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Why BNY Mellon thinks fintechs are friends not foes

As the world’s largest custodian bank and asset servicing company, and one of the oldest banking corporations in the US through its predecessor, many would believe that the Bank of New York Mellon Corporation (BNY Mellon) is a traditional financial services company that has not kept up-to-date with digital and technology advancements and is instead tied to its legacy past.

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Read more about our partnership with BNY Mellon here.

To benefit from outsourcing, advisers need to focus on what is, and isn’t, core to their value

Advisers are increasingly outsourcing parts of their business to focus on growth. But a new study from Vestwell, a digital platform that allows advisers to offer and administer retirement plans, suggests many aren’t doing it with a strategic focus on the unique value they provide clients.

When Vestwell asked 420 retirement plan advisers to name the key factor that differentiates their practice from others, 75% named some form of relationship management, such as employee education or holistic wealth management.

By: Ryan W.Neal

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Putting MEPs on the Map

As we all know, the Department of Labor recently unveiled a new final rule that will make it easier to form and manage Multiple Employer Plans (MEPs). So it’s no wonder that many advisors in the industry are thinking about the best ways to incorporate them into their business strategies.

For retirement plan advisors, in particular, new MEP rules are changing the game—especially in the small plan market. Thanks to recent regulations, employers that have little or no business-related connection to each other are now able to join a closed MEP, creating an opportunity for advisors to service smaller clients as a 3(38) fiduciary in a way that’s both scalable and cost-effective.

Where should an advisor start? Although advisors cannot sponsor closed MEPs, they can leverage relationships to put the right MEPs in place. Most advisors have spent their careers developing centers of influence. A MEP allows them to turn those relationships into partnerships by working together to create really efficient offerings.

While the MEP would be sponsored by a lead employer that takes on the bulk of the fiduciary responsibility and administrative oversight, advisors and partners can make it easier to craft and manage, while also delivering superior brand and value.

Two relationships, in particular, that bring significant opportunities are employer groups and associations, both of which can act as the “lead employer” of a closed MEP.

Since recent regulation now allows for unrelated employers with at least some commonality to create cost-effective group retirement plans, employer groups and associations are a perfect place to start. Both have access to a significant base of employers with common denominators such as a common geographic location, which the Department of Labor said is a sufficient nexus to join a closed MEP.

By sponsoring a MEP, association or employer groups can enhance their benefits, better support their members, increase engagement, and even boost membership.

The value in one payroll provider

Another relationship that’s highly relevant in the MEP universe is payroll providers. Having a number of disparate payroll providers in a MEP can be an administrative nightmare.

Since accurate payroll files are critical to administering the plan, some MEPs engage a separate data aggregator to process those files, which adds time and cost while making the plan more vulnerable to mistakes just by virtue of having another third-party provider involved in plan administration.

Therefore, having one central payroll system in a closed MEP is a huge value-add, and triangulating the payroll relationship with an employer group or association is an even stronger offering. Forward-thinking advisors will try to connect associations and payroll providers in a MEP structure for maximum efficiency with optimal cost designs.

Start the MEP discussion

Overall, advisors should be thinking about MEPs not just as they relate to their clients, but as they relate to their own business models as well. And while the future of MEPs may currently be in limbo, they are still a worthwhile discussion point for advisors in the small plan market.

If nothing else, conversations about MEPs give us all an opportunity to have transparent discussions around the future of retirement for companies of all sizes. And once the passage of open MEPs comes into play, advisors who take steps now to make changes to their business strategy will already be ahead of the game.

By: Benjamin Thomason, Vestwell

Ben Thomason is the Executive Vice President, Revenue at Vestwell, a digital platform that makes it easier to offer and administer retirement plans. Thompson leads the sales and service operations with a focus on expanding the firm’s current advisor relationships, building new strategic institutional partnerships, and overseeing plan sponsor support. 

2019 Advisor Survey

Evaluating Operational Challenges to Drive Scale and Efficiency

In August 2019, Vestwell conducted a survey to learn more about the reigning attitudes of today’s retirement plan advisors and how they are successfully approaching plan sales and engagement.

  • 33% of advisors see managing scale as their biggest hurdle when it comes to growth
  • Yet less than 30% are outsourcing their most basic functions
  • Additionally, 20% are still working with more than 6 recordkeepers
  • And those numbers are significantly higher for plan specialists!

What to dig deeper? Download the full report here.

Retirement Plan Improvements Highlight FinTech During 401kTV Awards

Retirement plan improvements help plan participants and plan sponsors alike.  Today, retirement plan improvement in the form of Fintech is at a tipping point. Led by advances and huge investments, fintech firms are competing to solve retirement, savings, investing and debt management issues at the worksite. At the inaugural 401kTV Genie Awards held in New York City on August 22nd at the Park Lane Hotel, 401kTV revealed the three Finalists for the 401kTV Genie Technology Award from the many nominations received.

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Reducing the number of 401(k) record keeper partners poses a challenge for plan advisors

With almost 500 retirement plans but less than $100 million in AUM, Steve Austin of Apex Financial, who is a former Paychex wholesaler, is proactively reducing provider partners. He said robos like Vestwell are making it easier, particularly with their focus on lower costs and technology, issues that resonate with clients. Mr. Austin also noted that advisers need a business process, especially if they are growing quickly, with consolidation a key component.

Read more here.

Maximize Savings with a Safe Harbor Plan…And Soon

safe harbor

Safe harbor 401(k) plans can be a win-win for employers who want to maximize tax savings and retain employees. There is still time to reap the benefits for 2019.

1. Safe harbor basics

A safe harbor is like a traditional 401(k), but the employer must contribute, and contributions become fully vested when made. Contributions can either be limited to employees who make deferrals or offered to all eligible employees.

2. The trade-off may be worth it

Unlike traditional 401(k) plans, safe harbor plans automatically pass a number of required tests in order to keep your plan tax qualified and avoid other penalties and costs. These plans can be a great choice for small businesses that may have trouble passing nondiscrimination testing. For example, a family-owned or small business with more highly compensated employees relative to “rank and file” or non-highly compensated employees may otherwise have difficulty passing compliance tests.

3. More good news

The business owner can contribute the maximum annual deferral amount to his/her own 401(k) plan ($18,500 plus any catch up contributions), receive additional savings from the company’s matching contributions (they’re an “employee” too) and, come tax time, the business can deduct all matching contributions (up to the $55,000 IRS limit).

4. There is still time to maximize the savings for 2019

Safe harbor plans must be in effect three months prior to the plan year-end date, which means eligible employees must be able to make salary deferrals starting no later than the payroll period that ends on or after October 1 of the plan’s first year.  This means plan sponsors must make decision and sign necessary documentation by September 1.

5. If you already have a plan, you can take advantage too!

If you offer a different plan, but would like to take advantage of Safe Harbor benefits, here are dates to know:

  • By or before November 30, 2019: Your provider can amend your plan or start a new plan with a safe harbor provision for the following year
  • December 1, 2019: Your employees receive a 30-day notice of plan revisions
  • January 1, 2020: Safe Harbor provision takes effect and exempts the plan from nondiscrimination testing

Overall, there are benefits to any type of retirement offering, but a safe harbor plan can be a smart decision for many companies, particularly for small business owners. If you have any questions about whether a safe harbor plan is right for you, reach out to info@vestwell.com at any time.