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Technology Key to Navigating Financial Crisis: Retirement Plan Advisor, May 2009

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The financial market downturn has had a tremendous impact upon the retirement industry, and one issue that has come into the spotlight is the increasing need for top-of-the line technology.

As such, experts like Scott Kilgallen, managing director and head of retirement sales at Goldman Sachs Asset Management (GSAM), believe that there will be a much more sophisticated and technical approach to defined contribution (DC) plans. Indeed, the crisis and the heightened volatility have further underscored the need for advisors to help plan sponsors create a well balanced and diversified investment lineup, he says, and this in turn calls for greater specialization using sophisticated research and analysis tools.

Even before the crisis, GSAM had hoped to offer its advisors a comprehensive investment analysis tool to help them build better investment menus for their plan sponsor clients and, ultimately, retirement plan participants, Kilgallen says. Now, the company is in an even better position to do that as a result of its collaboration with data provider Morningstar, to offer the Morningstar Advisor Workstation.

“The Morningstar Advisor Workstation does a great job of not only analyzing investment performance and style, but also fees and expenses–important issues today,” Kilgallen says.

An advisor’s time is very precious and advisors want information that’s but a click or two away, says Richard Mason, president of corporate markets for ING U.S. Retirement Services. The ING Institute for Retirement Research recently conducted a survey to determine which services are important to advisors, and technology scored high on the list, Mason says.

ING continues to invest significantly in technology, and has a particular focus on developing tools such as the Benchmark Wizard, which allows advisors and sponsors the opportunity to compare their plans to other plans.

“A lot of times we hear people say they want to see how the match of a particular plan compares to matches that other plan sponsors have,” Mason says. “Advisors and sponsors want that kind of data so that they can be more effective in their guidance.”

Peer comparison is a top consideration for most advisors today, agrees Chris Boruff, president of advisor software for Morningstar, and the Morningstar Advisor Workstation allows for precise and concise comparison. The tool enables advisors to compare a retirement plan’s existing investment lineup to a proposed lineup by analyzing retirement plan-level statistics; ensures consistency with the investment policy statement; views style diversity, consistency, risk and return, and category performance scores for entire plans and individual funds in a single, easy process. It also details the fee and fund expenses to a plan’s overall cost. “We’re seeing a much greater call for information that allows for very specific comparison, with all the volatility in the market,” Boruff says.

Having the right technology tools is also important at the individual plan level. ING offers an on-demand reporting tool for plan-level reports, which is designed for the sponsor’s own participant base, and helps highlight investment education opportunities and plan participation gaps, Mason says.

“Some tools are designed for to dig deep for information and some are more about saving time. But at the end of the day, it’s all about getting the information on a particular plan so that an advisor can help the sponsor take the next step,” Mason says. “Advisors and sponsors have a desire to help effect a positive retirement outcome, so having tools that enable them to figure out the opportunities for improvement is important.”

In seeking the best options for their clients, plan sponsors and advisors are also more and more focused on proper portfolio construction and a more sophisticated approach to investing. As such, GSAM has also been investing in its manpower and now has 12 specialists focused solely on the advisor community.

“We are bringing an institutional approach that includes more diversified investment menus and enhanced service and support to the DC marketplace,” Kilgallen says. “We believe these advancements are crucial to the continued success of the DC market.”


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