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Forget the DOL Rule or the SEC's Reg BI... Financial Literacy is Key to Protection, RBC Advisor Says

By Rita Raagas De Ramos October 22, 2018

Regardless of the Department of Labor fiduciary rule being dead or alive, it’s up to retirement plan sponsors to guide employees toward a situation where they are knowledgeable enough to make sound retirement decisions, according to one specialist advisor.

The DOL is “considering regulatory options,” given the U.S. Court of Appeals for the Fifth Circuit’s order in March for rule to be vacated in its entirety, which it made official in June.

“Financial literacy is a big piece that is missing,” says Michael Aylward, McLean, Va.-based advisor at RBC Wealth Management. “People just don’t understand retirement or what it’s going to take to retire. They need someone to support them. Many people turn to the plan sponsor in that situation, hoping for that level of guidance and support.”

The retirement plan sponsors then turn to the qualified advisors to help them and their participants figure out their retirement questions, says Aylward, who is among this year’s Financial Times Top 401 Retirement Advisors.

Thus the first line of defense of retirement plan participants are their plan sponsors, says Aylward.

“Plan sponsors have a responsibility to make sure they find advisors who will deliver value to the plan – not just cost but also experience and commitment to the participants,” he says.

Aylward says he has been advising plan sponsor clients at RBC Wealth management for more than 15 years. He mostly deals with small to midsize plan sponsor clients and their participants – plans with between $5 million and $50 million in retirement assets.

“The best protection for retirement plan investors has always been financial education,” Aylward says. “Retirement plans offered through an employer have the retirement tools and resources to help people understand their situation. But participants don’t always utilize those resources and sometimes there is a strong need for a retirement plan advisor to come in and help them figure out how to save for retirement.”

Financial literacy is part of the overall service Aylward provides his 401(k) and 403(b) plan sponsor clients and plan participants. The 403(b) plans are for some employees of public schools, employees of certain tax-exempt organizations and some ministers.

“It is critical for people to take ownership of their retirement planning and understand what needs to be done,” he says.

Most of the financial literacy services previously provided by Aylward were done onsite with plan participants.

He says he provides the plan participants with either group education on a variety of topics or one-on-one meetings to help them understand their retirement situation and what their lifestyle will look like upon retirement.

Over time, Aylward says he has been able to incorporate both face-to-face and digital meetings to his financial literacy sessions. Although he prefers face-to-face meetings.

“Some plan participants are interested in webinars or other digital mediums, but we feel that the best way to reach participants and to help them with a call to action to retirement is in person,” he says. “When they speak to our qualified plan advisors, that usually has the most impact to the participants.”

The topics he discusses with plan participants include general retirement needs, retirement timelines, creating retirement income, budgeting and other financial topics that people may find valuable to their situation.

The attendance in the financial literacy sessions varies form plan to plan, and it usually depends on how proactive the plan sponsor clients are in encouraging the participation of its employees, according to Aylward.

Michael Aylward

“In some plans, we find that dozens or hundreds will attend. Others are scarcely attended,” he says.

But sometimes attendance also depends on the demographics of the plan participants.

“If we have more people who are going to retire within the next 10 years, we have a higher participation rate with those meetings,” Aylward says.

Aylward’s small-to-midsize plan sponsor clients typically don’t have a retirement committee overseeing the plan and it’s usually the responsibility of the human resources department or the CFO, according to Aylward.

“But we find that they are much more committed to their employees,” he says. “Smaller organizations tend to be more hands on and tend to care more about the outcomes for those participants.”