Last week, I sat down with Beau Henderson at BusinessRadioX for their Retirement Tips to discuss my book, Rewarding Retirement: How Fiduciary Committees Can Elevate Workers, Companies, and Communities, and what that means for corporate retirement plan fiduciary committees. It was a pleasure to be able to share the message behind the book and have an open dialogue with Beau about overseeing a retirement plan.
Intro: [00:00:07] Retirement Tips Radio is brought to you by Business RadioX, the voice of business in your community. Currently serving over 25 markets, the Business RadioX network is growing fast. We're teaming up with retired execs and established entrepreneurs to support and celebrate local business leaders. If you'd like to make additional income while making a difference, discover more at BRXteam.com. Now, here's your host.
Beau Henderson: [00:00:46] Welcome to Retirement Tips Radio. I'm your host, Beau Henderson. And I'm excited today because one of the things that come up as we look in this country, and one of the issues I have when we have retirement conversations, in a lot of cases, we're not saving enough in retirement. But where savings does happen for a lot of Americans is in their 401(k) plans. I'm excited today to talk to our guest, Brian Allen, and he's going to speak to us about the importance of managing your 401(k) for financial freedom and what can you do to maximize this and do the best you can. So, welcome to Retirement Tips Radio, Brian.
Brian Allen: [00:01:25] Thank you, Beau. Thanks for having me.
Beau Henderson: [00:01:27] One of the questions I have, because I'm fascinated by this business in this industry, is how did you get started? Were you a kid saying, "I want to do retirement planning or financial planning." Or, what was that path? I find some interesting paths as we talk about this stuff.
Brian Allen: [00:01:41] Well, no, not quite that clear. I have interest in finances and investing from high school. And so, I've been interested in it for a long time. And my degree was in economics. And I started as a financial planner with my first job right out of college. So, I've been doing this for a long time. Now I specialize in plan advising. It's kind of a subspecialty of financial advising. And I started doing that, I took that fork in the road, about 1994.
Beau Henderson: [00:02:14] Well, so this has been the career. So, you've been doing this and working on this for your professional life. What I want to ask is, what about this book? Tell me a little bit about this book and we'll dig into it a little bit later. But I know there's a new book that you're rolling out.
Brian Allen: [00:02:30] Right. So, what I do for a living in my company, we advise the people that oversee the 401(k) plans for the American workers. Just 401(k) plans as an employer, any employer sponsored retirement plan, but it's predominantly 401(k) plans. And within each employer, there is a group of individuals that we refer to as committees, plan committees or fiduciary committees. In my company and myself, we advise those committees on how to structure and manage the 401(k) plans for the best interest of the participants in those plans. And that's just vitally important that those plans be managed well, that they perform well if American workers are going to be on track for retirement.
Beau Henderson: [00:03:16] And what can be done to improve the financial security for these American workers when you're dealing with this? Because you're kind of dealing with it from a different angle than a lot of advisers.
Brian Allen: [00:03:27] I am. [Indiscernible]. The first thing I would say is, every employer manages their 401(k) themselves. So, the skill of the individual committee members inside of those employers varies widely. And you have some employers and some plan committees that are very serious about it, very formal in how they go about overseeing those plans. And other employers are not.
Brian Allen: [00:03:55] And I wrote this book because I wanted to provide a basis of education for people that come on to the committee that take that role to oversee the plan, to make sure that they have a basis of knowledge and understanding so they can do a better job. If we can get these committees to be better educated to have better outcomes for the workers that work there.
Beau Henderson: [00:04:19] Well, who's in charge of this? So, there's these committees, but whose charged with being - or is that some of the problem, nobody is really taking responsibility? But who's that point person or who's in charge of overseeing these committees you're talking about?
Brian Allen: [00:04:32] Well, one of the interesting things is it is people that tend to be senior executives at the employer. But when they step into their role as a committee member overseeing the plan, they have a legal duty to no longer look out for the employer's interest. But they have a legal duty to now only look out for the participants interest. That's a tricky thing, if you've been the CFO, you know, nine hours a day, five days a week. And, now, all of a sudden, you go into a meeting and you have to divorce yourself of those interests and now only think exclusively of the decisions I'm making. Are they in the best interests of the participants? That's kind of a tricky thing, but that is what they're tasked to do.
Beau Henderson: [00:05:17] So, they work for the company during the day and then they're going to have to work for the employee. There's the thing.
Brian Allen: [00:05:22] That's exactly right.
Beau Henderson: [00:05:22] Oh, wow. I'm sure as you dug into this and you've looked at this and what you do specifically, you've seen a wide range of people doing it very well and people doing some pretty, probably, I could imagine, some haphazard or just kind of not even doing things right. So, what is the danger of not doing it right for me as an employee?
Brian Allen: [00:05:50] The biggest danger is that if this plan committee is haphazard about their role and their responsibilities, whoever is selling them the products that ends up being offered to the participants are not scrutinized. So, they can be overcharged. The performance can be bad. The investment lineup can be poor. So, if they have too much reliance upon their advisers, the advisers are in a position to sometimes take advantage of that.
Beau Henderson: [00:06:22] There could be conflicts of interest.
Brian Allen: [00:06:23] Absolutely.
Beau Henderson: [00:06:23] Now, is it possible, Brian, could a product provider or, I guess, custodian, could they bring in fiduciary responsibility or that's just too conflicted? Right? Because I could see conflicts of interest there. Or does it need to be that separate entities?
Brian Allen: [00:06:43] So, the firms that do what I do, plan advisers, most of the time, we do accept a fiduciary responsibility for the advice we give. But we can't usurp the responsibility that the plan committee itself has. So, they still are the primary overseers. But we would partner with them and we would have a fiduciary responsibility. Meaning, we also have to look out for the participant's best interest. But other product providers like record keepers, which are a major player in this industry, they oftentimes are not fiduciaries and so they don't have that legal responsibility.
Beau Henderson: [00:07:21] What I'm thinking as we're talking through this in the book, is this for that person planning on more of that planning committee? Or is this also for the consumer to be better educated on what to look for and ask for? Is there a specific target or is it both?
Brian Allen: [00:07:37] Now, I wrote the book specifically for these people that sit on the committees.
Beau Henderson: [00:07:41] Perfect.
Brian Allen: [00:07:41] So, you're this H.R. director, you're the CFO, you're the controller. Typically, the committees have anywhere between five and a dozen members on the committee. And this book is written to provide a background, and an understanding, and a way for them to know whether their advisers are performing well for them. So, they ultimately do a better job for their employees.
Beau Henderson: [00:08:05] If somebody is listening to you and they're saying, "Yeah. This is something I know I need to do at a different level. I need to do better with this." What's the first thing a planning committee could do to improve?
Brian Allen: [00:08:20] The first thing is, understand the importance of the role and take it seriously. Our country is set up so that a big part of people's financial security and, ultimately, their retirement security is based upon these employer retirement plans. They play a significant part in the financial outcomes of most Americans. So, take the role seriously. And then, after you take it seriously, get yourself educated. Don't just rely upon your advisers to tell you what to do and how to do it. You need to come to the table prepared to know whether they're shooting straight with you or not.
Beau Henderson: [00:08:59] And here's the other side, and this is the side I imagine people don't like to talk about, but I think they probably care about it as much as anything. What are some of the bad things, what are some of the liability that can happen if things go sideways and I haven't set this up or I'm not prepared with my plan?
Brian Allen: [00:09:20] So, one of the things that's happened in the last, about, ten years, Beau, is that employees are forming class action lawsuits. And they are suing their employers and these plan committees who are haphazard. And hardly a week goes by that there is not a new lawsuit in the news because these plans are being managed not in the best interest of the employees, but are alleged to be in somebody else's interest.
Beau Henderson: [00:09:52] So, we talked about conflicts of interest and I want to jump back to that for just a second just to paint a picture. Can you think of an example, Brian, of when a conflict of interest became an issue or when something really didn't work out because there was this conflict of interest that was obvious and kind of glaring?
Brian Allen: [00:10:11] There's two major conflicts of interest that I would want people that sit on committees to be aware of. First is their own conflict of interest. I mentioned to you earlier that the CFO works for the employer. They get their paycheck from the employer. But when they step into that room to oversee the plan, they are obligated legally to only make decisions on behalf of the participants. So, the first thing they need to realize is that they themselves can have a conflict of interest and they can make decisions on behalf of the employer in that role. And they should not do that. That's the first conflict of interest.
Brian Allen: [00:10:48] The second conflict of interest is from the advisers themselves. So, if you hire an adviser that comes to the committee and says, "Committee, you should put this mutual fund in the investment lineup." You want to know what that adviser has a conflict of interest in recommending that product to the committee. And the conflicts of interest that could be there are numerous. It could be anything from they receive a commission for placing that fund or the fund company that they're recommending could have just taken them on an elaborate trip to the Bahamas.
Beau Henderson: [00:11:25] Right. Incentives, right.
Brian Allen: [00:11:28] Yeah. So, there are lots of conflicts of interest. But those are the primary two that I would want any committee member to be aware of and to be on guard about.
Beau Henderson: [00:11:38] Okay. You're listening to Retirement Tips Radio. I'm Beau Henderson here with Brian Allen. And we're talking about what needs to happen, how do we take care and really answer that call to the fiduciary responsibility in our 401(k) plans? And one of the things I've got a question about the fiduciary, in particular, that word. But before we do that, somebody listening that says, "You know what? I need to get on top of this. I know I need help with this. I know there's conflicts of interest." How would they get in touch with somebody like you or you specifically to, maybe, start that conversation? And what does that look like?
Brian Allen: [00:12:16] Well, first thing is, you know, I've just published a book. I would love them to take a look at the book. It's Rewarding Retirement, and they can find that on Amazon, Apple Books, anywhere they buy their books. Me, personally, I'm on Twitter. RetireAdviser1 is my handle. I'm on LinkedIn. My company is Pension Consultants, and that's pension-consultants.com. And, obviously, we would be happy to help anybody that's listening.
Beau Henderson: [00:12:45] Well, let me step back a second. So, we got that. So, I'm curious for that listener that this is relevant to, Brian. What does that process look at? So, say, they read the book, they've heard this interview, "You know what? I want to go down that path." Is it you come in, sit down and do a consultation? Because I'm sure every single organization, every plan situation is going to be unique. So, I'm assuming there's some customization to it. So, if I'm thinking about I need to go down this path, what might that process look like?
Brian Allen: [00:13:18] Most plan committees have a plan adviser that's already working for them most of the time. And one of the things that I've done in the book that I would want to communicate to people to empower them themselves is, there's three major tests to know if your plan is actually performing well for your employees. And, Beau, if you think about this, this applies individually to anybody that's listening too. It applies to you and to me.
Brian Allen: [00:13:48] You have to have the proper amount of contributions being set aside for your retirement. So, if you save $50 a month, you're probably never going to accumulate enough money to retire. So, the first major test is, are the employees contributing enough to be on track for retirement? And that applies to you or to me and it applies to the workforce in general. The second thing is, you have to have good investment performance. If you earn two percent a year throughout your working career versus earning six-and-a-half percent, that has a tremendous difference in the amount that you ultimately accumulate for retirement. So, the retirement plan committee should monitor the investment performance. The third thing is, is the fees. As you as an individual or especially in our 401(k) plans, if the fees are high, they end up subtracting off of the returns that you end up making.
Brian Allen: [00:14:42] So, three things that any fiduciary committee should be monitoring and monitoring closely, the contributions for the employees, the investment performance in a 401(k) plan that's through the lineup or the investment menu that they provide, and then, three, are the fees paid. And I outlined specific metrics so that you can know that each of those three things are working well. If those three things are working well in your 401(k) plan, you can know that you're doing a good job for your employees and you can know that your employees are on track for retirement. If any of those three things are not working well, you've got a problem. And then, you should either work with your existing adviser or you should find one who can take care of it.
Beau Henderson: [00:15:24] And is that process of documenting, "Hey, we went through the steps to check the checks and balances that I'm assuming will protect that company should there be some kind of an issue." "Hey, we didn't -"
Brian Allen: [00:15:35] If your plan is performing well in those three areas, you have very little chance of losing any kind of lawsuit. Because those are the three things that ultimately determine whether somebody is successful financially in retirement or not. And while there are other things you have to pay attention to as a plan committee member, those are the big three.
Beau Henderson: [00:15:58] Got it. We're talking to Brian Allen. I'm Beau Henderson. You're listening to Retirement Tips Radio. And Brian, the book, it was interesting to me when I saw the title, Rewarding Retirement. Now, what is that and how did you come up with that title?
Brian Allen: [00:16:12] Well, it has a double meaning, Beau. So, individual participant or the individual employee, you obviously want to look forward to a day that your retirement is rewarding, right?
Beau Henderson: [00:16:24] Right.
Brian Allen: [00:16:24] But from the committee standpoint, when you do your job well, you are rewarding their retirement. And so, that's why we selected the title, that's why I selected the title is because it has a double meaning and it conveys the impact that a committee member's decisions and work has on real people.
Beau Henderson: [00:16:48] Well, what's next? So, I'm fascinated. How long have you specialized in this, Brian, this specifically?
Brian Allen: [00:16:55] I started Pension Consultants in 1994. So, my company was actually one of the first in the country to specialize in these plan advice areas. So, we've been doing it for a long time.
Beau Henderson: [00:17:11] This is kind of my vision casting and this can be specifically for you and Pension Consultants or it can be for the industry, do you see any changes or anything different? I guess the short way to answer my question is, what do you see coming up in the next, maybe, three, five years or so in what you do?
Brian Allen: [00:17:32] I think there's a trend and I'm trying to accelerate the trend. One of the reasons I wrote the book is I want to make the plan adviser industry better, because I think that's what's needed to have more employees, more individuals in this country be financially secure. And that overall trends in our economy that I think is going to impact our industry is transparency and accountability. If you hire a lawyer today, Beau, oftentimes, you're forced to decide on hiring that lawyer, whether you get along with them well or not, maybe you ask a few friends if they're a good lawyer. But because you're not a lawyer, you ultimately don't know if that person is a skilled lawyer or not. It's very subjective. And most professions have been subjective for all of our lifetime. But what's happening in our society through the internet and different things, there's all kinds of data now that you can actually quantify if something is performing well.
Brian Allen: [00:18:39] So, what I want to happen is I want these plan committees to be able to quantify transparently whether their plan is performing well or not. And not just rely upon the personality of their advisers or the brand that is on their business card. And I think if we can create more transparency around these three key drivers, contributions, investment performance, and fees, that we can impact millions of people's lives that right now, frankly, the performance is being hidden behind a personality or a brand that's not ultimately doing what it needs to do.
Beau Henderson: [00:19:18] Well, Brian, I appreciate the work you do because it's both levels, right? You're helping the companies do what they should be doing at a better level. That transparency going down to the consumer, maybe, creating that confidence to save more. Because that's one of the things we have come up all the time is, we're not saving enough and we're living longer than we plan to. And it creates this double whammy that's hurting Americans as far as being prepared to run out of money.
Beau Henderson: [00:19:44] So, kudos and thank you for the work you're doing to address that issue. Because if it's not addressed, it just becomes a cycle that we're going to see get worse and worse. So, I appreciate the work you do. And check out Brian's book, Rewarding Retirement. And that's available on Amazon and book sellers. And @RetireAdviser1 on Twitter to follow what he does. And website, one more time, Brian.
Brian Allen: [00:20:09] Pension-consultants.com.
Beau Henderson: [00:20:12] Brian, thank you so much for coming on and sharing your very unique and niche expertise with us on Retirement Tips Radio.
Brian Allen: [00:20:19] Thank you, Beau. Thanks for having me.
Beau Henderson: [00:20:22] I had a lot of fun. Take care.
Brian Allen: [00:20:23] Okay. Bye-bye.
Outro: [00:20:32] Retirement Tips Radio is brought to you by Business RadioX, the voice of business in your community. Currently serving over 25 markets, the Business RadioX network is growing fast. We're teaming up with retired execs and established entrepreneurs to support and celebrate local business leaders. If you'd like to make additional income while making a difference, discover more at BRXteam.com.
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