GuidePost

The GRABot BAG
by Sherrie E. Grabot, CEO

February 2005
MONITORING EFFECTIVENESS – Yikes! The Next Set of K Challenges
It's always nice to be ahead of the curve. But when you're fifteen years ahead, it can get a little lonely. That's how I sometimes feel about measuring the effectiveness of retirement plans.

At a recent meeting of the Western Pension Benefits Council in San Francisco, I had the pleasure to sit on a panel with other folks immersed in the wild world of defined contribution plans, while we discussed The Next Big Thing.

I was surprised to hear others beginning to whisper the “M” word: measurement. A favorite topic of mine, since my mantra for years has been, “If it can’t be measured, it’s not worth doing.” If you’re doing anything in a 401(k) plan, you ought to be able to measure it, right? Sadly, the industry hasn't always agreed.

Since I’ve been involved in the DC world nearly since its inception, I have a long memory. At first we were concerned with getting people into the plans – however we could do it - and that involved a lot of fancy, expensive, communication programs.

Once we realized that we still didn’t have everyone saving enough for their retirement, we thought it would be a good idea to give them more tools, choices and basically things they could hurt themselves with – like mutual fund windows and calculators to show all kinds of rosy, unlikely scenarios. We even gave them lifestyle funds to make it easier for the “uninvolved”. So they merrily opted in, deferring a percentage into each one of them!

And after about 1 trillion cries of “Can’t you just tell us what to do?!”, we came up with a safe, approved way to offer advice. We even offer it on a few levels: guidance, advice and one of those other “M” phrases: managed accounts.

But are participants any better off? Do we even know? Well, that would depend on what, or whether, you’re measuring:

• Participation rate
• Savings rate
• Investment mix

Each one needs to be in balance for each individual, it’s not enough to look at plan aggregates, which can be misleading. How does your plan measure up?

EFFECTIVENESS IS KEY
Don’t be fooled by “Of course we measure! We can get that report for you any time you ask.” You shouldn’t need to ask, and they shouldn’t have to go dig up the data. It should be built in. And you should be able to see what has happened to each individual in the plan – and whether or not the needle has moved in each critical area.

It can be very gratifying to see the results. In the case announced last week by Schwab, they’ve seen participant savings rates more than double when using managed accounts. (Yes, they're using GuidedChoice. And we’re proud of it! Read the whole story from Plan Sponsor.)

NEXT TIME
In the coming months, I’ll continue with this next wave of proactive accountability. Feel free to submit your own issues and opinions by replying to sgrabot@guidedchoice.com

By having an open dialogue, we can move our vision forward and help people reach their goals.

~~ Sherrie