Ed Dressel: 0:08

Welcome, everyone to another podcast with Grow RetireReady Clients. This is Edward Dressel. I'm excited to have Jonathan Schultheiss back. He was our first advisor interviewed and the first time I've had somebody back twice. So Jonathan, welcome. Great to have you.

Jonathan Schultheiss: 0:23

Thank you. I feel privileged.

Ed Dressel: 0:25

It's wonderful to have you. I hope things are well. Just as a reminder, let people know a little bit about what you do, and kind of what your role is.

Jonathan Schultheiss: 0:34

Yeah, so I'm a managing director with Strategic Retirement Partners, SRP, here in the Virginia and Carolinas area. And basically, our team--I have two other kind of CO managing directors--and we all have different, I guess, skill sets or passions, I guess you could say, and mine is employee education. So that's really where I focus most of my time and efforts.

Ed Dressel: 0:58

So you're working 401k plans. Your focus is to do retirement, employee education. A lot of people would think I would never want your job. Participant education is the torture chamber of a plan advisor. They're not focused on it. And it's not where people want to go. You seem passionate about it. There's some tension there.

Jonathan Schultheiss: 1:20

Well, I think if you feel like what you just said, is because you're doing it wrong. And I think the whole value of employee education is that it's valuable for everybody. Valuable for the plan, because we get more people engaged, which also reduces turnover. It's valuable for the employees, because it gives them access to financial advice that they couldn't get on their own. And if you're doing it right, as an advisor, it also drives your economic engine. So that's one of the things that that we like to do is we like to, we like to make money, right? So that's why we're in this business. I hear so many people at these conferences, they go, oh, man, employee education is kind of a loss, loss leader or whatever. But I don't look at it that way. To us, I mean, I feel like we've created a process that through delivering value actually makes us money at the same time.

Ed Dressel: 2:15

I might guess that if we've got any plan advisors listen to this they're going to either not believe you. And they have a big doubt, because they've tried employ education, six different ways. It doesn't work. I don't want to do it. I just want to work with the plan sponsor. I hear that over and over even as much pressure in the industry as there is "Oh, we need to do education!" I hear it over and over. It's taken a backseat. What are you doing that's different than maybe your typical advisor that you can say you engage people, which is going to be different. It drives your economic engine. What do you mean by doing it right?

Jonathan Schultheiss: 2:54

So one of the things that we look to do too, is how do we move beyond just talking about the 401k. Because if all you're doing is coming in and telling people how to invest in their 401k, that's okay. But really, you need to go more holistic. And so when we come in, and we become holistic, I always tell people, I say, imagine I got the side blinders on here. All I know is what you have in your 401k. If you want to share with me what you have outside of the 401k, it helps me do my job and give you better advice. And so a lot of times when you say that people start saying, "Oh, well, I got this old 401k" or "I got this, I got this IRA with XYZ company and I don't really know the guy. I don't really talk to him that much." And so it allows us to say, "Oh, well, you know, what,"--and this is my favorite line that I say right here. I say "Listen, you're already paying me, right? So a small percentage of the 401k fee comes to pay me, I'm more than happy to take a look at those other accounts that you have." And so they go, "Oh, great, well Jon look at this"--and so I get lots of opportunities, just from ancillary business, that people have in old 401k's or old IRA's that they've just left laying. And so we're, we're picking those things up left and right, just because we're coming in and going a little bit deeper. It doesn't take just a second to say that and get somebody to basically show you everything they got.

Ed Dressel: 4:20

So for people that may have not heard your first podcast, they think that they're going to--you just dont' walk in the room and say, "Hey, tell me about your other assets."

Jonathan Schultheiss: 4:29

No. So one of the things that we do--and I'm a huge fan is the the On TRAK reports. And we actually rebrand them. So we created a full employee education campaign. And we call it becoming a 401k Superhero. And so we're trying to help people improve their finances and we'd get off on another topic, but I wrote a book about it and it has a kind of a curriculum around the book of budgeting and getting out of debt. And so we talk about those things. But really, we want to provide a lot of value. But what really makes us a lot of money is that On TRAK tool. We've actually rebranded the tool to say, "Are you on track to become a 401k Superhero?" And when we deliver those reports, one of the things I think is brilliant that you guys did, is at the bottom of it, it says "other possible solutions." And so one of the other possible solutions is if you have a lump sum of x amount of dollars. And so I'm never done a meeting, a group meeting with TRAK reports, where I haven't had at least one person, raise their hand, say, "Hey, Jonathan, I got, I got that much money," or "I got more than that in my old 401k." And I always say, "Listen, I got this, give me a statement, and I'll help you." They'll give me a statement and usually, if it's a small amount, I'll roll into the 401k. If it's a larger amount, it makes sense to actually have it professionally managed, then we put it on our managed models. And and we were getting more business than we can handle.

Ed Dressel: 6:03

The On TRAK report you're referring to is our what we call our participant Gap Report showing a one page overview of where they're at. You're saying participants like to see that analysis?

Unknown: 6:15

Participants love it. And you know, what's interesting is everybody goes, "Oh, another boring 401k meeting." And so the thing is, is how do you go from another boring 401k meeting to delivering something that's important to them? Because most participants don't care about the correlation of large cap and small cap stocks and diversification. But what they do care about is "Can I retire?" And what's interesting is, I'll usually start a meeting where we give everybody an on TRAK report with saying, you know, I heard a statistic the other day, and the statistics says that the average person spends more time planning for one annual vacation than they do their entire retirement. And when I say that, there'll be at least three or four people in the room that start nodding their heads going, "Oh, my gosh, that's me." And then I say,"Listen, guys, when you leave this meeting, today, you're no longer going to be a part of that statistic, because I'm going to share something with you that's going to show you what you need to do to be able to have a comfortable retirement." And so then I pull up on the screen, and I show them the report. And I say, I walk them through here's how you read it. And I tell stories, because we've been doing this long enough, I've got stories to tell. And and we just kind of go through and we tell some stories about different situations. Because that helps them relate to it. I'm a big believer in stories. So you tell a story about how somebody wanted to rerun their calculation and retire early. And everybody goes, "Oh, my gosh, I'd like to retire early. So what do I got to do?" So it's all about trying to create engagement. So the problem with employee education is, if you don't have any engagement, and you're showing up, and nobody wants to meet with you, because you're not providing value, you can't make money. And the problem that we all have as advisors is we all have what we call the curse of knowledge. We get this stuff. And we come in and we talk about Roth IRAs and diversification and taxation and all these different things that we get, because we talk about it every day. The average participant doesn't have a clue. But if I can keep it simple and say,"Look, Mr. Participant, you're only saving 3%, you need to be saving 6% to be able to retire." They understand that more than they understand all the diversification and how it's taxed and everything else, where us as advisors, we all sit around and want to talk about how smart we are and talk about these other things, where you got to keep it simple, and you got to deliver value because value is what they perceive, right? If they don't understand all these other things, they don't perceive it as valuable. But if you can give them something that they understand, then they perceive it as valuable.

Ed Dressel: 8:57

So bringing value to the room, do you see you've talked about getting outside assets? What do you see in contribution levels? How's it impacting contribution levels in the plan?

Jonathan Schultheiss: 9:07

So here's the other thing that we always look at as a measurement of engagement, we will look at what is the participation rate and what is the average deferral. I love the look at the participation and average deferral before we deliver these On TRAK reports. And then we can see how much has changed. And so that to me is is a lot of value. Because here's the other thing too. Even though on the larger side of the market, we moved more towards like a flat fee. On the smaller side of the market, we're still asset based fee. And we always explained that as employee education because the more involved we are with the plan, the more successful we're making it. We want to be able to be rewarded in the playing group. And so you know, we look at it in that way. So I'll give you an example here. Here's an interesting conversation. I just I had this morning with a prospect. And we came in and we pitched them all of our services, our fiduciary services and everything else. But then we also show them our employee education services. And we tell them about the whole campaign, which include using the On TRAK reports. And one of the executives in there. He's like, he said something like, "Could we get it for any less?" And I said, "Yeah, we could just remove services." I said, "You just tell me which one you'd like for me to remove. Would you like me to remove the fiduciary piece or the employee education"piece?" And then the other, like the president of companies spoke up. He's like, "We definitely want employee education." And then the the delegate is like, "Well, we definitely need fiduciary services." So that was funny, because they were both going back and forth. I was like, yeah, we can always reduce the fee, we'll just reduce services, but but I've already pitched the services. And so what we did as a compromise this is--this is funny--because it's an asset base fee--it's like a $5 million plan--so it's gonna be 50 basis points or something. So I said,"Well, let's, let's do this. We'll do it for 45 basis points." So that way, we're going to come in and we're saving a little bit of money, and we're going to deliver more value. But honestly, if you think about it, they had a relatively okay, participation. But if we started doing education, we're going to--we're going to drive participation, we're going to drive deferrals, which if we're at an asset based fee, which means our revenues can go up. So it makes sense for me to give them a small concession on the fee because I know the plan is going to grow.

Ed Dressel: 11:34

Do you see--I mean, obviously, you've seen growth in the past. Do you have any data on what kind of growth you've seen?

Jonathan Schultheiss: 11:44

You know, we do, like I said, we track the increase of deferrals and these kinds of things. One of the things that we try to do at every meeting that we have is we always bring the vendors plan health report. And the plan health report will show us usually quarter over quarter the improvement of participation, and deferral rates and things like that. And so I actually had a meeting last week with a company that we've had for about almost two years now. And I was able to show them what their deferral rate was in dollars when we first took over the plan, which I think was like--it was like, $200,000 worth of contributions between the company and employees. And when we had our meeting last week, the deferral dollars were over, I think it was $570,000.

Ed Dressel: 12:40

It's almost tripled.

Jonathan Schultheiss: 12:41

And so, you know, you think about that, and you know, it's really because we've been hands on. We're there and we're showing up and we're delivering value. But at the same time, the ancillary business that's come out of that plan is, has been amazing. I think we've done probably six or$700,000 worth of managed assets that came from accounts that other people had other 401ks and things like that. So you talk about driving the economic engine, it's--we're valuing in two ways from employee education. We're valuing on the growth of the plan, which increases revenue. We're valuing on the ancillary business that we get out of the plan, which drives revenue. But yeah, so really, I mean, we look at those things. And we try to track what kind of revenue we're getting from the plan and rollovers from outside things and things like that, too, because we want to measure the value that we're bringing in and what the value to us is.

Ed Dressel: 13:49

Participant GAP reports. You're talking about doing that, and people get excited. But is that something you can do? I mean, the second year, the third year, the fourth year. Does that have--do they get tired of that report?

Jonathan Schultheiss: 14:02

You know, that's funny. I was just telling a story today to this client that we're pitching. I've got one client where we've been delivering these reports for like, five years now. So we deliver them every single year. And I had one lady that showed up to the meeting. And she had four reports in her hand, including the one that just gave her and she lays it out. And she's like, "Jonathan, look where I was four years ago, and look where I'm at today." And she can actually see the improvement that she's made over time. So you know, you think about that, and I think employee education too is--it's more of--it's more farming than hunting. If you deliver the value to these people, then whenever they leave or whenever they need something else, they're gonna come to you because you've delivered value. And I think that's, that's the problem. Have you--do you know Don Barton?

Ed Dressel: 14:59

No.

Jonathan Schultheiss: 15:00

Don Barton wrote the book, The Perfect Plan. He's a 401k guy. And so he talks about survey and the top 1% of successful people in the world. And he says, there's one thing that really sets the top of the top 1% apart. That's that they are all about service. So if you think about how can you be about service, and sometimes I'm meet with folks--I spent 30 minutes on a phone call the other day talking to a lady about--she needed to renegotiate her payday. I don't get paid anything for that, but that was valued, because she needed that. But the thing is, is she's gonna go and tell somebody she works with the value that I provided for. For all I know, one of her co workers has money that that needs to be managed. There's, there's another guy who--he's new at his company--he's called me up. Matter of fact, I was just emailing him right before this call. And he's asking about how to set up his investments. He's got another financial advisor, but I'm delivering it because I know one of his co workers. I'm talking to them about a million dollar rollover. So I'm want to make sure that when they both talk about me, you know, they both have good things to say. To look at this and say you got to be about service. Employee education is truly about service. And the more you can serve the market and deliver value, then you're gonna get all the other ancillary business. If you come into it, and think, hey, I'm going to do employee education just because I'm gonna make more money--that's transparent. I mean, they can see that. You think that you might be hiding it, but you're not. People can see through it. But if you're truly there to deliver value, then you'll get the business. And that's what has really served us well. I really want to help participants become better. And if I help enough participants, yeah, there'll be several that I helped that I don't make anything for other than the fee that we charge on the plan. But because I'm helping them, enough other participants will come to me that have money to manage. And that right there, we'll make make me enough money to pay for all the other folks that didn't really make me.

Ed Dressel: 17:14

Something that you highlight here is your ability to move them over to the retail side as they leave the 401k plan. You know, record keepers are trying to gain their business. They don't promote advisors. they're not saying Jonathan Schultheiss is a great advisor. You need to look at him if you move into retirement. It sounds like you may be winning those accounts, because you're aging participants towards retirement readiness.

Jonathan Schultheiss: 17:37

A hundred percent. A hundred percent. That goes back to really just delivering the value and being of service. Because when those folks leave--you think about it--they're going to be getting called from the record keepers and everybody else, but if you're the person that they know, this is a relationship business. With your money, people have a special relationship with their money. If you built that relationship with them, and they have a relationship with you, and the record keepers calling them, then a lot of times that's going to make them think of me. And so when that record keeper is calling them saying, "Hey, you got this money," then you know, they're gonna think about me too. So I'm going to be there helping them build relationships. This business is about relationships. If you develop the relationships with the employees, that is also I think the key to it. If you're helping these folks and you're delivering true value, then they're going to want to do business with you because they're going to trust you. They're gonna know you, like you and trust you when it comes to their retirement. They want--people want to work with somebody they know, like, and trust.

Ed Dressel: 18:49

And I agree with you that we need to bring value. I just think most advisors don't know how to do it to the participant. They don't think there's any money there. And they suffer with what you alluded to or what you spoke of--the curse of knowledge. They feel like they need to educate the participants to become mini advisors.

Jonathan Schultheiss: 19:08

Exactly. Well, here's, here's a funny thing. I got to get philosophical on you. So I read this amazing book called Psycho Cybernetics. In Psycho Cybernetics it talks about mindset, and most people are intimidated by numbers. If you think about it, if you keep hitting them with numbers because you want to teach them to be an advisor, but they don't like numbers and don't like being in those things. It's a hard thing to overcome. So I think that's the issue is you got to keep it simple. ln Psycho Cybernetics it talks about how do you create a mind shift? How do you get participants to see themselves as something different? If they say, "I'm bad at numbers. I'm bad at 401k then I'm not gonna go to a 401k meeting," then you've lost already. So you got to create something that is fun, exciting and engaging for that employee. And that's where we created the Become a 401k Superhero campaign. And so now it's about that identity shift. It's not about, "Oh, I'm bad at numbers." It's about, "Hey, I want to become a 401k superhero. I want to have a successful retirement. What do I need to do to have a successful retirement?" So then we deliver those On TRAK reports, and we call them On TRAK to become a 401k superhero, to your futureself. And so they know now what they gotta do, and we take, we take all the complicated stuff out of it. So we're not trying to teach them to become advisors. I'm the advisor. I'm the expert. You've come to me and ask me. I don't need to teach you all the things that I know. I need to be able to bring you things at your level that you can engage with. And that is where they see value, because otherwise you bore people. If you're sitting there and you start talking about things that you and I might be excited about--about the economy, and you know, what's going on with the Fed meeting and stuff like that--it'd be of interest to us, but the average participant could care less. So if you're trying to make your employee education meetings around those things, you're losing people. Where if you come back, and you just keep it as simple as you possibly can and give them enough value, it's better. Here's an example. We did a campaign where we have an email series that goes out to employees. And we said, anybody who asks a financial question gets in a drawing to win a free 401k Superhero t shirt. And so all you had to do was ask a question. I got some of the most basic elementary questions from participants. Like one person said, "How do I take money out of my 401k when I retire?" We don't think about that, because we go, "Duh, that's how you do it." But the fact that I got that question three times, tells me that if you're much higher than that, you're losing people. You gotta keep it super, super simple. So that's really where I think you have to go with an employee education is you got to be able to give them something that resonates with them. That's how you show value. Not being above everybody's head.

Ed Dressel: 22:13

And I say we're always talking about derivative issues. Non core issues. The core issue is, can you retire? How do you get there? If revenue issues are, let's talk about asset allocation? Well that's--once we figure out how to get into retirement, asset allocation becomes important. But if you're not getting into retirement, asset allocation, maybe better to spend the money on a lottery.

Jonathan Schultheiss: 22:34

Absolutely, well, that's the thing. If you're only saving 2% of your salary, it don't matter how diversified you are, how great your investments are, you're not going to be able to retire. So I think that's the important part is to get people to save enough. I love--Putnam did a white paper several years ago. It's called The Forest for the Trees. It showed this example of if you had best investments, and then you have a crystal ball, and they showed your crystal ball if you made every investment decision right every single year, how much money the participant would have had. Then it said, if they had just average investments and saved 1% more, it was better than the crystal ball.

Ed Dressel: 23:13

Wow.

Jonathan Schultheiss: 23:14

And so you think about this, and I love to share that story. I say I think I'm a good advisor, but I don't have a crystal ball. But one of the things I can help you do is I can't help you say 1% more. And so we try to make all the employee education meetings not around investments, not around these kinds of things, but really around increasing your savings. You're increasing your deferral rate, because ultimately, that's what's going to help you retire more than anything else.

Ed Dressel: 23:45

Well, Jonathan, it's been great to have you today. I really appreciate you taking the time. I wish you success in this marketplace. It sounds like you're having having a lot of fun bringing value. Stay away from the curse of acknowledge and really engaging participants toward retirement readiness. Thanks for taking your time today.

Jonathan Schultheiss: 24:01

Yeah, thanks for having me.

Ed Dressel: 24:02

Thanks, everybody, for listening. Hope you have a great day. Thanks much!