus, they have several different types of retirement plans from the old system, which closed after the end of 1983 and then from the new system started in 1984, and then some of the subsets that involved air traffic controllers, firefighters and military reserve techs. It's just a whole different breed of how they approach their benefits marketplace. They have a wonderful benefits package, better than most Americans. It actually gives them the opportunity to retire, in some cases, as many as 10 to 12 years sooner than most Americans, because depending on the program and their age and their years of service, they can retire somewhere between 55-57 and essentially get a pension for the rest of their life and, in certain cases, be able to keep their health insurance and life insurance throughout the rest of their life and provide benefits to their survivors, which does make it unique because most of your ERISA based plans don't provide those programs.
Ed Dressel: 4:31
So it seemed like there were two aspects of what you do. Tell me a little bit about working directly with federal employees. What do you do in that context?
Shawn McCoy: 4:39
Well, in that context, I'm a federal contractor, so I go out and I deliver federal employee benefit briefings for federal employees all over the country and even out of the country. I've been to Japan and Puerto Rico recently, and what we do is we provide full day benefit briefings. Typically that would run, say, 8 to 4 that would cover seven key areas of their benefits and then oftentimes will offer 1/2 a day of financial literacy, which is really more of a generic financial education program to cover those benefits that are not part of their typical federal employee benefits that may impact them after they retire or leave service or may impact their spouses.
Ed Dressel: 5:17
And the other side that you indicated you work with advisors. Tell me a little bit more about that.
Shawn McCoy: 5:23
Yeah, a program that we offer through Federal Employee Benefits Advocates is called FedEd. It's a two day hands on program where we teach advisors about all the nuances of federal employees. We go through the seven key areas of their benefits, which would include their pension, as a subset of that would include their survivor benefits. We also cover their thrift savings plan, their social security benefits. And then we also cover four risk management areas, which include their health insurance, life insurance, subset of that with the dental and vision, along with their disability and their federal long term care program. So those are the seven areas that we cover. In addition to that, we also give them educational information about the special provisions, which is law enforcement, federal firefighters, air traffic controllers and military reserve text. And then we teach them how to market to federal employees, which is kind of one of the nuances of our program compared to some of our competitors. And what we think is one of the more important parts is we also provide as a part of the training program the RetireReady Federal Gap Calculator, which allows them to be able to sit down and do the various analysis with the federal employees. So we only offer this on a hands on basis, and we do this in a two day format that we offer at various places around the country.
Ed Dressel: 6:38
What do you enjoy about equipping agents to reach the federal market? What drives you there?
Shawn McCoy: 6:44
Well, most of my career I've been involved in helping advisors to understand whether it's financial products and, in this case, federal employee benefits. And so really, the basic nature of my company is advocacy. I'm an advocate for federal employees because I know that they simply do not get the training that they need. And so, by equipping the financial advisors, it's almost giving them an extension of what my company provides to the federal employees directly by providing them and empowering them to be able to go out and assist the federal employees to help them not only understand their benefits while they're in service, but also how to make sure that they're prepared to protect their family and to accumulate assets while they're working, and then what happens once they have retired are separated from service.
Ed Dressel: 7:28
What opportunities do you see for agents who are contemplating shifting some of their focus? Or they're focused to working with federal employees?
Shawn McCoy: 7:35
Well, first off, it's the opportunity as an aggregate. When you look at the federal population, today, according to the Office of Personal Management, is about 2.7 million federal employees--of that number about 600,000 are postal. But when you look at their average age of their workforce, their average age is 39% is age 50 and older, and they have an average employment of about 16.3 years of service. And that is much longer than what you see in the private sector. Also, one of the other things that I found is that there's a connotation amongst folks that federal employees are not well compensated. Well they are in fact well compensated. And they have to be to compete in the private sector. The Office of Personnel Management has indicated that the average salary for federal employees is about $78,000. The other thing is when you look at the vast number of federal employees that exists in every state, so 85% of all the federal population resides outside of the metro DC area. So when you compare that with the opportunity, then when you look at the number of areas where you have to assist federal employees. And so those areas come number one, first in the area of pension maximization or pension income alternative. They have a defined benefit plan that allows them to choose a survivor option. As we all know, when you look at pension max, you're essentially looking at providing an alternative survivor benefit that would allow them to choose a lower cost item, but at the same time still providing the necessary retirement income that they need in order to maintain their health insurance. So that presents an opportunity for protection sale using a life insurance product. The other area that they could help assist them on--and this is an area where most federal employees are not cognizant of this--is that even though they have a pension, if they have less than 10 years of service and they die in service, there is no pension for the federal employees, and thus that creates to problem. Number one is income replacement and number two, the possibility that they may not be able to maintain their health insurance under the federal subsidized rate, which is, they subsidize about 75% of their health insurance. So those are a couple of risk management areas. Another area that occurs in the accumulation side is on their thrift savings plan, very similar to a 401k plan that you would see with ERISA. And there's really a couple of areas that provide the need for an advisor to a system. First off is the suitability and finding the right investment mix. The TSP--according to the statistics, these are a little dated, but it's the largest pension plan in the world, with about $579 billion in there. The thing that absolutely floors me and floors most advisors is that approximately 40% of that money is in the G fund, which is effectively a money market account. So they need that during the accumulation, phase. And then the other side, they need to make sure that they have sufficient income so that they're able to subsidize the other two parts of their retirement, which is their pension and social security with the income from the thrift plan. So they need assistance once they retire on having suitable investments as well as distribution options. Now another area--and this area is the opportunity for this area--is not quite as great is in the program they have available only for the older system, which is called the Voluntary Contribution Program. So this is an archaic defined contribution program that essentially allows the federal employees covered under the old system--those hired prior to 1983--to put in up to 10% of everything they've earned. And because of the change in the tax law in 2008, they can effectively transfer that money into a Roth, thereby avoiding the income limits that Roth traditionally can have, as well as the contribution limits. But again, the federal population for that remains today at only approximately 2% of the population, about 55,000 employees. The other areas for opportunities come in the area of their federal employee group, life Insurance. They've had federal employee group life insurance since 1954. It's the largest life insurance program in the world with those over four million active and retired federal employees. But where the challenge comes in is on their Option B coverage. When they start getting into their fifties, their Option B coverage, the cost of that, starts to go up exponentially. And one of the things again that I like about the RetireReady Solutions software is that they can actually illustrate that federal employees, particularly if they're a longer term federal employees, may actually spend more money on the premiums over their lifetime than they would get the death benefit, so that provides an opportunity to provide them with some alternate solutions in the private sector for protection products. The other area comes in the form of disability. They don't have a true disability program, like most private sector programs, where you have an insurance base, they have a disability retirement program. While the definition for that disability is fairly lose, the challenge is after the second year, after the first year they dropped to 40% of their income. And for most people, that's not something that they can afford to live on. And that's an area again that provides an opportunity to have a standalone disability policy. Or, as we know today, a lot of the companies will offer riders that will allow them to combine of various types of protection from life, to chronic, to critical, to accelerated death benefits through one policy. And then the final area comes in the area of long term care. As we know that's a need that, as you know, as we've gotten through the marvels of modern medicine, longevity, those costs and retirement can become tremendous. A statistic that I looked at the other day that came from some of the programs out there is that the approximately cost for long term care assisted living nationwide is about $4000. Now, if you go on either coast, you're talking more closer to the neighborhood of $7000. While they do have a long term care program available that they could purchase, the challenge is, it doesn't give them the opportunity to combine husband and wife together. But it also may give the opportunity to look at this, as I mentioned earlier, by combining this with a single policy, a life policy that may have a critical or chronic rider on there. So, really, someone who's considering this marketplace has to look at the total number of federal employees that are out there and each of those seven opportunities. Now, not every federal employee is gonna be an opportunity for all seven. But certainly you have a lot more choices out there in terms of how you can interact with the federal employees potentially than what you would have with your typical of ERISA base program.
Ed Dressel: 14:13
What do you believe a federal employee wants most from an agent?
Shawn McCoy: 14:17
Well, I think the first thing they want is education. Federal employees tend to be--my experience has been--they tend to be a little bit closer to the vest than what you would typically see with other employees. So I think the first thing they want to do is to be validated in the fact that they understand their benefits. I think the other thing they want to do is to make sure that they understand how all of these different risk management and accumulation areas come together. I would say that, you know, the first thing is being able to demonstrate that you're truly a scholar of the program and that you could definitely understand what their different needs are and how they affect them.
Ed Dressel: 14:52
So in addition to being a scholar, knowing the federal pension systems, what do you believe agents need most to build a relationship and find success with the federal marketplace?
Shawn McCoy: 15:01
Well, I tell you, I would say that they need first off the tools and knowledge and support to be able to work with federal employees, and those can come in a variety of areas. But really, what I tell people is, if you're gonna get involved in the federal market, you really need what I call the three C's of commitment. First, as I mentioned, is the commitment to be educated about the federal employee benefits. The second is the commitment of time that it takes to develop the market because this market is a little bit different than your typical market, because it can take a little bit of time to break in just by the very nature of how the federal government operates. Any of you who have interacted with the federal government, it's not something like you see in the private sector where you make a decision, it gets done. You know, tomorrow there tends to be a little bit longer tail on the sale when you're working with federal employees. And then the other C is the commitment of the resources to invest the time, the effort, and the energy and the financial resources in order to develop the marketplace.
Ed Dressel: 15:56
So it sounds like there's a little bit of a hurdle getting in, but that very hurdle will stop others from following really quickly.
Shawn McCoy: 16:03
Yes, what I would say is to get into the federal market in our program, we teach you three ways to develop organic lists for prospecting directly to federal employees as well as federal agencies because there's such a diverse federal population and because geographic nature can affect that. And, what works in Idaho may not work the same way in Miami. So you know, one of the things is having different tools that you can go out and build those organic lists, and that kind of goes back to the kind of the basic premise of our business model is we want to empower advisors so that they have the ability to work with federal employees. But also they have the control. One of the things I've found over my almost 32 years as of May of this year, is that most advisors want to be in control of their prospecting and their marketing efforts. And so that's one of the things that we bring to the table, is that we do teach you how to market to the federal employees and not just one singular way. And we provide those tools. Again, this is where the RetireReady Solution comes in so that you could, you know, adequately and accurately illustrate their benefits and know how those benefits interact as a holistic program, as opposed to just looking at things somewhat myopically.
Ed Dressel: 17:16
What's the top thing you found or top things you find advisors don't know but need to know about working with federal employees?
Shawn McCoy: 0:00
I would say probably the top thing is again the lack of the continuity between the ERISA based plans and federal plans because you have really the new program, which is the vast majority of the people that are working for the federal government today. Their retirement is based on what I call the three pillars, which is their basic pension benefit, social security, and the thrift savings plan. Social security--that's something that's germane to everyone, regardless of whether they're a federal employee or not. The thrift plan--very much like a 401k plan, but it's really their pension because their pension is based upon what they call their high three average, which is a formula that they figure out to determine how they're going to start the dollar amount for their pension. And then the other one--and this is probably the more critical one--is what's known as credible service because there's three areas of credible service that can affect that. It would be such as their actual civilian service, military service, unused sick leave. And so how all those come in together are quite different than what you see with your typical ERISA based pension plan.
Ed Dressel: 18:29
When working with federal employees, what difference do you see if you're using an educational approach or a sales approach to engage in a federal employee?
Shawn McCoy: 18:39
Well, that is a definite The fact of the education approach is the preferred method. And when you look at the federal employees and you engage with them, particularly as I do with their point of contact. The one thing they want to make sure is that someone is not coming in there just strictly to push a particular product or service. What you do is you earn the right to do business with them by providing education. What you may find is instead of maybe your typical two interview process with federal employees, you may find that it may take three or four. But the other side of this is one of the things that I've learned over the years of working with federal employees, and the people that work in this marketplace can attest to is, they're probably one of your best resources for getting referrals. They're much more apt and likely to provide a referral to someone else that they work with or even make an introduction to a supervisor to try to share the education then they would if somebody were just simply coming in to push some particular product or service.
Ed Dressel: 19:41
What are some key lessons you've learned that you could pass on the agents?
Shawn McCoy: 19:44
I would say the key lesson is to be patient--to understand the different cycles that go through. I mean, right now, we're kind of in a unique situation with what's going on with the coronavirus and that how those can affect what goes on in the federal market, that you also have budgetary issues that come up with the federal budget that can cause some disruptions and so understanding their cycles, understanding the things that can affect the ability to access the employees--I think that's the key thing. And then also, it's just the patience factor again that goes back to that commitment of the time of the resource to develop the market.
Ed Dressel: 20:21
What are some of the hurdles when working with federal employees?
Shawn McCoy: 20:24
Well, I would say one of the hurdles potentially would be accessibility. There are certain branches of the federal government, certain agencies that are very challenging to get access to. One of those would be military. Military is actually the largest of all the employers in the federal government. So you have to kind of understand the different ways that you can network in to get to that agency. Also, other agencies that have to do with national security, such as the Department of Homeland Security, any of your law enforcement agencies even is even the Internal Revenue Service. Those could be challenging. But again, once you're able to make that contact, as I mentioned earlier, I think it's simply one of the best opportunities to get referrals. Because if you do a good job for them and they feel comfortable with you, the likelihood that they're going to refer you to another coworker or family member or even a point of contact is very high compared to what I've seen people's willingness to do in the private sector.
Ed Dressel: 21:22
So how do you get started getting connected with federal employees?
Shawn McCoy: 21:26
Well, there's several different ways. I mean again, my philosophy is you gotta have the tools and the knowledge and the support to be able to get in there to work with them. So you know, oftentimes people will come to our program after they've kind of dipped their toe in, and they start working with the employee, and they realize they don't have all the answers. They try to go get them themselves, and they don't have a comprehensive program. And so I think that's one of the hurdles is you know, just having that knowledge and then knowing how to access and then kind of knowing the do's and don'ts of what you can and you can't do. One of the big things is you're not supposed to solicit federal employees on federal property. There's a statute for that. And you know, sometimes if you make a misstep, it can affect you adversely in the ability to continue to work with that particular group or agency or military installation, if you will.
Ed Dressel: 22:14
What is a success story you've seen in the federal marketplace you'd like to share?
Shawn McCoy: 22:19
Well, I think probably one of the biggest success stories is an advisor that I work with up in the Maryland area. I won't disclose his name for a variety of reasons, but this gentleman has been working with fellow employees now for probably about 15 years. And what he started doing was he started--and he was trying to create a program where he could provide educational information to federal employees--and there really wasn't anything out there. And then he sought out an organization to be able to help him and I've actually been working with him now for about 10 years, and we've taken his business. When we first started working together, he was probably doing, I would say, somewhere in the neighborhood of about $500,000 of gross dealer concession and because of the programs that we were able to help him get involved with, he now probably does somewhere in the neighborhood of two to two and half $1,000,000 of gross dealer concession, and he's managing about half a billion dollars. And the interesting thing is, that's all that he does is managed money, whether it be from a variety of products, not necessarily just investment advisory, but on the annuity side and other products, and really does know protection. But I would say he's probably the best success story of just having a consistent, repeatable and sustainable process where he's constantly working with our firm to go out and develop and attract federal employees to seminars. And most of those, quite frankly, are done on site and are done at military installations.
Ed Dressel: 23:48
You mentioned a few times in this interview that you use our solution, The Retirement Analysis Kit, for helping with federal employees, and you're one of the more proactive individuals that engages us. Why do you bring us to the table? What do we help advisors with?
Shawn McCoy: 24:03
Well, first off Ed, I want to say, you know, we've had a good, long standing relationship now for probably close to 8-9 years. And one of the things I found about the folks that your organization is at that number one, they're solution oriented. They're there to help, and in some cases they go above and beyond what I've seen with other organizations. The other part is, I like the comprehensive nature of the software. One of the first things when I ventured out on my own was absolutely a must was that your software would be a part of the program because I'm a firm believer in taking the holistic approach when you're doing planning, not looking at things simply myopically but being holistic. And that was one of the things I found attractive about your software. I also think your software is very easy to use from a navigation standpoint. I also believe that in terms of the price point that you offer for the software, it makes it very attractive. And the other part is that, you know, while I only use the Federal Gap Calculator, you have some wonderful additional options that are available with Pension. Max. I mean not to toot your horn, but I think your Pension Max illustration is probably one of the best ones that I've ever seen. And the fact that you have the upgrade-able version that allows you to look at a variety of state defined benefit plans. Really, I think ties everything together because you find a lot of people will begin working with federal employees and then find that they have the ability to branch out to work with the other state employees. And so I think having that natural progression is important. And as I said, I think your staff and yourself personally have just been an excellent partner for our firm. And, you know, we continue to hope that this relationship will continue for many years to come.
Ed Dressel: 25:39
So how have you seen TRAK benefit agents in building relationships with federal employees?
Shawn McCoy: 25:44
Well, it goes back to the educational nature of the way that your software work. I think you know, there's firms out there that have what I call solution based software where they look at one need myopically and then they come up with the solution. But I think what yours allows them to do, because of the component nature of the way it's set up, is it allows the federal employee to put information together in a holistic fashion. But again, not everybody is interested in the full blown report. Plus, you have some--the Gap Analysis that you're able to show them with their income, to show them where they may need to make some changes. So I think from that standpoint, it's being able to gather the data and then come back and show them where they're at and then that allows them to position themselves to help them get to where they need to be and to identify what areas that they're interested in. Is it interested in the accumulation or some of the retirement benefits? Are they interested in focusing in risk management or combination? But because it's done in a modular nature, it allows the advisor to really hone in on what's most important to the employee and then provide that type of solution for them in a customized fashion. The other thing I'll point out that I think is attractive about your software is the fact that you have a federal letter on there. And I think for those advisors that are registered reps or investment adviser representative, I think that gives them an additional level of confidence because they know that it's been vetted by the regulators. And as we all know, in this current regulatory environment, that's important to not only the broker dealers, but also to the advisors and ultimately to the clients.
Ed Dressel: 27:18
So before we wrap up, give me a little bit of information about the programs you offer for working with advisors.
Shawn McCoy: 27:24
Yeah, our program--our two day program--is called FedEd. It's a two day hands on program, as I mentioned earlier. We do cover all the nuances. We provide you the software. We also provide you with a basic business template. And as I said previously, kind of the other side of that is the support where myself and the other people on my team have the ability that if you do run into a situation where you do need some assistance, we can help you kind of figure out exactly what the federal employee needs and kind of point you in the direction. From an educational standpoint, we're not there to promote products, but we do offer these classes in a variety of locations around the country. We can find more information about this through our website, which is febadvocates.com. As a matter of fact, we have a class coming up in Dallas, Texas, at the end of April-- April 30th and May 1st. And so, if you do have some additional information, you can contact us either by our website or you can email directly to me at shawn@febadvocates .com.
Ed Dressel: 28:46
Shawn, I really appreciate you taking the time today. It was great to have you--a lot of information, and you packed it in a very short amount of time with a market place that a lot of people may have started hearing about, but obviously got a lot more information and can consider if they want to engage it. I appreciate you taking your time. And with everything that's happened in today's marketplace, I wish you the best.
Shawn McCoy: 28:46
Thank you, Ed, and thank you for the opportunity to continue to work with you.