Edward D 0:01

It's exciting today, welcome to a podcast with RetireReady Solutions. I have with me Gerald Wernette who focuses in the 401(k) world and I'll let him tell a little bit of that. Welcome Gerald, good to have you here today.

Gerald W 0:13

Yeah, thank you Ed, I look forward to our conversation today and happy to be here.

About Rehmann

Edward D 0:19

So tell me before we get started, you work for Rehmann. Tell me a little bit about the organization, company you work for.

Gerald W 0:27

Rehmann has been around, I think this year is 77 years, founded on a traditional tax accounting, auditing CPA practice. I t was pretty much n ontraditional right out of the gate, a very entrepreneurial spirited firm, always looking for ways to serve our clients. And as the firm has grown and evolved over the years, that's exactly what's happened. We've grown certainly through strategic business combinations, but we've also grown very dramatically through organic growth. And a lot of that has been fueled by what I would call no ntraditional C PA fi rm s ervices. Maybe that's a misnomer today as the industry itself has evolved, bu t t hat has certainly been the case for Rehmann. Like the area I'm in with Rehmann financial, in o ur retirement wealth management services.

Edward D 1:33

How long have you been with Rehmann and tell me a little bit more about your role, what you do for Rehmann specifically?

Gerald W 1:39

Sure. So the beginning of this year I celebrated my 35th anniversary with the firm. So I've, I've been with this firm my entire career and that in and of itself has been kind of a neat thing to be able to tell people, and it's been certainly really exciting to just be part of this evolution, revolution that the firm has gone through. I started out as a traditional tax practicing CPA and very early on in my career got involved with retirement plans via 5500 returns and, and what we finally called in the industry, a balanced forward accounting for retirement plans, saw an opportunity very early on for us to improve how we were doing that and turn it into another business offering at the firm. So started to grow our retirement plan administration and consulting practice. And fast forward to right around the year 2000 the firm had been putting its toe in the water in the wealth management space and we had an opportunity to bring somebody on board and merge his advisory practice into the firm. And that really gave us the foundation then to build an advisory wealth management practice. And I started then very quickly to get involved in the advisory side of retirement plans then , about 2006 we basically merged our plan administration practice into to Rehmann Financial and really started full bore to build the investment advisory side of that practice and as they say, the rest is history. And specifically what's your job title or your role? My specific job title is director of retirement planning consulting. My role is really one of leadership in the area combined with business development and then just being a technical resource to the entire group, whether it's on the investment advisory side or the plan design plan, administration side.

Perspective on the current 401(K) world

Edward D 4:13

Kind of backing up, where do you see the 401(k) world today and working with participants?

Gerald W 4:20

I think It's at a very exciting place from the standpoint of an opportunity to grab people's attention and truly affect their lives. We have, through certainly the efforts of the department of labor, through just how information is assimilated these days. It's pretty much a given that you're going to have a 401(k) plan if you want to be able to take care of your employees and be competitive in the workforce environment and that sort of thing. You're going to have some sort of 401(k), 403(b), 457(b) depending on what kind of an employer you are. And with that being said, I think employers have really grown up in this arena from the perspective of, you know, we have this plan because we have to have it and we really don't care that much about it. Or we have it just for the owners and key employees. Virtually every one of our clients looks beyond those goals and also looks at, we have this plan because we want to improve the financial lives of our employees and we want them to be able to be better prepared for retirement. So with that being said, it has elevated the opportunity for us to be able to go in and really show employers where value can be added in a retirement plan and areas like participant education and communication, really participant engagement and being able to move the needle for people so that we've seen as a real opportunity. We've frankly positioned ourselves to be able to capitalize on it and grow our business.

Edward D 6:24

Oh, you bring up a lot of issues that are pertinent, germane to the industry today and I'm excited to pull some of that apart. When I think of participant engagement affecting their lives, there

Retirement readiness

Edward D 6:36

is so many studies out there showing that people are not participating, they are not engaged and they're not prepared for retirement. That affects real people in our lives. I know several people who have not participated and it's hard to see them when they get close to retirement, not having the adequate resources. What are you doing to help the individuals get ready for retirement? Because when you're working with a group of 30 or 40 people, that's a lot of work to help them. How do you focus on retirement readiness?

Gerald W 7:06

I think it really comes down to two things. One, and you kind of keyed on it with your question and that is, it's got to start with the employer. So part of our job is really educating a plan sponsor on where the opportunity is here and really talk to them about what this concept is, what does participant engagement mean and what value can it provide? Not just a participant but to the employer. And once we're able to kind of paint that picture for the employer, the value that they can gain from having a solid participant engagement program within the 401(k) plan, then it's a matter of taking it down to the participant level. And that's where it really comes to having a really good resource to engage the participant and make it meaningful to them, put it in their terms, make it all about them and make it very, almost simplistic but certainly very understandable and that has been a key for us. If you're going to engage these employees and you k now, no knock on anybody out there, but they fall on all across the spectrum as far as their level of financial understanding. You've got to be able to do it in a way that's going to take all these confusing terms, take the scariness of what all that means, once you start talking about it and bake it down into little bite sized pieces. I love the analogy, how do you eat an elephant? The elephant of being prepared for retirement is huge, but for a lot of people it's just break it down into that one bite at a time concept and it, it just changes the whole perspective. When people can look at it up close and wrap their arms around some numbers and some meaningful changes they can make themselves. And see how it's go ing t o i mpact them on an ongoing basis. So the tool has to be able to deliver not only a current picture but allow you to come back and up date i t a year from now and show them the progress that they're making.

Edward D 9:36

So I don't want to interact in both. Both aspects

Employers response to participant engagement

Edward D 9:39

of youth of the employer and the participant with the employer . How do you see employers responding to, "we're going to engage participant"s. Is that something you can prospect with? Does that differentiate yourself, are they excited once you explain it to them?

Gerald W 9:54

I think it really does you know, when we're able to show them the resources we use, which is RetireReady Solutions gap and contribution analysis reports and walk them through what those things look like and how we interact. Give them some live examples of other interactions we've had with participants. I have not had an employer yet that isn't excited about what we're able to put in front of them. Now we've had some where they look at there personal environment if you will. We've got multiple locations and how are we going to get in front of in front of our people and that sort of thing. But those are all obstacles that I think we can deal with. If I've got that standalone employer with 30, 50, 150, 250 employees, that is like an ideal, perfect world for us in this tool because we know we can go sit down with people, walk them through these resources and really be able to provide an impact. Our average competition isn't doing this and if they are, they're kind of stuck in traditional world. They're not bringing a resource like this to the employer and the employee on a proactive basis, they're pointing employees to the record keeping website and yeah, you can put your information in here. And the problem is people aren't using those tools. They're not doing it. Certainly not at the level that we come to the table with, which is we're going to put something in front of 100% of your employees. That's a difference. Every single interaction that we've been having, I'm kind of blown away, but we have not run into anybody yet that is doing what we're doing.

Personalized approach justifies higher fees

Edward D 12:06

You made a comment and working with the participants, you say make it all about them, and when you're dealing with 250 employees, that sounds like a ton of work. How can you justify all the time that that would require based on compressed fees and all of the other parts that go with it ? How can you make it all about them?

Gerald W 12:25

Well I think there's a couple things. One is if you're really presenting this right and the value that it can bring, we've actually been able to go in and raise fees rather than have to lower our fees to get the business. So right out of the gate we're bringing value to the table that our competitors aren't and we're justifying that we deserve to be paid for it. Being able to leverage a solid team is certainly critical. If an advisor's a one man show, he's going to have to look at the investment that it's gonna take to make a tool like this work. But here's where I think we've garnished some added justification in what we're doing. And it really, in this business, it's really all about taking your time and extrapolating it down to, okay, how much revenue can I generate on? What's an hour of my time? When you're taking that hour and getting in front of four or five participants in a 401(k) plan and you're walking away from that hour and you're getting four out of five of them to increase their contributions and maybe two out of five of them to say, Hey, I've got assets outside the retirement plan, can you help me figure out what I need to do with those monies ? Now you're generating additional revenue, whether you're increasing assets in the plan or garnishing outside assets that you're either rolling into the plan or managing separately. And this thing really starts paying for itself and paying dividends in the long run. That's what's really justified the investment of time and energy for us.

Edward D 14:31

How much satisfaction do you get from helping average American , m iddle-income America?

Gerald W 14:38

Yeah, that's frankly the other part of it Ed, I didn't w ant t o over embellish that, but that's a big deal for us, i t's definitely a big deal for me personally. At the end of the day we got t o cover our overhead, I g ot t o pay my associates. I w ant t o make a good living, but I w ant t o be able to do that in a way where we can impact people's lives. And I can't tell you how many times we've had interactions with participants where we've literally, at least from their perspective, changed their lives. We've helped them see more clearly, g ain an understanding they never had before on the path that they need to follow financially in order to be able to reach retirement and do it with dignity and do it successfully. And it's been really neat to have somebody literally give you a hug and cry on your shoulder that t hey're going to be able to retire. So that part of it is, I mean that's the icing on the cake and y ou k now to take that that back then to your client, I mean you're building an emotional connection that you can't buy i n that kind of an environment and we're just seeing the, the opportunities and the dividend from that multiply as these participants then move into retirement phase and t hey're like, just turning to us saying, o kay, what can you do to help me? So it's k ind o f the gift that keeps on giving both ways.

Story of committee response to higher fees

Edward D 16:26

I want to go back to that phrase you said, we raise our fees, not lower them , which is completely contrary to what you're hearing in the industry and fee compression. I'm just thinking of walking into a committee meeting and saying my fees are higher. What's the response of a committee meeting when you go, I've got higher fees, I'm going to do a little education on the side, but I might say fees are higher. What does that look like?

Gerald W 16:47

Yeah, let me give an example of a situation we've had within the last year that I think will really kind of paint the picture. So we had brought on a clients who's a fairly large medical practice plan and they had previously been direct with the record keeper. So they weren't used to paying advisory fees at all. So we came in, we showed them what we could do for them and then everything was fine. And now it's a couple of years into the relationship and one of the committee members really wanted to make sure that I spent some time at the meeting talking about our fees and basically what we're doing to earn them. And I felt going in that this was gonna potentially be a situation where we could get beat up a little bit. And a little bit of what have you done for me lately kind of a thing. So we just went at the j uggler and we took the opportunity to really show the value of what we brought to the table and how we utilize our participant engagement on top of the other services we were providing and what it was doing for their plan and for their associates. And by the end of that meeting it was just absolutely refreshing because this particular trustee member did a total 180 and he was kind of slobbering all over us from the standpoint of pointing out to the rest of the committee how we had really earned our keep and you know, little joking, but I think there was a little seriousness to a statement he made as to you guys should be getting paid more for what you're doing. You should be raising your fee . And it was really cool, in my mind and to the other associates of mine that were there really showed them we're doing something different. We don't need to be making excuses. We just need to be doing a good job continuing to deliver. And showing the plan sponsor, trustees, whomever they may be, the value that they're garnishing with its roots in this participant engagement. So very, very refreshing.

Edward D 19:17

Oh, that just sounds like a lot of fun to be in that room. A little pressure in the beginning. A lot of big smile at the end.

Gerald W 19:23

Yeah, that was cool.

Finding outside assets

Edward D 19:25

So you talked about finding outside assets in the plan that seems, you know , in and through the participant engagement. Pull that apart. Why or why do you think that the process you're using is finding outside assets versus assets you might not find about, what's the difference that you're bringing to the table that helps them talk about those assets?

Gerald W 19:46

I think it really comes down to being able to frankly build instant rapport with the participant. Because I thought about that in the beginning as, as we were getting involved in this. And what I was quickly finding out is the financial area is one of those areas that people aren't just gonna sit there and talk about to anybody and everybody. And when you come into a meeting and you clearly show this employee, you've got a bunch of information about them and you just start asking a few questions. In order for this to be real effective for them, they need to kind of put their heart on the table, all of a sudden you're talking to people about their dreams for retirement, the fact that their spouse passed away or they got divorced and you know, tough life challenges that you're going through and right out of the gate you're empathizing with them. You're showing them, here's your situation, here's things that you can think about to help make a difference. And voilà, I mean that's like the keys to the kingdom, you know, they're handing you the roadmap to instant relationship with them. And I haven't found a tool yet that is this easy, this an expensive to give us that instant rapport and position us to be a trusted advisor to these people very, very quickly. That's powerful in this business .

Case for "small" plans (1-10 million dollars)

Edward D 21:30

A lot of advisors tell me they don't focus on the smaller plans because there's no money in them. What would you, how would you respond to somebody saying that?

Gerald W 21:40

Well for starters, I'd love to know their definition of a smaller plan. The sweet spot for our business is that one to $10 million space of which with a lot of advisors out there that's smaller plans, they can be the perfect client. For us, that type of employer really, really needs our help. They've got a workforce that is not so large that we can't engage it on a one on one basis. You build a block of business on the backbones of that, it has just a tremendous amount of benefits. Obviously you've got to be an advisor that is going to want to engage with individual participants, but if that's not your model, I frankly still think you could leverage this. You're delivering it more in a group setting, which we have to do with some of our larger plans that are spread around the country. So we don't necessarily get the one on one interaction with people. But I still think a tool like this can deliver a higher touch rate than just cutting people loose with the resources that the record keeper has available. So even in that environment, I'm a proponent of this, but when you look at the profitability levels that can be available in these smaller plans because you're building those relationships and you've got things to gain outside the retirement plan from that. For the advisors that are willing to work in that environment, I think it can be hugely profitable and therefore bring you way down the radar screen when it comes to working with smaller plans and still being able to make a good living and also take you in an environment where there's probably less competition, or less sophisticated competition. So definitely some benefits from that standpoint.

Leveraging wealth management

Edward D 23:49

So in getting to engage these participants, do you find that those that are getting close to retiring, you have a better relationship with so you can move them into the wealth management side? Has that helped with that at all?

Gerald W 23:59

It has for us, it is certainly positioned us from the standpoint of, you know, being that trusted advisor, somebody to go to. In fact it's, it's kind of a double edged sword in that you may find yourself in a position of being too successful and you better think about it going in, people are going to want your help and they're going to turn to you. And if you don't have a structure to accommodate that, then frankly could create a problem, a problem of having too much business come your way. And we've actually been vetting out opportunities to better position ourselves to take advantage of these sorts of opportunities that are coming out of these plans because 10,000 baby boomers a day are reaching age 65 and retiring and the money's moving. And we're actually looking at that within our own client base in doing some things to position ourselves to be able to handle more and more of that kind of business. Basically trying to come up with our own robo IRA solution, if you will, because we just see the opportunity to fill a need and want to ride the wave of that goodwill we've established within the retirement

Engaging participants, energizing advisors

Gerald W 25:35

plans.

Edward D 25:35

Do you have any fun stories of how you've used RetireReady Solutions in one of your recent participant meetings?

Gerald W 25:42

I would say a few typical scenarios we kind of run into. We've had a few out there where we've gone into the meeting, in fact, one of my associates told me about this, he went into the meeting plan was currently at about 50% participation and he could just tell from the looks on the employees faces that they were just expecting another boring possibly over my head retirement plan presentation. "Okay, fine, we're moving to another platform, whatever. I don't understand any of this stuff. Oh by the way, mr. Advisor, you're not going to change my mind on anything . I know what I'm doing and what I'm not doing and so on and so forth." And we were being told by the end of the meeting that they had never heard it presented this way before. It gave them a whole different perspective on this. We went from 50% participation to 96% participation and just about everybody that was in the plan before was increasing their deferral rates. And we were just getting thanked left and right from the standpoint of us being able to help people understand what was going on. And my associate is telling me this and I could just hear in his voice, you know, he's walking on air. So not only are we winning a happy client and a more successful relationship with that client, I got an associate that is loving what he's doing instead of getting in front of a group of people that don't appreciate it and basically just kick his butt. Now he's walking out of there feeling the love. I mean, how cool is that? So it's just win, win, win all around.

Implementing TRAK

Edward D 27:42

So Gerald, with all that you've said, it's exciting to hear. Tell me a little bit about how much commitment your company has made to this tool. How much work is it? Have you have a big team that's focused on this participant education and how have you made it successful?

Gerald W 27:59

So couple of things. One is we have some associates that it's their job to get the data from the client and put it into the tool. And we've spent some time working with your folks said and working with our retirement plan administration, people who really understand the census data that is needed to drive success in the data that the tool is going to produce, what it's going to take to get that from the client. And we've refined a process. So when we onboard a plan, we have a transition team that grabs a hold of this part of the process, interacts with the client, gets the information. We have some other people that are trained on using the tool to generate the reports. We've been able to tweak things to build efficiencies when it comes to printing them out, stuffing them in envelopes, having people's names show on the envelopes. That just saved us tremendous amounts time. So we've really nailed down a process for being able to generate these reports. So when it's all said and done, it's become pretty easy for us to do it. We've built it into our pricing on our clients. So it's just, it's a given. This is, this is what we're going to be doing. We carve that pricing out separately when we get to some of the larger plans. So that gives us the latitude to, on the larger ones, get more customized as to how we're gonna approach generating the reports. Maybe we have to go to your organization Ed and have you guys help us generate the reports, which you've got a process set up to do that or we're able to do it ourselves and you know, determine how, how we're gonna get it out there to the audience if you will, and do it through a webinar or whatever the case may be. So we've been at this long enough that we've really nailed the system down, but I can safely say it wasn't one of these situations where we were losing money at developing this process and that took us two years to get where we are. No, we, we've been making money r ight out of the gate leveraging this tool. We've just over the last couple of years, refined our processes and made them even better and more efficient.

Edward D 30:37

Well, thank you Gerald. I sincerely appreciate that. It's really good for me to hear, put a smile on my face throughout it . I live to have people like you be successful like you are that it's what I'm passionate about.

Gerald W 30:49

I owe you a lot. You guys have helped build the cornerstone in our business when it comes to participant engagements and sets us apart. And yeah, it's filled a lot of objectives for me. Like I shared, it's not just about making a buck. It's about being able to change people's lives. And I thought going into this the only people that ever get to do that are like doctors and, and so, Hey, I found out that is not the case. We get to do it too. So that's cool.

Edward D 31:28

Gerald, it was wonderful to talk today. Thank you for your kind words about our software and it's been great to hear your success. I love hearing about participants engagement success, and I call it middle America getting ready for retirement in a successful way. I thank you and I wish you the best in the marketplace today . Have a great day .