The Hire thru Retire Podcast

JD Carlson on Legislation, M&A, and Long Boards

• Voya Financial • Episode 17

Share episode

In this episode, Bill and Heather and joined by arguably one of the coolest guys in retirement — Owner of Plan Design Consultants, JD Carlson. JD is also the host of Retireholics, a weekly show where retirement industry professionals get together to talk shop. And, while he spends most of his time talking to folks in varying roles across the retirement plan industry, we’ve asked him to the podcast to share his own perspective to provide a “state of the industry.”

 

Bill Harmon is a registered representative of Voya Financial Partners, LLC (member SIPC).

Plan Design Consultants is not a member of the Voya® family of companies. 

 

CN1873214_1022

Speaker 1:

You're listening to hire through retire, a health and wealth podcast with, for your leaders, bill Harmon, and Heather LaVale tackling the old things from 401ks to HSS and everything in between. We're talking to the best and brightest in the industry to bring you the latest in health, wealth, and investment trends in the workplace. Come along with us on our journey to help all Americans become well-planned well invested. And well-protected

Speaker 2:

Welcome back to hire through retire health and wealth podcast. We've had a lot of fun on this program since we first kicked off and we're so appreciative of everyone tuning in really just love to hear us talk. I'm also sure that we're going to have even more fun with today's guests, but before we get there, I'd like to introduce you again to my trusty friend, colleague and cohost bill Harmon. Hey bill. So nice to see you again.

Speaker 3:

Hey, thanks Heather. Happy to be back with everyone today. And, and you've said it, you know, this really has been fun and we're excited to be back again today, but you know what today joining us is arguably one of the coolest dudes in retirement. If you want to go to a point break reference, he's the Bodie of retirement right here. And it's the owner of plan design consultants, JD Carlson. He's also the host of retire. Holics a weekly show where retirement industry professionals get together to talk shop with an occasional beer in hand. And as a former guest, my cell phone on his show, I can say firsthand. It is an experience, but time well spent talking with some of the best of the best in the industry. So we heard JD like our old pod. We had to get them on here. So JD welcome. Great to have you on the pod. Thanks for joining us.

Speaker 4:

Yeah. Yeah, it was, it was fun having you on our show bill. And I'll say what every podcast guests always says at the beginning, I'm happy to be here. Happy to be here.

Speaker 2:

We love it, JD. And, and you know what I got to say that there's a lot that bill and I can learn from you as the podcast professional. So we're super excited. You're on the show with us and you've gotta be a short boarder or those are not just decoration, right? Yeah.

Speaker 4:

Yeah. I've got, you know, it's funny as I've got nine boards here at the office and I've got no joke, like probably 35 at home in my garage. Yeah. That, and yeah, so I, I've got two long boards that are mostly for people come to town or you want to push someone into a wave. Um, but they gathered dust and I ride a variety of boards between five, four, and six to, you know, yeah,

Speaker 2:

You're a gig. I won't say the word on a podcast, but you're an engineer, you know what,

Speaker 4:

Yeah. So w why don't we mix it up? Let's do 20 minutes of surfing on the higher, through the tire pod.

Speaker 2:

So I'm going to jump right in and, and I've got probably a long-winded question to start off with. So you, you spend so much of your time talking to folks about varying roles across the retirement plan industry. So we know that you hear a ton of views about what's going on in the industry, but, you know, we've asked you here today to help us by sharing some of your own perspective about giving us and just a state of the industry. So we've got a few topics to tackle. So let's start with a broad one around retirement savings. And for us as a retirement provider, and for you as a TPA, helping individuals prepare for a secure financial future will always be our priority. But what's really interesting today about planning for the future involves so much more than just retirement and the financial burdens like student debt support, building emergency savings, which really put a spotlight on COVID-19 is really top of mind. So when it comes to advice, what are you focused on most of these days? And how do you see that going into 2022?

Speaker 4:

Yeah, I think when you hear my thoughts too, it's always important to put them in context, like I'm obsessed with the financial advisor, you know, the retirement plan advisor and how they go about tackling their jobs. So that's where a lot of my thoughts come from, but I think what's front of mind for me these days is if you would've asked me five years ago, I would've said I was a total fan of the specialists, right? The, the advisor that does nothing but service the 401k plan. So they're not, they're not helping with financial planning or wealth management or getting involved in any of the other benefits. I actually felt like back then, like that would be a distraction. Well, I looked back at my five-year five years ago, self and say, you are so wrong, JD, you're so wrong. Um, I am completely on board 1000000% with this concept of convergence, this health, wealth, and retirement. And now I'm like so excited to see what advisors will create, what types of solutions they'll bring to their clients to help in these other spaces of all benefits. And so to me, that's it like, that's, that's the topic that pops up. Every one of my podcasts, every conversation I'm having with, whether it's a big firm or a little firm, is this concept of convergence it's real, and it's going to change the landscape of our industry. And, um, I'm excited to see what it, what did it look

Speaker 3:

And a big, good conversation topic for this time of year, because obviously we're in open enrollment and people are thinking about these decisions and balancing decisions. And my question is going to go towards, you know, no two individual employees are alike each of their situations, financial situations, different family situations, different. And so one of the ways that we've heard many advisors and TPS kind of support how to customize or how to really personalize some planning could be through managed accounts. Does this, is this something you've found to be true? And are you seeing a lot of demand for managed accounts from your clients? Do you think it's a way to provide more customized solutions to a client?

Speaker 4:

Yeah, for sure. So it kind of ties in with what we just talked about a little bit, which is, I think the old 401k solution was a lot of defaults and a lot of kind of simple answers for things. And I'm not sliding target date funds because I think they're a great solution. And I think target date funds will evolve as well. Like we're seeing different types of methodologies around those, but manage accounts, service as a more customized solution is very, very popular these days. And again, not all managed accounts, service solutions are the same. I keep talking about how excited I am about new things coming, but look at managed accounts, like there's a lot of evolution happening there and a lot of new types of managed accounts. And so I'm excited to see where they go and yes, what, what they're doing is getting more granular, right. And helping different participants with different needs, not every 45 year old has the same risk tolerance. So if we can pull data from these participants, understand their specific situations a little more and give them more flexibility in terms of their portfolios and the investments that we're putting them in, then those are great things. And they're huge right now. Yeah, they're, they're everywhere. So every big time advisor seems to have a managed account service that they're promoting and behind. And for good reason,

Speaker 2:

I'm going to pivot your excitement a little bit onto another topic that, uh, whether you'd say it's exciting. Um, it's certainly one that, that we all spend a lot of time on and that's the topic of legislation. Um, Awesome. Um, so we know that there's just a lot of different regulatory changes going on in the world. You know, we saw one of the things coming out of 2021, um, in the passing of the secure act. We're, we're the PEPs, the pooled employer plans, you know, certainly a game changer for the industry. Um, but as we look at 2022 and now the potential passing of secure 2.0, what's top of mind for you, what are you talking to your customers about? Um, you know, and what kind of advice do you give around sort of this, uh, legislation and what's proposed

Speaker 4:

So secure to point out lots of neat things and secure 2.0, I'm going to kind of steal from Frederick. One of the ones I'm most excited about is the saver's credit back to the employer, so that what it is that they upped it from 50% to a hundred percent and it's 5k annually. And you can even believe in offset, uh, give you a tax credit for employer contributions to the employees, to like a thousand bucks. So this is just massive. And again, stealing from Fred, he said, people have kind of overlooked this and that, the impact that it could have in terms of helping new companies, startup 401k plan. So, so that's the big trend is this, uh, the coverage gap and solving the coverage gap. And I think there's provisions in these new regulations that help that a lot. I like the college savings, you know, deal. I like the, you know, paying off the college loans through the employer match. I think that's interesting. I love the push on automatic enrollment. We need to push that harder, especially in the small and micro market. And I think that legislation helps to do that. Yeah. Secure two pornos. Good, good, good. Let's just hope a dog goes through here.

Speaker 2:

Read my mind a little bit on, you know, some of the stuff you talked about, the savers credit and the student minds, when you think about some of the legislation that could dramatically improve the retirement readiness for all Americans, you know, what are some of your thoughts about it for, for employers? You know, what are you hearing? And I think about pros and cons, you need to say supportive of, of those that can help many small employers start these plans. Maybe give us a little bit more of your thoughts broadly about what's on the horizon.

Speaker 4:

I think the biggest one is we heard, we heard Brian Graff from the American retirement association, talk about this federal mandate, you know, and so, and th and this comes close to home for me because I'm for your audience. I'm here in California and California has a state run plan that is mandated. So we have a deadline next year in 2022, where if you have five or more employees, you have to have a retirement plan in place. And I think at first, everyone here in California advisers providers, the industry was a little fearful of it. And then once we kind of understood it, and now that we've experienced, it's like a boom for retirement plans because employers have to focus on this, right? They have to pay attention to it. It's a mandate. They must do it. And so they naturally think about what their other options are. And so we've seen it here in California for the last few years, and we've never put in more new plans, right? So it is helping the coverage gap in California, if it goes nationally and there's a federal mandate, I mean, great things are going to happen. I mean, we are really going to put a dent in the coverage gap and I, and I think that's the best way to do it. Brian Graff said, uh, he's looking at six, some study that he looked at said like 615,000 new plans, some$7 trillion in assets over the next 10 years, you know, and these are all companies. I think the study was with an average of like 12 or 15 employees, something like that. So real small mom and pop shops like that to me is there's no bigger news than the federal mandate, probably

Speaker 3:

Really good for the TKA community, because a lot of these small plants need guidance. I mean, now all of a sudden, now they're being told they have to, to put this plan in, what do I do, help me out, make it easy for me. And, you know, I've grown up working with CPAs. They were always there to provide that support. So it should be a real good opportunity for the TPA community, from the switch a little bit, stay with legislation, but different topic, you know, earlier this year, the DOL published some information, security guidance, Theresa plans. And as a result, this provided a list of information, security, best practices for such plans and record-keepers and service providers that we could all follow in order to protect plan and participant data. And, you know, in today's world, we certainly understand and appreciate that there's a growing concern and really frankly, a need for cyber protection, especially we're talking about some individual's largest asset of retirement plan. So tell me, JD, how do you think about this in terms of the roles of the advisors and CPAs and how does it change what you're doing? Um, how do you consult your customers on this guidance and, and what are they asking about when this comes up,

Speaker 4:

When you think about them, and I've seen this live and in color now with clients, I really kind of like cybersecurity, cause it's something that the plan sponsor, the employer really understands. You know, we've been in their conference rooms for years, talking about mutual funds and different fund rankings and scores and fiduciary responsibility and regulation and documents. And these are things that, you know, aren't really exciting for them. But when you talk about protecting Joe or Sally's account balance and not wanting to have someone steal$250,000 from someone, they really pay attention and it makes a lot of sense to them. So I've found that the conversation around cybersecurity is one that they're pretty engaged in, and that that's a good thing. It's a good thing that they're engaged and it's good for the advisors that are servicing them because they can show value by helping them. But here's my, here's my take on it. You know, you've got all this stuff, all this fancy terms, right. SOC two and SOC three, and looking at all these internal controls and, and kind of, you know, putting a spotlight on recordkeepers right. And, and all the things that they do to protect from this, these, uh, bad actors from getting in there and stealing this money. I really think that the value might be in an audit of all the steps in the process outside of that as well. You know, like the human beings that are taking any emails, talking to participants, getting these very requests from people for these types of distributions. And so I believe that an advisor partnered with a client can really look at each one of these steps and try to find the cracks and then work to fix those cracks. And I've been seeing that happen. And it's a great moment because the advisor is able to provide additional value than what they typically did and the client understands it. And so then he was, that's my, my little piece of advice, everyone out there is you really do have to look at the humans and that means training them and, and, and limiting some of the things that they can do on their end. And then lastly, uh, I see this new focus on like insurance, right. Or what type of restitution programs are in place either at the record keeper outside. And I think that's getting a lot more focus and a lot more attention as it should. Um, so yeah, cybersecurity, the government's told us it's important. We heard them. And now as an industry, we're starting to really get good at benchmarking it, looking at it, fixing it and tightening it up. So, yeah. Fun, good stuff. I'm into it.

Speaker 2:

I love your, uh, your advice. And I think one of the things we hear about from our of security all the time is just, you gotta, you gotta operate as though your information's already been compromised. And so everything you're doing is, is, uh, with a sense of just a little bit of, uh, of skepticism when you're, when you're interacting. Right. So I'm going to switch like, w we've, you know, talked about legislation, we talked a little bit about cyber. Now, I'm going to go to another fun topic. And that's definitely one hot topic in our industry today. And it's all about M and a right. There's all ton of M and a taking place in our industry, whether it's in the record keeping space, whether it's an advisers CPAs, curious from your perspective as a TPA and as an industry expert, what opportunity as industry consolidation provided for you or conversely, does it pose any challenges and how are you advising your clients as a result?

Speaker 4:

Well, so first from the, from the TPA perspective, as in other TPS getting bought up by larger national firms, um, call me the optimist. But, uh, to me, that's good news for me, right? It's, it's not in my business plan. You know, my father started the company in 1975. It's it's my, now I hope we go on for another 50 years. So I don't plan to sell out to anyone. So the more of my like peers, you know, my look alike peers, I get bought up into a bigger firm to me is good because that makes my firm stand out. Right. We continue to be unique. There's less of me that's out there. And so I like that from a TPA perspective. Now, mergers and acquisitions on the advisor side is the one that's like really taking off. Right. So we're seeing these national aggregators. Many of them have been on our, on our podcast. And so I've got to hear straight from them. And I think it's cool. Like, I'm sorry to use the word exciting over and over again, but to watch these like great advisors from all across the country, come together and share tools and ideas. It to me is phenomenal and what's more impressive is they get together and they really build out like what the future should look like. Right. So, so they're evolving their service model and their solutions. And then I feel like the whole industry becomes the benefactor of that because even the small and medium size shops that are not part of these large national aggregators can learn from them and kind of tweak their business model. So, so it pushes us all forward. And, um, so I like it. I love the, the M and a happening in the advisor space. I think it's doing good things for our industry. That sounds,

Speaker 2:

No, it doesn't sound weird at all. And you know, I'm going to, like, this has been such a fun conversations. Um, you know, you, you, you commented about peers. I'm not sure JD the avenue, right. I think you are so unique and it is so much fun to talk to you today. So let me try to recap, right. We talked about the fact that as an industry expert, you totally shifted, um, how you view the role of advisor right now, instead of just 401k. They really need advisors to be thinking holistic and kind of get getting the convergence. And that's great talked about the importance of legislation and some of these things that are really going to help all Americans, right. Achieve the, the, you know, the future that they're hoping for and how M and a in particularly what you're seeing in the TPA and advisor space is something that can be really positive. So, you know, I love your perspective. Um, I just want to say that, uh, it is always so valuable to hear your perspective and insights. Um, I just would love your energy. Um, love your time and just thank you so much for joining us.

Speaker 4:

Yeah. It's been fun talking shop with you guys. Thanks for having me.

Speaker 3:

You mentioned your five-year-old self or five years ago. So now, and so on, I'm going to go back and think of my 20 years ago, self that I've worked with, you know, new known of you and your dad for a long time. And I'm not so sure that 20 years ago, I would have said, Hey, you know what, we're going to do multiple podcasts together, JD. So that's the world's change. It was great to hear you hear, um, it was a lot of fun and hope to have you come back again soon

Speaker 4:

And I'll keep 10 and in, and, uh, you guys keep doing that's awesome. I I'm such a fan of this medium, you know, just putting in earbuds and listening and actually part of what I'm doing tonight is to try to give Nevin and Fred a little spotlight for their podcasts or six episodes in. And so I think there's room for a lot of them. And I just think that once advisors tap into some of these better podcasts, where they can really learn, it's such an efficient way for them to better their game, you know? So, yeah.

Speaker 3:

Yeah. Anytime I think anyone can get little snackable pieces that they can take with them and adjust their model. And I think that's great a hundred percent. I want to thank our listeners for tuning into today's episode. And as always, we hope you've heard some ideas that might be beneficial considerations. And if, to keep hearing the more, remember to go to our show page and hit subscribe, you'll be notified when we drop new episodes. Thanks again, for coming along on our journey today, stay well.

Speaker 1:

This information is provided by Voya for your education. Only need the voice nor its representatives to offer tax or legal advice. Any opinions expressed within do not necessarily reflect those of the way a family of companies, sports representatives, and are not intended to provide specific advice or recommendations for any individual. Please consult your tax and legal advisor before making the tax related investment or insurance decision products and services offered through the Voya family of companies.