Press Room
Personalizing Staff Investment Portfolios
Boston, MA, June 08, 2008 – We hear a lot these days about the possibility of people outliving their retirement funds. The University of Miami recently decided to offer a new benefit to help faculty and staff manage this risk. This action was taken partly because in 2005 members of faculty- and supplemental-retirement committees expressed concern over losses their colleagues incurred during the market downturn of the early 2000s. The simple fact was that some university employees felt they were not able to retire when they had planned, as a result of these decreases in their retirement fund balances. This led to further discussions in these committees (made up of staff, faculty, and trustees) related to inadequate overall retirement savings.
The committee members put their heads together and decided to consider outside firms that provide professional investing advice. We’ve recently selected a provider and initiated a system that shows early promise for helping our staff plan and fund retirement. Here are the steps we took to identify, select, and implement this service.
Too many choices
For some time, administrative staff has had access to a supplemental retirement plan; faculty have had a defined-contribution plan. Because we never wanted to tell people that they couldn’t use the plan carrier of their choice, we’ve supported a huge array of investment alternatives. Carriers included Fidelity Investments, TIAA-CREF, T. Rowe Price, and others.
As a result, plan participants were having a hard time choosing a carrier and deciding which funds to select. So, we began thinking that we should either narrow down the choices significantly—as some employers do—or come up with another solution.
Which way to go?
In considering a new strategy, committee members noted that more than education, investors wanted a professional service recommending the funds in which to invest. Since investment advice is not a core business of the university, committee members thought that a professional service provider would have more resources readily available. Also, a firm that is not providing the investments can give an unbiased view of the fees charged for similar types of investments that individuals may be considering.
Such a company could (1) give advice to employees, allowing us to keep all the options we offered; (2) help narrow down the choices that made sense for individuals based on their risk tolerance; and (3) review other factors that should be considered when setting up an investment portfolio. We knew that whether it’s a small portfolio or a larger one, some of the same factors go into that decision making.
Based on these considerations, we decided to hire an outside, third-party investment adviser.
Selecting the Right Service
Members of the faculty- and supplemental-retirement committees, with the approval of the board of trustees, set out to move the idea forward. As chair of the retirement committees, I worked with the human resources and benefits team to staff the project.
We hired Towers Perrin, a global HR and actuarial consulting firm, to assist in determining possible providers. The firm identified six companies and invited them to respond to a request for proposal. Two companies responded, and Invesra (www.invesra.com) was the provider we ultimately selected.
Implementation Challenges
Rolling out the service included some difficult aspects. First, we had to obtain buy-in from our five investment providers to cooperate with Invesra in clarifying the various participant accounts (employee vs. employer; 403(b) vs. 457(b); accounts from other employers; and so forth). In addition, our IT department needed to set up a method to identify employees, to ensure that outsiders were not using the service. Fortunately, benefits administration interceded and was able to obtain the necessary information directly from the investment companies and pass it on to our third-party provider.
Once we resolved these matters, we were able to kick off this service. Our timing was good, since we were coordinating the launch with changes to the retirement plans. We rolled out a new defined-contribution option called the Retirement Savings Plan on June 1, 2007, to new hires and allowed participants in existing plans to choose the retirement plan in which to earn future benefits. We now offer the advisory service to all participants in the Retirement Savings Plan; to faculty who are still in the previous Faculty Retirement Plan; and to people who use the supplemental retirement program.
Training on the system has gone well. The service is Web-based, and the provider assigns an on-site staff person to meet with employees who need assistance or have questions.
Early Responses, Future Plans
Staff have responded quite positively to the new benefit. Many individuals had not been investing because they were intimidated by the number of funds offered. Now, the investment service can sift through the more than 400 funds and, based on employees’ answers to some basic questions, create a personalized investment portfolio for participants.
Over time, we hope to integrate the investment service into the new-hire process, so that employees can start saving for retirement as soon as they come on board. We’d like employees to view retirement planning as a lifelong project. By determining regularly if they are on target with their investment goals and adjusting their allocations as necessary, staff will have a better chance of their funds being sufficient for retirement.
SUBMITTED BY Diane Cook, vice president and treasurer, University of Miami, Coral Gables, Florida
This article is reprinted, with permission, from the June 2008 issue of Business Officer, published by NACUBO, Washington, D.C.
About Invesra
Invesra provides internet-based investment management and retirement planning services to consumers for the management of their retirement assets. Invesra's service is delivered to consumers, employer groups, financial institutions and affinity groups through its proprietary internet platform utilizing sophisticated and objective investment methodologies. Invesra, whose management team has extensive experience in leading financial institutions, is a SEC-registered investment advisor.
