Take Care of Your Employees

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Take care of your employees.

Jamie Kertis, AIF®, QKAjamie kertis headshot
Retirement Plan Specialist
Grinkmeyer Leonard Financial
1950 Stonegate Drive / Suite 275 /Birmingham, AL 35242
Office: 205.970.9088 / Toll-Free: 866.695.5162
www.grinkmeyerleonard.com

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On Shaky Ground

shutterstock_305483711The stock market of 2016 seems to have picked up right where it left off in 2015 on shaky ground with dramatic downswings and nagging uncertainty. Admittedly, we all had become a little spoiled by the last bull market which started in March of 2009 and persisted until the third quarter of 2015 and we have been thrown back into the harsh reality that even though the S & P 500 has had an overall upward movement since it was introduced in 1923 there has been and more than likely always will be an element of volatility. As a matter of fact, when you take a look at the history of the stock market from 1928 to 2013 you will find that a decline of at least 10% occurs on average every 11 months and a decline of 20% happens about every 4 years.  So the question is what can you as a plan sponsor do to help ease some of queasiness caused by these ups and downs.

Process, Procedures and Prudence

As I have discussed in previous blogs, I believe the number one thing that plan sponsors can and should do to protect themselves and the plan against market volatility and investment performance is to have a documented process with written procedures that demonstrate prudence in selection and monitoring in place. You can argue until your blue in the face about the best investment in each asset class, but when it comes down to it performance takes a backseat to process. Now more than ever, it can be important to review the plan’s Investment Policy Statement (IPS) and to review the committee that is place to execute that IPS.   There are also notices such as the 404(c) notice and the 404(a)(5) notice that you can send out to your participants that describe the participant’s right to direct their own investments and to gather information regarding those investments.

Monitoring

While sometimes the best investment strategy within a 401(k) plan for a participant can be “set it and forget it”, the same is not true for the investment committee and the monitoring of the investments within the 401(k) plan. Once the committee has decided on an appropriate investment menu for the plan, the committee must also monitor those investments for continued appropriateness. A word of caution here, many recordkeepers and investment providers have tools that can help the committee monitor performance, but they may or may not consider other factors such as the demographic make-up of the participants, the overall risk tolerance of the plan, the cost of the investments and/or the availability of alternative investments.

Dollar Cost Averaging

Google “time in the market versus timing the market” and you will find countless articles that preach the value of a buy and hold strategy and that bemoan the fact that most average investors buy high and sell low. This concept of buy and hold, while not appropriate for every investor, is of particular interest in 401(k) plans because of the power of dollar cost averaging. Dollar cost averaging is the practice of investing a regular amount of money regardless of the performance of the market and therefore, the average cost of investments has the chance to decrease while your chance of greater returns increases.

The beauty of consistent contributions into a 401(k) plan is that a participant can participate in dollar cost averaging without even realizing it! A note about dollar cost averaging, dollar-cost averaging is not a foolproof investment technique. It does not assure a profit or protect against loss in declining markets. It involves continuous investment in variably priced units, regardless of price fluctuations. Investors contemplating the use of dollar-cost averaging should consider their ability to continue purchases over a period of time even when prices are low.

Education

Knowledge is power which leads to confidence and calm; this is very evident in 401(k) plans when it comes to the comfort of the average participant in investing his or her hard earned money in an investment that they have little to no control over. When we conduct employee education meetings the first tenant that we attempt to convey is that of risk tolerance. We believe that if a participant understands and is comfortable and confident in the amount of risk that he or she is taking, then that participant is less likely to stop investing in times of market volatility. Additionally, we find too often participants do not have a realistic expectation of investment performance due to a lack of education about the investments in their plan which leads to confusion and frustration and ultimately a decline in participation. We take the time to educate our participants about the level of risk and the potential return that they may receive for taking on that risk.

While the recent markets have caused even the most seasoned investor to reach for aspirin, there are steps that you can take as a plan sponsor to insulate yourself, your plan and its participants from the headaches of volatility. If you need further guidance or have questions about the current market condition, I would love to hear from you. Please contact me at 205-970-9088 or jamie@grinkmeyerleonard.com.

Disclosure:  Certain sections of this commentary contact forward-looking statements that are based on our own reasonable expectations, estimates, projections and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. All indices are unmanaged and investors cannot actually invest directly into an index. Unlike investments, indices do not incur management fees, charges or expenses. Past performance is not indicative of future results.

Be So Good

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Jamie Kertis, AIF®, QKAjamie kertis headshot
Retirement Plan Specialist
Grinkmeyer Leonard Financial
1950 Stonegate Drive / Suite 275 /Birmingham, AL 35242
Office: 205.970.9088 / Toll-Free: 866.695.5162
www.grinkmeyerleonard.com

Contact Jamie

Follow Jamie on LinkedIn

Follow Jamie’s Blog

Three Ways to Make Employees More Productive With Your Retirement Plan – {Anatomy of a Happy Office}

shutterstock_249108538 copyA quality retirement plan is a carrot that encourages loyalty and productivity. We talk about plans that “recruit, reward and retain” employees, but you should also consider the importance of helping an employee “retire.” The trend of baby boomers planning to stay employed to a latter age is well-documented. Although this can be beneficial, it can also mean increased costs for your company:

  •  Wages are likely on the high side of the scale for comparable positions
  •  New talent is not being developed, or is leaving for greener pastures

If you can offer an effective exit plan for the baby boomer, you help your employee and your company.  The seasoned employee is motivated to be productive, but also sees a light at the end of the employment tunnel.

A competitive retirement plan motivates younger employees as well. They see an opportunity to grow wealth within the company rather than seeking their fortune elsewhere. The golden handcuff of a long-term savings plan may give them a reason to avoid the salary chase.

An effective approach

This is an excellent environment to review and update your business’s retirement plan. While many business planning considerations may be on hold due to capital restrictions, productivity of the current workforce is paramount.  And retirement is on workers’ minds … young and old.

Cost should not be the controlling factor in reviewing the company’s plan. Effectiveness should be the target.   Keep these keys to effectiveness in mind and you’ll have a happier, more productive workforce:

1. Make it about them:  I’ve seen some retirement plan communications that read more like playbooks than explanations. While it is important that employees understand the “how” of the plan, you first have to sell the “why.”  Think of it this way: you invest dollars to set up a retirement plan, but a few cents spent in effectively communicating the plan can significantly enhance the return on your investment.

2. Offer options:   Automatic enrollment, pre-tax and post-tax features, expanded investment options – all of these give the employee an enhanced feeling of control. In an environment where so much of their retirement capital is associated with your company plan, peace of mind comes with giving the employees an enhanced say in how their money is handled.

3. Promote the hidden paycheck:  Now that you have the employee’s attention, use the company retirement plan to promote the other benefits of employment with your company.  With communication about the retirement plan, you can also change the conversation from “wages” to “pay plus.”  You can promote the company’s contribution to Social Security, the medical plan, flex time and other benefits that enhance the employee’s life.

In decades past, workers built retirement savings by paying down the mortgage balance on their home, putting money in savings bonds and building up cash values in their life insurance policies. Although it can be argued that these approaches are admirable, the reality is that not as many Americans are doing this. Instead, a sizeable chunk of a family’s retirement savings sits in their qualified plan at work. 401(k) features, such as automatic enrollment and employer match, make it increasingly easier to build up a retirement nest egg. For higher paid employees, nonqualified plans have become a key savings source, especially in a rising tax environment. The bottom line is employees are far more attentive to what retirement plans are offered through their employers.  When an employee feels like their employer has his or her best interest at heart, they are far more likely to work harder and perform better.   Add in the value of the employee not feeling as stressed about whether they will or will not be able to ever retire, the employees’ morale boost again increases work productivity which helps you the employer while benefitting your employees.

-Jamie Kertis, AIF®, QKA / Retirement Plan Specialist

*excerpts of article from Forbes.com article by Steve Parrish – “Why You Should Care About Your Employees’ Retirement Plans”


anatomy-smallAll through November, all of the advisors at our office are doing a series of articles, tips and tools and geared toward the “Anatomy of a Happy Office”.  Follow all of our blogs to read it all.
Northside of Average by Valerie Leonard
Motivated Monday by Caleb Bagwell
TAG-Living Loud by Trent Grinkmeyer

 

Jamie Kertis, AIF®, QKAjamie kertis headshot
Retirement Plan Specialist
Grinkmeyer Leonard Financial
1950 Stonegate Drive / Suite 275 /Birmingham, AL 35242
Office: 205.970.9088 / Toll-Free: 866.695.5162
www.grinkmeyerleonard.com

Contact Jamie

Follow Jamie on LinkedIn

Follow Jamie’s Blog