Thursday, December 12, 2013
They would also get prompted to opt in to their companies' 401(k) plans or increase their contributions.
Now Ready, the Charlotte-based director of Wells Fargo's institutional retirement and trust unit, is hoping to get companies to buy into that vision.
Steps taken so far, he said, include Wells Fargo discussing the concept with the companies for which it services retirement plans. He said the response so far has been positive.
In addition, Wells Fargo is examining possible partnerships with software vendors that provide the human resources portals used for benefits enrollment, Ready said. He stressed that Wells Fargo is in the early stages of coming up with concepts for such partnerships.
Ready said the goal of such efforts is to make the idea of retirement saving more front and center for employees than it currently is.
"If you think about benefits in general … dental, vision, health care … there’s a whole process that’s very well-defined around that," he said. "For some reason in this country, and within the corporate benefits space, we have moved retirement out to the side.
"We're trying to drive the importance of it. If you think about it, it’s the second biggest decision you will probably make that will impact your long-term financial well-being, in addition to health care."
Ready talked about the issue with the Observer Wednesday, when Wells Fargo and Gallup released results of a survey on retirement saving. The survey found that optimism among people investing in retirement plans fell eight points from August to November as investors lost confidence in the economic recovery. Although the investor and retirement optimism index remained in positive territory, it dropped to a reading of 25, its lowest level this year.
The poll also showed that investors who are making regular contributions to 401(k)s or 401(b)s, or taking regular disbursements from them, are more optimistic than those who don't have such plans.
Among other noteworthy survey findings, 45 percent say now is not a good time to invest in the stock market, even though stocks have been surging this year.
This month, Ready became the sole director of the unit after Laurie Nordquis, who is based in Minneapolis and was also director of the unit, was promoted to head Wells Fargo's personal and small business insurance operation.
Ready has been with Wells Fargo and its predecessor companies, including First Union and then Wachovia, for 28 years. Among other things, his unit services roughly 5,000 retirement plans for about 3.6 million 401(k) participants and pensioners of various companies.
Ready talked with the Observer about the poll results, the lender's push to get employees to think more about saving for retirement and other topics. Questions and answers have been edited for brevity and clarity.
Tell me more about these efforts to get companies and employees thinking more about retirement saving.
Those are things that we're working on internally right now. Our goal would be maybe to partner with, and we're sort of working through this from a concept standpoint, some of those firms on those HR portals.
Right now we're sort of in the formulation stage of these ideas. One of the dialogues we’ve had, and this is really resonating with companies, is … how do we move retirement into that enrollment process with the same visibility as these other benefits and at least make sure that people understand it is important, it is primary and it needs to be considered in the context with all those other benefits on an equal basis. The reality of it is … the defined-contribution system is going to be the primary benefit for you. We need to bring it into that decision-making process.
As you see it, saving for retirement hasn't received the same emphasis as enrolling in health care and other benefits. Why do you think that is?
If I ask people "Why have we moved it to the side?" the best answer I've gotten is that's the way we've always done it.
What prevent companies from making it part of the annual benefits-enrollment process?
The broad objection right now is primarily around the technology change and development they have to put in place to do this. I think this will gain momentum, because the response we've gotten around it as an idea has been really positive.
Regarding the survey results, what was your reaction to the drop in the index from August to November?
I was actually surprised. I thought it would have dropped more, given some of the budget stalemates, the debates, the government shutdown and some of the broader, macro economic issues.
What were some of those macro issues?
Health care costs was a big concern, unemployment, underemployment (and) wage stagnation were sort of the leading, top three macro economic issues.
Bankers these days say businesses are reluctant to borrow because of uncertainty about the economy and government policy. Are those things impacting how much people contribute to 401(k)s?
Within our broad book of business, I would say the average savings rate remains flat. So, it’s not increasing, which we think is really important; if people really want to hit their goal, the only way they’re going to get there is to save. The average deferral rate has stayed pretty constant … over the last three years.
What about the number of people participating in 401(k) programs?
That’s not growing.
Stock prices have been climbing, so why are people reluctant to invest in the market?
People are still feeling the effects of the drop, the financial drop, that they had in 2009. I think people are still skeptical. You might think that, broadly, those that were near retirement during that era, that saw a significant drop in their balance, might be the ones that would have the longest memory. When we look at the age demographics, we would say it doesn’t really stand out that way.
People just are not convinced on the recovery or they’re just skeptical because they’ve seen this drop four years ago and are really hesitant to go back into the market. That’s something that we have to work to correct.
With the stock market hitting record highs this year, are people making big changes to where their money is allocated in retirement plans?
We have not seen a big change in allocation. Inertia's a tough thing within these plans to overcome. People just fail to act.
What's your financial resolution for 2014?
I don't think it changes from year to year. I max out on whatever I can from a retirement standpoint. I'll just continue to do that. Three years ago, I got the magic touch of catch-up contributions; that's an eye-opener for you when you hit that age. Then I sort of continually focus on, at the same time, trying to just pay down debt.
The one habit I am in is I do take the opportunity to kind of step back and look at everything and include my wife in that process.
The only other resolution is I want to spend time in Charleston, at the beach.
Posted by Deon Roberts at 12:25 AM