Changing the conversation: Going beyond costs and capabilities when searching for a provider

by James McInnes

Finding the right provider for a defined contribution plan requires more than comparing costs and capabilities. James McInnes, Senior Vice President at Prudential Retirement, explain the key needs sponsors need to focus on.

“It is imperative that sponsors choose a partner with a track record of success and innovation, yet is nimble enough to modify its offering going forward.”
-James McInnes

Many providers offer similar services and pricing, making it difficult to select one that is the best fit. Sponsors should focus on how well a provider meets these needs:

Sponsor

A provider must assist the sponsor in fulfilling its responsibilities-including those as a fiduciary-to provide a sound plan, and ensure participants have the tools they need. Sponsors should also look for providers that allow maximum choice in investment alternatives and suitable recordkeeping services.

Participant

Surveys indicate that participants want a plan that helps them better prepare financially for life after work. A good provider must promote plan participation and offer a range of investments, asset allocation, and the opportunity to create a reliable stream of retirement income.

Intermediary

Intermediaries need to support their clients by providing choice and guidance in the investment selection process, help in fulfilling fiduciary obligations, and assistance with participant education. An effective provider presents intermediaries with an array of investment choices, data and analytics to back the counsel they provide, and the ability to leverage an integrated participant education program.

By focusing solely on costs and capabilities, sponsors cannot be certain they are choosing a provider who will meet their requirements. They should consider changing the conversation and focusing their search based on a list of differentiators:

Institutional investing

A good provider offers access to an array of institutional investment vehicles that provide:

An open architecture, granting access to a variety of investment managers and vehicles, including collective trusts, separate accounts, and mutual funds; Recommendations based on the best interests of the plan; and advantageous cost structure.

Prudential's investment strategists deliver access to quality investment vehicles plus analytical support and monitoring that meets sponsors' need for choice and assistance.

Working with intermediaries, Prudential offers analysis, data and support, and administration of a range of investment vehicles. This collaboration helps solve the intermediaries' need to advocate the investment mix most appropriate for their clients' plans.

Prudential offers an asset allocation solution in GoalMaker^Ò, a program that suggests a properly-allocated portfolio created from the plan's underlying funds and based on the participant's years to retirement and risk tolerance. GoalMaker enables intermediaries to set the allocation themselves, or to default to one provided by Prudential.

Income solutions

Traditionally, defined contribution plans have only addressed accumulation, not lifetime revenue. Prudential's IncomeFlex® is the first in-plan income option to deliver:

Protection against longevity risk with guaranteed lifetime income; safeguards against market risk with a stream of revenue that won't decrease even if markets decline or accounts become depleted; upside growth potential; and flexible access to retirement assets.

For sponsors, IncomeFlex offers a complement to an asset allocation or target-date strategy that addresses fiduciary requirements and meets QDIA guidelines. IncomeFlex can also be embedded into GoalMaker for a complete asset allocation and income solution. "Sponsors should seek a provider who can help their participants translate their nest egg into a guaranteed stream of lifetime income," says Brent Walder, Sr. VP  Director of Institutional Income Innovations Prudential Retirement.

IncomeFlex also meets the intermediaries' need to bring compelling investment solutions to their clients by complementing the plan's underlying investments with income and allocation tools that are driven by the intermediary.

Safe investment solutions

Sponsors should offer investment choices that deliver principal preservation and steady returns. These assist participants in constructing balanced portfolios. Choosing a provider that offers a strong stable value portfolio can meet sponsor, participant, and advisor needs for a "shelter from the storm." "Sponsors need to offer investments that include the safest options possible. A safe option should preserve principal and accumulated earnings, and generate  steady returns," says James King, Jr., VP Stable Value Markets Group Prudential Retirement.

Stable value funds also provide an appropriate investment for participants with a short investment horizon, a more conservative investor style, or the need to balance their more aggressive investments.

Prudential offers a range of stable value solutions, including general account, separate account and alternative options-as well as an FDIC-insured product-all of which provide: Guaranteed interest rates, Protection of principal and accumulated interest, preservation of capital plus competitive intermediate-term returns and well-diversified fixed income portfolios.

Ongoing risk management

Choosing a provider that can help navigate the intricate regulatory environment is vital. The provider should be adept at consulting on compliance issues, because risk management increasingly takes a prominent role in the success of today's plans.

Prudential's Retirement Plan Strategies consulting team includes actuaries, regulatory consultants, and investment strategists, and focuses on delivering integrated solutions to help sponsors: Enhance the design and cost-effectiveness of their plans; quantitatively assess retirement income; improve investment options and governance; and understand and manage fiduciary risks, including compliance with regulations.

Strong plan design is also tied to the participants' need for positive retirement outcomes. Prudential offers  features that help do that, including: Auto enrollment - for improving participation among low-income and young employees; and contibution escalator - which follows through on participants' best intentions by automatically increasing their contributions. "Sponsors face  greater fiduciary risk as the regulatory environment changes. Through integrated plan design, legislative and regulatory compliance and investment strategy, we help sponsors reduce risks and focus attention on their core business,"  explains George Palms, Sr. VP Retirement Plan Strategies Prudential Retirement.

Delivering tradition and innovation  

It is imperative that sponsors choose a partner with a track record of success and innovation, yet is nimble enough to modify its offering going forward.

Prudential has been delivering retirement solutions for over 85 years. An insurance leader for 135 years, our Rock symbol is an icon of strength, stability, and innovation that has stood the test of time.

Meeting your retirement challenge
It's clearly no longer in a sponsor's best interests to choose a provider based on capabilities and costs. Sponsors need to change the conversation and ask themselves: "Do I want a provider who reacts to yesterday's problems, or solves for tomorrow's needs?"

Prudential stands ready to meet your retirement challenge. We are a partner that puts a thoughtful approach and a visionary mindset to work for you.

About

Jamie McInnes is Senior Vice President of Product Management and Development at Prudential Retirement. He oversees the management of Prudential's full-service and investment product suite, including defined contribution and nonqualified deferred compensation, Total Retirement Services®, retail products, and sub-advised funds. Jamie holds the CFA designation and earned a B.A. in Biochemical Sciences from Harvard University; an M.A. in International Relations from the University of St. Andrews (Scotland); and an M.S. in Finance from Suffolk University's School of Management.