At Your Service
Giarraputo, Joseph, Global Finance
Executives in the defined contributions marketplace discuss the impact of the Internet, the demand for personalized services, and the need for customized educational tools for 401(k) participants. Global Finance's Joseph Giarraputo moderated.
GLOBAL FINANCE: How important is service to plan sponsors?
JACK BOYCE, senior vice president, GE Retirement Services: The only quality that matters is the quality that the customer feels, so it's important to deliver against those requirements. They differ from one client to another.
RICHARD VOLLMER, vice president, Retirement Service Division, Bank of New York: The quality of service we provide has become a point of differentiation. It all comes down to that.
JOSEPH MASTERSON, vice president, Diversified Investment Advisors: All services and information should be shared with all clients, both in terms of complaint analysis and breadth of services available.
TIM MURPHY, 401(k) sales and marketing, Hewitt Associates: There's a distinction between services offered to the client-- employer versus the customer-- employee. It's easier to measure services to employees. But it's important to ask what the employer is getting for its return on investment.
FREDERICK CASTELLANI, senior vice president, MassMutual Retirement Services: A sophisticated buyer helps a sophisticated provider to assure the quality equation. Plan sponsors have a responsibility to make sure they understand what the best offer is in the marketplace or what is competitively available.
GF: How has participant education become an increasingly important issue?
PHILIP LUSSIER, principal, State Street Global Advisors: Education is a complex issue as more attempts are made to educate the many participants who are not ready for it. Participants do not have to take action, yet the pension system is increasingly one of self-help. Getting the word out and getting people to take action is the key.The Internet will help, as it is a great tool, but many people who need the most help are not using it. You cannot legislate participant action.
RUTH HUGHES-GUDEN, principal, Morgan Stanley Dean Witter Investment Management: The one thing we can't change is inertia. Despite 401(k) education and communication programs, most people don't tend to move their current balances. Studies show that people are more apt to move or redirect future allocations. Although the Internet is a means to an end, I wonder if in the future more financial planning will be made available to employees. We'll have financial planners who will actually sit down with people and give them a realistic picture of their retirement possibilities.
CASTELLANI: As account balances get bigger and more people contribute to defined contribution plans, it will be a challenge to us as providers to track the real consumer. Customization and personalization will become increasingly important to reach the consumer as he builds wealth and has a real need for information.
MASTERSON: Every employer should demand personalized reports for each participant. They should offer overviews of how a participant is investing today, as well as solutions to help them reach their financial goals. It's incumbent on us as an industry to offer that solution and maybe adopt it in a government-regulated way. Inactive participants desperately need such advice, and the longer the industry waits, the worse the problem gets.
LORIE O'MALLEY, president, Scudder Kemper Retirement Services: Plan participation rates today are evidence that education has had an impact. The next key opportunity is to provide gap analysis. While some existing education tools help individuals define the gap between what they'll need for retirement and where they actually are today, the natural next step to address this gap is advice. In the near term I anticipate we'll move away from the current situation where education and advice are clearly delineated. …