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Retirement Specialist

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The question of retirement is one of the biggest issues facing our society today. It’s part of the healthcare debate when the subject is Medicare and Medicaid. It’s a factor in discussions about the federal deficit and funding the Social Security system. It’s the unacknowledged presence in the unemployment picture–more and more people feel they can’t afford to retire, at least not fully.

More than ever the need for help with retirement planning is what drives individuals and businesses into the offices of advisors. If the advisory firm they turn to is Rehmann (pronounced RAY-man) Financial in Michigan, then Gerald Wernette is likely to be the man behind the help they receive.

Wernette has been with the firm for 26 years and joined when Rehmann, one of the largest CPA and business-consulting firms in the Midwest, only had two offices and about 65 employees. Today there are nine offices throughout the state, four more in Florida, and more than 600 professionals on its payroll. Rehmann has four divisions: Rehmann Robson, certified public accountants; Rehmann Consulting, business management advisors; Rehmann Financial, comprehensive financial planning; and Kerby, Bailey and Associates, professional investigation and security consulting.

“We were what I would label a traditional tax accounting auditing firm with a very entrepreneurial spirit,” Wernette recalls. “That spirit was driving a lot of ancillary services, mainly in the consulting realm, and as the firm grew, it grew both through internal client growth and through mergers throughout the state of Michigan.”

One of those mergers in the late ’90s was with a firm that had a healthcare accounting practice. Up until then, Wernette says that Rehmann’s principals had been trying to figure out how they could position the firm to deliver a whole realm of financial services, not just traditional accounting services. “Over time, we kind of cracked the nut, if you will, on delivering financial services in an accounting practice and being able to team up with the accountants and that trusted relationship that they have with their clients and connect the dots on the financial services side. Rather quickly word got out and we started to add advisors around the state that saw the vision. We started to develop services that we were bringing to our customers whether it was in the wealth management or the retirement plan arena.”

Wernette’s role in the firm had been managing a third-party-administration (TPA) practice specializing in retirement under the consulting umbrella in Rehmann’s accounting practice. In January 2006, that practice was merged into Rehmann Financial, “combining that with what we were doing on the advisory side for retirement plans and turning it into a robust, full service retirement plan consulting administration and investment advisory practice,” says Wernette. “Our retirement plan practice in conjunction with our wealth management practice continues to draw a lot of attention in the accounting and the financial services professions as we’ve been moving around the country and telling our story to different firms and advisors. We seem to have developed a formula that’s really working for us.” (For those advisors thinking of getting into retirement plan consulting, Wernette has some specific advice: see the “Advice for Advisors” sidebar.)

Serving Plans and People

Wernette’s group works with both individual wealth management clients and retirement plans. “On any given day we may be providing services to a plan as a whole and then sitting down with individuals within that plan and working with them specifically. We also have many clients that are employed in other places and we don’t touch their retirement plan per se, but we’re dealing with those individuals more on a wealth management side and incorporating into that retirement planning for those folks,” explains Wernette.

Rehmann’s retirement services group includes 32 individuals, in addition to Wernette, who provide a variety of services to about 1,000 retirement plans, which run the gamut from those with a sole participant up to ones for 15,000 employees, although the average is 25 to 500 participants. In terms of assets the largest plan the firm handles contains $50 million.

When it comes to retirement plans, Wernette says that Rehmann Financial can handle the client’s needs from enrollment through education and ongoing investment management. If the client is the employer sponsoring the plan, Rehmann is likely to handle the whole thing; if the client is an advisory firm, then Rehmann is likely going to provide administrative services.

In order to provide a better understanding of how the process unfolds, Wernette explained the way his group works with a new retirement plan client. The first step is get employee census data– birth dates, hire dates, compensation, etc.–and then sit down with the employer to determine the goals and objectives for the plan. “What is the owner looking to get out of the plan? Are there any key employees that he’s specifically trying to benefit in some way? How much is he willing to spend on his employees as a benefit? From there and with that census data, we start crunching out some plan design options and walk him through those options,” explains Wernette.

Once Wernette is confident that he has a plan designed that will meet the owner’s objectives, he starts looking for the right investment platform. “That part gets back to the makeup of his workforce and what kind of individuals we’re dealing with: how much guidance they may or may not need on the investment side; any specific objectives that the owners or key employees may have,” he says. “We can deal with just about any investment platform that’s out there and find the best one that’s going to be the best fit for our client.”

The Benefits of Scale

More on this topic

One of the advantages of a firm the size of Rehmann is that the skills of a wide range of professionals are available in-house. For investment guidance Wernette relies on Rehmann’s 10-person investment research department. “In the retirement space they help screen the platforms that we look at, help us sift through the hundreds of options that may be available on a platform, and siphon that list down to a menu that we’re going to recommend to our client,” he explains.

In terms of retirement investing, one of the most heralded advancements in recent years was the development of target date funds. The big hits that virtually all mutual funds took in 2008 and early 2009, however, have caused many investors to question the original premise of the funds.

“I still think target date funds can be a great solution. The problem we’ve had is that on the surface the target date funds were very easy to understand. Underneath the surface, nobody knew what the heck was going on,” says Wernette. “Unless you sat down and started tearing them apart, nobody had a clue on what the underlying cost structure looked like.”

Without a common set of guidelines, potential investors could look at two funds with the same target date but each of which might be based on an entirely different set of assumptions. When the bottom dropped out of the equity market, he notes, “It caught a lot of people off guard.”

Although he still thinks that target date funds are in principle a good idea, Wernette stresses that the advisor has to be able to break it apart and explain to both the plan sponsor and participants how the fund works and if it meets the needs of the investors. “I think target date funds are here to stay, but they’re going to have to do something when it comes to creating some standard as to what the target dates can call themselves.” Moreover, Wernette belives that the organizations that provide the evaluation tools to monitor the plan’s investments are going to have to figure out how to monitor the target date fund with those evaluation tools.

The need to come up with investment solutions for retirement plans is only an issue for about 20% of Wernette’s clients. He says that about 800 of the plans that he works with are managed by another investment advisor. What Rehmann provides to them are those TPA services.

Making the Most of the Recovery

One of the biggest psychic casualties of the recent worldwide economic upheaval has been the confidence of Americans that they will be able to maintain their lifestyles in retirement, or possibly even retire at all. “Nobody’s been free from those kinds of feelings,” acknowledges Wernette. Like many advisors, during the months of uncertainty in 2008 and early 2009, Wernette and his team accelerated their efforts to keep open lines of communication with clients. “We’ve found our clients were looking for more guidance from a professional perspective. There’s been plenty of press out there regarding alternative investments and using ETFs and all those sorts of things that are a little foreign to the average investor (see the ETF Advisor on page 42 for more on the place of exchange traded funds in retirement plans). We’ve certainly been spending a lot more time taking a look at those options, looking at how we can incorporate those into what we’re doing for our clients in the retirement plan arena, and spending a tremendous amount of time just educating our clients,” he says.

The educational efforts of Wernette and his team are aimed both at plan sponsors and participants. At the sponsor level, Wernette says the big issues revolve around fiduciary responsibility while for individual participants the goal is “to provide participants with an environment where they can get the kind of guidance that they need to make good investment decisions and not be in a position where they’re constantly second-guessing themselves or allowing their emotions to take control and head them down a bad path. We’ve been working with managed options, advice tools, things that are going to position participants to make better investment decisions in the long haul. We find that’s becoming a bigger and bigger part of what we’re bringing to our customers, because either directly or indirectly that’s what they’re asking for.”

The crisis in the financial markets has taken its toll on many advisory firms, some of which have seen assets decline due to both market forces and loss of clients. Wernette acknowledges that Rehmann hasn’t been immune from those forces, but notes that the retirement plans that they’ve lost have come from those for whom the firm was not the advisor, but the third-party administrator.

At the same time, Rehmann has managed to draw in new business. “We picked up more new plans this past year than I’ve had in any other year that I’ve been tracking this stuff,” he says. He says that all the attention in the press on retirement has certainly kept the subject front of mind and that Web sites such as [Editorial disclosure: is a property of Summit Business Media, which also publishes Investment Advisor] and make it pretty easy for advisors to get information on employers’ plans.

“The whole issue of fees has certainly been resounding out there and it’s caused employers to take a hard look at how plans are structured and wanting to gain a better understanding of what the fees are and how they,” he says. “It’s not all about the investment options.”

While he spends his workdays immersed in ways to help other people stop working, Wernette remains steeped in enthusiasm. “What excites me most about the job is the fact that I have the ability to make a difference in people’s lives in a very deep, meaningful way,” he explains. “What’s really cool is they may never know that it was me, or my wisdom, or the help I provided. It’s also kind of scary when I put it in that context, too. It gives me excitement, but it also humbles me because of the responsibility that’s connected to that. I think the combination of those two really help to keep me focused.”

Managing Editor Robert F. Keane can be reached at [email protected].