Most small business owners are too preoccupied with the daily challenges of running their companies to make providing employees with retirement plans their top priority, according to a Top FT 401 advisor.
And among the small business owners who prioritize employee retirement plans, many rely on advisors to do the heavy lifting, says Teri O’Connor, founder of and senior corporate retirement advisor at Altus Consulting Group in The Woodlands, Texas.
“A lot of your large employers, especially here in Houston — companies like Shell Oil, ExxonMobil, British Petroleum, Hewlett-Packard — have what I call a culture of retirement,” O’Connor says.
“Small business employers are typically busy with other things, so they rely on us advisors to come up with a plan and come out and educate their employees to explain the program to them, including financial wellness, which is a big buzzword now,” she adds.
Altus targets small companies, which O’Connor describes as having fewer than 1,000 employees and less than $20 million in retirement assets.
O’Connor — who has been an advisor since 1985 — estimates that around 47% of small business owners “still don’t have a retirement plan in place” for their employees.
“Most small employers are still struggling; they still want to keep their businesses going. They still have other priorities in their lives besides the 401(k),” O’Connor says. “I know the Secure Act is going to try to address that. But it’s still not a mandate, it’s an improvement.”
A report from the Nationwide Retirement Institute shows that nearly 60% of small business owners believe the Secure Act would improve their ability to provide employees with 401(k) plans because it would make them more affordable. NRI is part of insurance and financial services firm Nationwide.
The Secure Act — or the Setting Every Community Up for Retirement Enhancement Act — is aimed at giving small business owners the ability to participate in “pooled employer plans” that would bring down costs. It was passed by the House of Representatives in May but has been stalled in the Senate.
Altus has financial advisors who work one-on-one with employees of its plan sponsor clients at least twice a year, according to O’Connor.
“If there’s something that needs to be discussed beyond just where to put your money in your 401(k) or a few very basic snapshot questions, then we set up outside meetings, outside of the company, for them to come in and spend more time and perhaps bring their spouses and we can actually put together plans if that’s something they need,” she says.
Every client is different
Among the most common topics the financial advisors discuss with the employees are the appropriate age for them to draw from their Social Security (“it’s not always 67, it’s not always 70, every single person is different”), life expectancies, health issues, debt load, dreams and aspirations.
O’Connor says not all small business employers with retirement plans for their employees are created equal. The degree to which Altus is involved in the retirement plans and financial wellness programs depends on the type of employer.
“We have employers who don’t want to encourage their 401(k) because it costs them money. And they have it [retirement plans] specifically there to benefit the ownership and some key executives and maybe the supervisors. But they look at it like, ‘Yeah, we really just don’t want to encourage this. We’re just doing the bare minimum,” she says.
“We have some employers who are on the other end of the spectrum, who are very paternalistic. They care very much about their employees’ well-being. They go above and beyond. They see it as part of their culture because they are very caring employers. It’s just their nature, and that’s what they want to do,” she adds.
There are also employers “in the middle, who want to use it [retirement plans] as an employee retention tool,” according to O’Connor.
O’Connor is among this year’s Top FT 401 advisors. To be included on the elite FT Top 401 list, qualified retirement plan advisors are scored on seven criteria: DC plan assets under management, DC plan growth, focus on the DC business, experience, advanced industry credentials, employee participation and compliance records.