Thursday, May 11, 2017

Financial Advisors / Plan Advisors: Are You Asking the Wrong Questions? Retirement Planning Expert Ed Dressel Says You Might Just Be

I met Ed Dressel, CEO of the firm that makes TRAK retirement planning software for financial advisors, through a mutual acquaintance. I have since taken a deep dive into the financial planning software and listened to Ed tell his story a couple times. What he says makes a ton of sense to me, so I invited him to record a Best Practices in the Financial Services Industry interview.

A transcript of the interview is posted below.

MARIE SWIFT: Well hello everybody and welcome back to Best Practices in the Financial Services Industry. This is your host, Marie Swift. I'm joined today by Ed Dressel, who is President and CEO of Retirement Readiness Solutions (formerly known as Trust Builders, Inc.).

Ed’s company produces transformational retirement planning software for advisors. The desktop version is called TRAK and the cloud-based version is called TRAK-Online. Details are available at www.AskTRAK.com.

Ed, welcome to the show.

ED DRESSEL: Nice to be here, Marie.

SWIFT: So, one of the things we were dialoging before the show was about 401(k) advisors and the things they get wrong and participant engagement success with their clients. So, could you talk a little bit about this? I think you know a thing or two about how engagement and participation can make a big difference for 401(k) advisors.

DRESSEL: Yes, we've been focusing on this area for 30 years, partly in the performance area review world and for the last 10-15 years in the 401(k) world. In participant meetings there are a lot of things that could be done differently, if we say it nicely. If you look at one of the umbrella aspects: advisors are not providing effective motivation and we can put details under these umbrellas.

Number one is that they are answering the wrong questions. If an advisor walks into a room and asks the participants, "What are they key questions that you need answered today?"

Often, they are going to hear about fees, funds, allocations. Those don't engage anybody. Those don't get anybody leaning forward. Those don't get people excited to talk about retirement. Those are very academic. They are important, but they don't get people saying, “I'm looking forward to this meeting.” Rather they create meetings people don't want to be in. But if you say, “I'm going to answer a question for you today. In this meeting, I'm going to tell you if you can retire.” People are going to perk up and say, “That's really about me.” They answer the question: Can I retire today? If you can provide that in the room, rather than taking a passive approach and saying, “Today, in this session, we are going to talk about fees, funds, allocations. Afterwards, I want you to go to a web portal, learn how to log into it and figure it out. And figure out if you can retire.” Instead, if you can say, “I'm going to tell you if you can retire today” and bring that answer into the room, we are going to take a different approach rather than a passive approach to the retirement planning. We can take it into the room.

BEYOND THE ABSTRACT

We also talk abstractly to a participant about what it means to increase their contributions. Let me give you an example. If I ask an advisor, I'd like you to increase your contributions from 3% to 5%. Advisors don't know what that means as far as take home pay, which is the number everyone cares about. How does it impact what I'm taking home? It's very abstract to say go from a contribution of 2% to 5% or 2% to 4%. But if we could show a participant the small steps they can take, they would be much more ready to say, "Oh, I can afford $50.00 a paycheck."

Another part is we expect a big step from them rather than showing them the small steps. We can show them and show them from a gap analysis, needs analysis that they need to go from 2% to 12%. That will cause most people to say, “I can't retire.” But if we can show them they can go from 2% to 4% or 6% this year, and next year we will revisit it. If it costs them $50.00 a paycheck to increase their contributions we can come back next year and say, “can you afford $50.00 more?” So, we can spend it over time, increase it and get to the goal, rather than saying we need to swallow the whole chunk today.



Delaying action is easy to show using our tools, and this is especially important for younger people - and younger people may be the hardest people in the room to get engaged. Younger people don't understand the cost of delayed action. They say, “Well, I can start next year.” For a younger person, the longer the delay, the bigger the cost. It doesn't affect the people closer to retirement, but the further they are from retirement, the steeper the cost is on delayed action. We motivate young people by saying, "you should start today because even waiting a year going from 2% to 4% can costs you thousands of dollars over time.” So, that is really helping the participant engage and look at retirement as a practical, meaningful aspect.

The other one is a little bit different: the metrics advisors talk about. They only focus on how many people in the room are participating. The more important metric is how many people are participating in a way that allows them to have a successful retirement? Being able to answer the second question, by saying everybody is participating, but only at 2% or 3% contribution, then that's not success. Success is when participants can anticipate having enough money for retirement, based on the metrics of saving correctly. That's a much more meaningful metric to provide to the plan sponsor than saying, “Well, I got everybody participating at 3%.”

It's really helping people motivate participants and providing good information to the plan sponsor that proper metrics are related to real world data.

MISSION TO HELP ADVISORS

SWIFT: You know, you bring up so many good points. One of the things I hear is your mission to help advisors help more people retire successfully. I imagine there are a host of other benefits for the plan sponsor, as well as the advisor. Could you touch on those other benefits?

DRESSEL: One of the key benefits is employee satisfaction, especially amongst the millennials. Studies have come out that showed millennials really want to be able to retire successfully. They are going to appreciate any plan sponsor, any employer that says, “I'm providing you more than just a retirement plan. I'm going to show you that you can retire successfully.” It's been a lot of fun. Even at the advisor level, I was talking to an advisor the other day and showed him the reports we provided. He said, “I want somebody to provide this for me.” Well, that's advisors saying that – and just think what it will do to the participants when they understand it. It becomes meaningful information. The plan sponsor isn't just providing a plan but providing information on what it means to retire successfully and people are engaged in the process, so they appreciate more of what the plan sponsor is doing and hopefully will help cut down on some of the turnover rate that employers are experiencing.

WHAT DOES “TRAK” MEAN?

SWIFT: Indeed. So, you mentioned the reports that you provide. Can you talk a little bit about the tools and the reports and the TRAK? What's that stand for?

DRESSEL: Yes, TRAK, stands for The Retirement Analysis Kit. Our branding is AskTRAK, which means Ask The Retirement Analysis Kit for retirement planning questions. We can work in a group level with census data that has a few more data points than people are used to asking, but we can import that and provide a customized report for each individual in the room. Each member of the plan and the participants get to see where they are at. They can see a gap analysis statement on the first page, which allows them to see where they are in retirement planning. If they are fully funded or if they need to go from their 3% or 4% to 8% or 9% or 12%, there are some options in there to configure. A lot of configuration options work with a Roth, because there is a lot of detail there.

We also show them how that affects their take home pay. That's the number they care about. If going from 3% to 12% only costs me fifty cents a paycheck, no big deal. But if it's going to cost $400, then it becomes a talking point. Down below there are other actions on whether they want to wait a year before they start saving more, or if they want to retire a year later.

The third item is if you have outside assets that are not included in this plan, an advisor can talk to them at the group level. If you have outside assets, you may want to consider rolling them into the plan. The plan may have lower fees. The plan is easier to manage and to talk to the advisor one-on-one. That helps the participant to start thinking about, “what about my outside assets?” Now a lot of them won't have it, but the few that do can result in a significant increase in the plan assets. There is a one-on-one tool that an advisor can use with participants that might say, “You know, the one-page isn't as complicated as I want,” or “I do have outside assets that I’d like to add to see what it does for my retirement goals.” You can customize it.

Once you have the basic data in there, you can sit down with the participant and, in 5-10 minutes, provide a decent retirement needs analysis, add those outside assets and show them where they are at and what they need to be doing. This provides a very easy way of engaging each individual in the plan. The other part is that somebody can't go from 3% to 13% contributions. We can show them another report that you can attach that shows small steps going from 3% to 5% to 7% to 9% and what those increased deferrals do to their take home pay, and what the future holds for that at different rates or returns. You've got a lot of information in these reports. Some advisors say, “That's way too much information.” But I've watched participants in meetings really enjoy seeing their information presented in a report in a way that is tangible to them. That leads them back to talking in a very concrete way. “What are the fees? What are the funds? What are the allocations?” Those become a lot more meaningful when somebody is engaged in the plan and increasing their savings and starting to really think about, “I'm really going to be able to retire.”

WORKS FOR PRIVATE CLIENTS, TOO

SWIFT: Yes, that is really exciting. Does TRAK, The Retirement Analysis Kit, also work in reverse? Let's say I have clients and am an advisor and clients come into my office and they are not really there for the plan so much as their outside assets?

ED: Yes, we have a lot of advisors (that's the world we come out of, it's the 403b world). I call it the retail-advising world. A lot of advisors use their software in that context. People may say, “Well, I use e-Money.” If you are doing a full financial plan, and you want the complications of e-Money, we are not trying to compete with them. We work in a world with Middle America where we can answer questions very quickly. You can do a full retirement plan with somebody in 10-15 minutes, without having any data in the software, and show them where they are at, where they need to be and talk to them about their other assets. It's a very engaging tool, as it can be used interactively with a person and it's not intimidating like, “Oh, I missed that data point.” It's very self-explanatory. Most of our user base uses the software interactively with their clients in that context.

REAL-LIFE ADVISOR EXAMPLE

SWIFT: You know we were just down at the T3 advisor conference and you had an advisor who was co-presenting with you talking about how he uses The Retirement Analysis Kit to build relationships and serve more people. What is his name? Wade?

DRESSEL: Wade Murphy.

SWIFT: Could you talk a little bit about Wade?

DRESSEL: Wade is an advisor in Southern California, mostly on the 403(b) side, but works some 401(k) plans as well. He's been using our product forever and is a big advocate of AskTRAK because he gets people leaning forward at his desk. He gets 401(k) participants looking at the reports. He can be efficient. He doesn't have to tell the lower income America, “I can't afford to work with you,” because he can provide the reports very effectively in an engaging way, where the people appreciate the amount of information they are getting and are able to take action. The key aspect in retirement planning in individuals is to provide them enough information, enough analysis, where they take action. If we provide too much and go away saying, "let me think about it," that's going to cause them not to take action.

Wade is a fun presenter, a well-informed advisor and it's been a pleasure working with him. He's been an advocate for us for twenty-five years now, almost thirty years of using our software and helping people retire successfully.

SEQUENCE OF RETURN PLANNING

SWIFT: Wow, that's really something. Recently you had some news releases that came out. I think one of them was sequence of return planning. Could you talk a little bit about that and anything else you have on your product roadmap?

DRESSEL: Yes, we introduced sequence of return planning recently. We want to do a quick retirement plan with somebody. So, with just 5 or 10 minutes with a 401(k) plan, we can do a quick retirement plan. If an advisor wants to do a little bit more sophisticated tool, we can grab the sequence of return tool and select the historical assets that we want and look at what would happen if they selected a historical market index and how would that have done in retirement. How would they have succeeded and/or failed? It's kind of like a really quick Monte Carlo without having to spend all the time explaining Monte Carlo. It literally can be done in 2 minutes, rather than say, “I'm going to start with college 400 series in retirement planning.” We started with college level 101 and then moved it up to 201 really quickly. If you are selling annuities or indexed annuities and you a want to illustrate annuity limits on the product, whether it be point-to-point or caps or spreads you can add that to the historical index, and say, “Here's how the annuity would have helped or hurt you in retirement.” You can provide a quick analysis for them. For some people, you cannot justify the time and/or it just doesn't make sense - maybe it's a younger person. You don't want to get into sequence of returns with them yet. That's beyond the scope of the conversation. You just never go to that tab, you just focus on the tabs that you want.

So, we are constantly adding new features to the software. The next major set feature will be an asset allocation or a bucket strategy where you can allocate different buckets, which is a popular model, also called a “ladder strategy.” Let's start with a five-year bucket, then we will do five to ten, ten to twenty etc. We are working on a very elegant solution. Our goal in our design in our software is not to illustrate the nuance of the products or the world, we are trying to illustrate it so a person understands what you are doing. They understand what an advisor is trying to say in a way that makes sense to them. It will make sense to the advisor because they are around it all day long. But a client doesn't come in thinking, “I really want to know about retirement,” and studying about it hard. They often come in flat-footed and our tools and methodologies are a little bit different than others. Where we are helping people connect to what they need to do and why they should take action today.

SWIFT: Wow, it sounds great. So, tell us how we can learn more.

DRESSEL: We have a web portal, website at: www.asktrak.com. You can download our windows version and there is also a web portal version at www.online.asktrak.com.

You can try a two-week demo there and take a look at the tools. Now, if you are getting into the 401(k) tools, I'll tell you right off the bat that they are not self-explanatory. They are a little bit complicated in importing census data. Give us a call. We have a sales staff and a support staff that can answer your questions. We are not just here to sell you products. We have people in-house that will help work through your issues and get you going with it. It will really help you understand, and moving forward, get engaged. We not only want to sell you our product but we want good word of mouth from your experience.

SWIFT: Ed Dressel, thank you for your time today. It's been a pleasure

DRESSEL: Thank you, Marie.

-------

SCREEN SHOTS OF THE RETIREMENT READINESS TOOLS

TRAK-Online, is a transformational retirement planning solution for advisors. By changing the focus of retirement planning conversations from sales to education, TRAK-Online helps educate clients and engages them in the retirement planning process, resulting in them understanding your value as a financial advisor. With TRAK-Online, you can be there when your clients need you. With only an Internet connection and a standard browser, you can support more collaborative retirement planning meetings.

Take the guesswork out of financial planning. Many individuals who are nearing retirement are filled with fear, doubt, and confusion. With TRAK, you can show your clients’ options in form of a report, chart, or graph. Powerful visuals engage clients and easily illustrate how factors such as retirement age, life expectancy and inflation affect the likelihood of success or failure.

These visuals will give your clients peace of mind about their retirement plans and financial future. Advisors can use the Retirement Analysis feature in the Sequence of Returns calculator to analyze a client's retirement plan against historical rates of return.



Bottom line: TRAK might just be the only financial planning software you really need.

1 comment:

  1. experience. Knowledge can be acquired with the appropriate personal investment in course work (undergraduate or graduate work, certificate programs) and also through the course work required to obtain certain recognized certifications.FinancialAdvisor.com.au

    ReplyDelete