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

By Jamie McInnes, Senior Vice President, Prudential Retirement®

Finding the right provider for a defined contribution plan requires more than simply comparing costs and capabilities.

“Plan sponsors should seek a provider who can help their participants seamlessly and confidently translate their nest egg into a flexible, guaranteed stream of lifetime income.”
-Brent Walder, Senior Vice President Director of Institutional Income Innovations Prudential Retirement

In today's fiercely competitive marketplace, many providers offer similar services at comparable prices, making it difficult for sponsors to select the provider that is truly the best fit. To cut through the clutter, plan sponsors should focus on how well a provider meets these essential needs:

• Plan sponsor needs. A provider must be able to assist the sponsor in fulfilling its responsibilities-including those as a fiduciary-to provide a well run retirement plan, and to ensure participants have the education and tools they need to take full advantage of that plan. What's more, plan sponsors should look for providers that allow sponsors maximum choice in selecting the specific investment alternatives and recordkeeping services suitable for a plan.
• Participant needs.Many surveys indicate that participants want access to a plan that helps them prepare financially for life after work, and positions them to achieve better retirement outcomes. A good provider must effectively promote plan participation and offer a range of investment options, asset allocation, and the opportunity to create a reliable stream of retirement income.
• Intermediary needs. Advisors and consultants need to support their clients by providing choice and guidance in the investment selection process, help in fulfilling their fiduciary obligations, and assistance with the delivery of participant education. An effective provider presents intermediaries with access to a wide array of investment choices, sound data and analytics to back the counsel they provide their clients, and the ability to leverage a comprehensive and integrated participant education program.

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

1.     The ability to offer institutional investing
Choice in investments is the first criteria that should be met. A good provider offers access to a broad array of institutionally priced investment vehicles, regardless of plan size. When analyzing the provider's investment platform, sponsors should determine if it:

• Provides open architecture, granting access to a variety of investment managers and vehicles, including collective trusts, separate accounts and mutual funds;
• Allows for recommendations that are based solely on the best interests of the plan and its participants; and
• Delivers an advantageous cost structure.

Prudential Retirement's investment strategists are among the most highly credentialed in the industry, delivering access to quality investment vehicles plus analytical support and monitoring that meets the sponsors' need for both choice and assistance.

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

Prudential also offers a powerful asset allocation solution in GoalMaker®, a proprietary program that creates a portfolio based on the participant's years to retirement and risk tolerance, helping meet the goal of positive retirement outcomes. And because it is built using the underlying funds in the plan, the portfolio offers help in ensuring appropriate participant diversification. What's more, the GoalMaker solution enables intermediaries to set the allocation themselves, or to default to one provided by Prudential.

2. The proven experience to deliver income solutions
The second area of opportunity plan sponsors should explore is income. Traditionally, defined contribution plans have only addressed accumulation, offering little that helps participants meet their need for lifetime revenue.   

Forward-looking providers like Prudential understand the need for income solutions that address this concern. Prudential IncomeFlex® is the first in-plan income option to deliver what participants need most:

• Protection against longevity risk with guaranteed lifetime income;
• Safeguards against market risk with a reliable stream of revenue that won't decrease even if markets decline or accounts become depleted;
• Upside growth potential with the ability to capitalize on market recoveries; and
• Flexible access to retirement assets.

For plan sponsors, IncomeFlex offers a much-needed complement to an asset allocation or target-date strategy that addresses fiduciary requirements and meets qualified default investment alternative (QDIA) guidelines. What's more, IncomeFlex can be embedded into GoalMaker for an all-in-one asset allocation and income solution.

Prudential ensures that income is integrated into the participant communication process, and offers the Retirement Income Calculator as an effective way for participants to easily determine if they are on track toward a rewarding retirement.

IncomeFlex also meets the intermediaries' need to bring compelling investment solutions to their sponsor clients. IncomeFlex can be used with GoalMaker and the plan's underlying investments in a way that allows income to complement the investment solutions and allocation tools that are driven by the intermediary. And they are further supported with the information and tools they need to deliver wealth management and income education assistance to participants.

3. The resources to offer a breadth of safe investment options

Now more than ever plan sponsors should offer investment choices that deliver principal preservation and steady returns. These choices assist a participant in constructing a balanced portfolio. Choosing a provider that offers a strong stable value portfolio can meet sponsor, participant, and advisor needs for a "port in the storm" from unpredictable returns.

"Plan sponsors need to offer investment options that include the safest options possible. A safe investment option should preserve participants' principal and accumulated earnings, and generate predictable, steady returns."

- James King, Jr., Vice President, Stable Value Markets Group, Prudential Retirement

With low volatility and returns that are geared to keep pace with or exceed inflation, stable value funds provide an appropriate investment for a variety of participants, including those who have a short-term investment horizon, prefer a more conservative investor style, or simply wish to balance out their more aggressive investments.

Prudential recognizes the need to deliver a range of stable value solutions, and offers general account, separate account and alternative stable value options-including 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
• Well-diversified, high-quality fixed income portfolios

Prudential is proficient at developing stable value solutions to meet nearly any plan sponsor's needs, and will help intermediaries deliver the product selection, fiduciary support and participant education their clients demand. 

4. The expertise to provide ongoing risk management
Choosing a provider that can assist the plan sponsor in navigating the intricate regulatory environment is vital to the selection process. The provider should be adept at consulting on compliance issues specific to the sponsor, because risk management increasingly takes a more prominent role in the success of today's retirement plans.

Prudential's Retirement Plan Strategies consulting team is an integrated practice of actuaries, regulatory consultants and investment strategists. This group is focused on delivering integrated consulting solutions to help plan sponsors:

• Enhance the design and cost-effectiveness of their retirement plans;
• Quantitatively assess retirement income;
• Improve investment options and governance; and
• Understand and manage the fiduciary risks, including compliance with regulations.

Strong plan design is also directly tied to the participants' need for positive retirement outcomes. Prudential offers valuable plan features that help put participants on a path to retirement security, including:

• Auto enrollment, which is especially important for improving participation among low-income and young employees; and
• Contribution escalator, which works like a follow-through on participants' best intentions by automatically increasing their plan contributions.
  

"Plan sponsors face an environment of greater fiduciary risk than ever as the regulatory environment changes at a rapid pace. Through the integration of plan design, legislative and regulatory compliance and investment strategy, we help sponsors reduce risks and focus more attention on their core business."

- George Palms, Senior Vice President, Retirement Plan Strategies, Prudential Retirement

The Prudential consulting team, coupled with the knowledge and support of intermediaries, can deliver the right plan design solution to meet any plan sponsor's needs, including compliance with the intricate and complex regulatory environment.

Delivering tradition and innovation   

With the abundance of providers in the marketplace today and the comparability of capabilities and costs, it is imperative that sponsors choose a recognized partner with a proven track record of success and innovation. 

As the marketplace evolves, sponsors will need a provider that is strong today, yet nimble enough to modify its offering going forward. A partner that understands the industry and provides the right products to meet the needs of sponsors, participants, and intermediaries alike. A partner that has not only weathered the recent market storm, but has endured for years and consistently emerged stronger.

Prudential has been delivering retirement solutions for public, private and non-profit organizations for more than 85 years. An insurance leader for 135 years, our well-known Rock symbol is an icon of strength, stability and innovation that has stood the test of time.

Meeting your retirement challenge

With a marketplace flooded by competitors offering similar services at comparable prices, it's clearly no longer in a plan sponsor's best interests to choose a provider based solely on capabilities and costs. When making this critical selection, sponsors need to change the conversation, and ask themselves this imperative question: "Do I want a plan provider who is reacting to yesterday's problems, or one that is solving for tomorrow's needs?"

Prudential stands ready to meet your retirement challenge. You'll find we are the retirement partner that puts a thoughtful approach and a history of innovation to work for you.

About Prudential

IncomeFlex guarantees are based on the claims-paying ability of the insurance company and are subject to certain limitations, terms and conditions. To maintain the IncomeFlex benefit, you must invest in one or more Prudential IncomeFlex Funds. Like all variable investments, these funds may lose value. Guaranteed growth of the income base ends at age 70 or when guaranteed withdrawals begin, whichever is earlier. Withdrawals in excess of the guaranteed lifetime income amount will reduce future guaranteed withdrawals proportionately.

Prudential IncomeFlex funds are investment options available under group variable annuity contracts issued by Prudential Retirement Insurance and Annuity Company (PRIAC). PRIAC does not provide any guarantee of the investment performance or return of contributions to those separate accounts.  PRIAC's guarantee of certain withdrawals is supported by PRIAC's general account and is contingent on its claims paying ability. Guarantees are subject to certain limitations, terms, and conditions.  You should consider the objectives, risks, charges, and expenses of the funds and guarantee features before purchasing this product.  You should carefully review the Prudential IncomeFlex Important Considerations before purchasing this product.   Product availability and terms may vary by jurisdiction. Subject to regulatory approvals. Contract form number GA-2020-IFGW2-0805 or state variations thereof.

Product guarantees are contingent on the claims-paying ability of the issuer. Retirement products and services are provided by Prudential Retirement Insurance and Annuity Company, Hartford, CT, or its affiliates.

Prudential, the Prudential logo, and the Rock symbol are service marks of The Prudential Insurance Company of America, Newark, NJ, and its related entities, registered in many jurisdictions worldwide.

Control No.: 0193823-00001-00                                                                                                                                                      Ed. 01/2011

Biography

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 Chartered Financial Analyst 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.

Contact information:

For more information about choosing the right plan provider, please contact Jamie's assistant, Mary Rose Tomalavage, at maryrose.tomalavage@prudential.com, or at 732-482-4454.