When I started Aptus, it was initially because I saw people falling victim to conflicted advice from people posing as advisors but who were actually salespeople, selling insurance or annuities. I wanted a business where people could find an advisor whose ability to make a profit was not tied to the client’s financial decisions. For example, if I buy your annuity you make a LOT of money; if I don’t buy it you make ZERO money. That is hardly unbiased advice.
But what happened was I started getting clients who were quietly referred to me. They walked into my office with fear and sometimes real shame because they didn’t have enough to retire. In many cases they were making 6 figures and were 70 years old with little to show for the money, desperate to stop working but trapped in long working days. And there were many variations on that same theme.
The world loves to judge these people, but before you judge let me tell you about them. These people are kind and generous; they are volunteers and leaders in the community. Their lives weren’t full of the frivolity you might expect. There was the unexpected illness, caregiving for a parent, subsidizing a parent’s retirement, taking on their kids’ student loans for them to go to college, or even putting everything they had into addiction rehab to give kids a chance. I promise their stories would pull anyone’s heartstrings.
But the reality is that had they saved early and even modestly, I am convinced things could have worked out differently. So why didn’t they save?
Let’s think about it, and most people reading this will nod in agreement. When was the last time someone actually sat down with you and made a compelling case for you to save at least 10% for retirement? How many of you have been in a 401(k) plan where the plan sign-up is somewhere buried in a stack of other papers, and you have an hour with an HR person just to go through this assembly of paperwork. You are too nervous about your job to even think about the plan, so you just let them auto enroll you at 3%, assuming you will get back to it later. And then you never get around to it.
Or maybe you get motivated and attend the annual 401(k) session. For an hour some guy with slicked back hair in a tie walks through asset allocation and relative investment performance. You don’t know what asset allocation or relative investment performance even means, but everyone else seems to know. At least some people are nodding. So, you just sit back and listen. The advisor makes some kind of mumbling remark that he is happy to speak with anyone about the plan, but you don’t have any desire to do that. What would you discuss, anyway? Then you leave—vowing to understand things better next year.
This is not the way to get people to save, folks! And this is how most retirement plans are run. From the perspective of the advisor, a retirement plan is a great deal. Let’s say a typical advisor has a plan with 100 people in it, and there is a plan balance of $10 million, mostly built up by the highly compensated employees in the company. The advisor takes a fee of 0.50% of assets from fee kickbacks on the investments in the plan. That’s $50,000. Let’s assume they come once a year and hang around the office for 2 full days. If they spend 16 hours in your offices and maybe another 4 hours on administration of the plan throughout the year, they just made $2,500 an hour! That’s pretty good money. In fact, that seems to be the game. Win the retirement plan, do less and less work each year, and make more and more money as the plan $$$$s grow.
It’s like winning the lottery of financial advising, right?
Except there is a major loser in this world--the many people under-saving each year (or not saving at all).
So I decided to do something about it.
In our world, we don’t believe in conflicts of interest from getting paid through fund fees or a cut of the plan balance. We make the unusual decision to have the plan pay us a flat dollar amount based on the actual hours spent on the plan. We believe people deserve to be talked to—in real words—about the stuff that matters. We personally ask people, both in groups and individually, to save enough, to invest in themselves. We never want people to judge themselves or feel shame. I love seeing the transition of a person who walks in with arms tightly folded across their chest, probably embarrassed about not having saved enough, into a laughing, jovial person ready to take the plunge into saving. We see the effects of us all living in such a harsh, judgmental world, and I think our forgiving presence is disarming. It opens the door to people making good decisions.
Over the past two years, in the plans we advise—encompassing nearly 2,400 participants—here is what has happened.
Savings have grown 50%. In all our plans. That’s FIVE ZERO. And it’s consistent. I once had a pitch at a local business accelerator regarding our approach to retirement plan and when I mentioned the results the guy running the accelerator asked for a clarification. Wait—are you saying a 5% savings increase? No. Not 5%. 50%.
One of our concerns was that our data could be skewed. If you get a bunch of the higher paid employees saving more, then the dollar amount increase could be a little deceptive. But we went into a large analysis in our first plan and found that the savings rate increased by 80%. EIGHTY!!! That means the savings increase was actually driven more by the front line, lower paid employees than the higher paid ones!
Over time as we add more plans, we expect to gather more data to document these dramatic savings increases. We dream of replicating the Aptus model on much larger plans, like public employee retirement plans.
In conclusion, our dream is to help create great employer retirement plans. It is how we can reach ordinary folks who would never otherwise get a financial advisor who is truly only interested in what’s best for them and getting them to save more money. We imagine a world where people get to retire. With dignity. On their own terms.
Join the Aptus movement.