Business Innovators Radio - Interview with Shaun Clearwater, with Full Focus Financial Discussing Unknown Flaws in Company Retirement Plans

Episode Date: March 13, 2024

Shaun’s start in the financial services industry came from his desire to share both standard and advanced financial strategies with middle America across the kitchen table. Since his start in 2004, he’s shifted his focus to the 401(k) space where it can have a greater impact as he can impart knowledge broadly and efficiently. Shaun is fortunate to be surrounded by his 3 amazing daughters and loves to enjoy a glass of red wine with his beautiful wife.Learn More: http://www.fullfocusfinancial.com/Influential Entrepreneurs with Mike Saundershttps://businessinnovatorsradio.com/influential-entrepreneurs-with-mike-saunders/Source: https://businessinnovatorsradio.com/interview-with-shaun-clearwater-with-full-focus-financial-discussing-unknown-flaws-in-company-retirement-plans

Welcome to influential entrepreneurs, bringing you interviews with elite business leaders and experts, sharing tips and strategies for elevating your business to the next level. Here's your host, Mike Saunders. Hello and welcome to this episode of influential entrepreneurs. This is Mike Saunders, the authority positioning coach. Today we have with us, Sean Clearwater with full-focused financial, and we'll be talking about unknown flaws in company retirement plans. Sean, welcome to the program.

Thank you, sir. Appreciate the opportunity. Hey, I'm looking forward to talking with you. I want to dive into this topic because I think that anytime you hear something about unknown, I want to know about it. So before we get into that, give us a little bit of your story and your background and how did you get into financial services? Sure, no.

I appreciate the opportunity to share that. I started getting close to 20 years ago. I was introduced to the idea of financial services way back when, way back when my grandmother wanted to start a Roth IRA for me, because she knew the value of time and getting started at a young age. And so she wanted to help me get started. And I remember there was an advisor that she worked with that I wanted to talk to too. And he was shy to be able to spend any time with me because I didn't have a certain amount of money in an account that deemed worthy of his time and energy. And that always kind of rubbed me the wrong way. And so I

I got started in financial services in an effort to eliminate other people's exposure to that limitation of access to financial advice. And I've worked for a number of different companies over the years from Transamerica Financial Advisors and Allstate Financial Services. And then I determined that it was really best for myself and for my prospective clients for me to be unlimited in my options. I never wanted to be in a spot where I knew about a better product or service that I couldn't offer. And so being an independent advisor, having unlimited access to all of the different companies and carriers that are out there,

all competing for my attention to put their product or service in front of the people that I'm meeting with, was really a really comfortable position for me to move into. So I've really enjoyed being able to bring the advice that everyone in the country deserves. without a specific limitation to how much money without limits, yeah, or anything like that. So I could go on. Or the limit of, you know, fitness square pig and a round hole like, oh, I work for XYZ company. And these are the products. You would never say that even when you're working there.

But you internally would feel like, oh, I wish that I could offer this or provide that. But here's the cadre of products that we have. And you felt limited. And it was something that once you go over to, you know, an independent and have all. the options available. Now you can take that full look at a client's needs and bring those holistic solutions to them and just make some great recommendations. So let's talk a little bit about the company retirement plans. With your specialty in working with entrepreneurs and business owners, a company retirement plan is going to be a big jewel in their, you know, offering to their

employees. What's the first thing that you start looking at when you are working with a business owner about their retirement plan? Sure. You know, this kind of started when I was working with a prospective client and she was showing me what one of the key components of her retirement plan was. It was a profit sharing account with a fairly large medical provider. And the struggle was that she didn't know how it was invested or and she didn't have any control over it. And so that kind of got me curious. And over the last couple of years, I've developed a focus on working with business owners on having quality. retirement plans that they offer to their employees and what those can look like. And what we really discovered was that there was a lot of old retirement plans that haven't been reviewed or analyzed and looked at to ensure that they're competitive and healthy. They just sat on a shelf until somebody decided to dust them off. So there's a lot of opportunity to help bring the type of education I was referencing a bit

ago to a large number of people all at the same time and really be able to leverage my experience. and education opportunities and put those in front of more people at once. Yeah, and it's almost like the employees in some cases never feel that benefit because they just see their retirement plan and they see, oh, look, this is wonderful, but it's the employer, the business owner that goes, wow, when we used to have this setup or these options, it was limiting and you've now opened their eyes and now look at this opportunity. So what are some of those misconceptions that the business owners have when, you know, like maybe when you first start talking to them and they say, oh, we're okay, but you say, okay, that's fine if you're okay,

but may I just point out this or this or this and kind of the light bulb starts going off? What are some of those misconceptions? You know, I think some of the misconceptions are focused on a lot of finger pointing. There are a lot of assumptions that all the different roles and responsibilities that exist within a retirement or plan from a plan sponsor perspective. So from the employer's side, they assume that, you know, the expectations. accountant that is doing the audit is also doing some competitive analysis, and they aren't, and they aren't even required to do so. And they assume that the financial advisor is ensuring that

all the funds that are on the platform are competitive and properly priced and covering all of the different diversification requirements. And you've just got so many different roles. You've got a number of people, all these different cooks in the kitchen, and they all are assuming that one's doing something that they're not. And so bringing that information to light is really valuable because, again, this type of program sits on the shelf. You know, they started a 401k plan because they had to. And it's a service and a benefit that they offered to their employees, but it doesn't

get the attention that it really needs. You know, as we've seen with technology and cars and how they've evolved over the years, there are so many changes that come along each year. if you don't take a minute to look at it or hire or ask for someone to give you their perspective on what you have, you may just not know. You don't know what you don't know. Yes, that's scary. So give us a couple examples of what that could look like because when you hear you don't know what you don't know, that's a little scary right there.

What might one of those things be where you can go, okay, I'm going to make a note of that one and see if that could apply to me. I think the most common one that I'm finding is that the administrative fees on these plans aren't competitive. And so one of the things that we're able to do with the tools that we have are some quick analysis metrics. And so we're able to measure how a plan's performing and how its fee structure is set up in comparison to other plans of similar sizes. And so what that gives us the ability to do is is show someone kind of a scorecard, give them a grade on how their plan compares to others. And that's not something that they immediately have access to without asking or trying to find this information. And so a lot of this we can do without even talking to them. So I have access to a database

thanks to the government's opportunity for us to see the publicly filed forms. There's this form that each retirement plan has to file each year. It's, it's called. a 5,500 form. And anybody can look these up. So there's the ability for me to utilize the tools that I have with this publicly available information and do some quick analysis. And what I'm seeing is that the majority of plans don't have competitive fee structures. And most of them, I'd say 85 plus percent of them, are not outsourcing some of the fiduciary responsibilities that they could and that they should. The Department of Labor even recommends outsourcing fiduciary responsibilities. And so what does that look like? Most people don't even know where to start.

They just assume that they should sign on the dotted line like they do for their taxes. You know, if their accountant is handing them a form and they say, hey, you know, we've completed all this. Sign here. They just sign there because they are supposed to. That's what they've always done. They didn't know any better. And one of the things I'm helping these plan sponsors and these business owners realize is that by virtue of them signing the 5500 form, they become a fiduciary of their plan. And that comes with a lot of responsibilities that they just don't even know exist. And so what we're able to do is show them that by signing there, they're taking on those

responsibilities, but they have an option to not. They can outsource all of that responsibility to another firm that can specialize and take on those roles and responsibilities and not just remove all of that work and that responsibility, but really empower them to focus on their core business and allow their retirement plan to be managed by a firm that that specializes in doing so and allow them to stay in the scope of their own business more effectively. You know, what I find interesting about your point about the administration fees. It's not just you saying, oh, you're just going to, you're paying too much. I feel like you're paying too much and we're going to be cheaper. you've got a tool that can actually find that out and point to it and say, look at this number,

this is too much, and here's our number, and here's the comparison. So that's really a great way to quantify that. Because I think too many times people like, oh, I'm sure you're just paying too much, and then it's just this fuzzy math, you know, like we've heard it years past year. Agreed. And one of the other things that I like to try to focus on are the things that aren't subjective. You know, any advisor or sales guy can come in and say, oh, I'm going to provide better service and better products than what you currently have. And that's hard to prove. But when I can show

somebody black and white where they're at and where they could be, whether they choose to utilize my services and engage my company in helping them facilitate adjustments or not, I want them to know that there are other options out there. So they can take the information that we provide and they can choose to do with it what they'd like. My hope is that we've earned an opportunity to earn their business. But at the end of the day, My objective is to really make these unknown flaws more prevalent and more aware. It just kind of bring it to light because the longer it goes unpaid attention to, the bigger of a problem it creates, especially in the future.

And really, at the end of the day, for all of the participants that have no idea. And they also don't even have much control. They don't have choices. All these people that are participating in these plans can't say, hey, I want to go over and choose this retirement plan to put my money in. They only have what's in front of them. And let's dive a little bit deeper into that point you made about fiduciary responsibilities, because I think that's a term that gets batted around a bunch. You know, like if whose name is on the dotted line, if fiduciary responsibility is not outsourced?

You know, more often than not, it's the owner. Depending on the size of the company, it might shift to another responsible party within the company. typically an executive, whether it's the head of HR or it's the CFO or the actual CEO or owner. It's one of the higher ranking executive representatives of the organization. And it doesn't have to be. Again, most of the plans we look at are not taking advantage of opportunities to outsource that responsibility. And so you'll see some of the litigation and things that are going on in the environment in the news, some of the larger plans that are being criticized and attacked and some legal action is being taken

is against some of these individuals on a personal level. And that's the part that that's really striking is that you've got an employee doing what they're supposed to do according to their roles and responsibilities, all of a sudden being made aware that they have a personal liability beyond the company liability. And it's just remarkable. Because of the company retirement. plan and it might not be set up as best as it could or the mix of options might not be as broad as it could. And how are they supposed to know that? Exactly. No, this is exactly what I was going to say.

They have no way to know without that being their core business or something that they have education or credentials or certifications or experience in. There's no way for them to know that there's an alternative, that there are other options out there. Again, they're following advice and whatnot that they're given by their trusted advisors. And part of the problem is that some of the trusted advisors don't know what they don't know. And so what we're really trying to do is just kind of bring, again, this educational concept to the forefront and give it more attention and make sure that people are aware that they have options. They have choices.

And you can make some of these changes, as we'll talk about later, you know, without significant effort. Yeah. And if this is not set up and managed the right way, it could have. implications on the owners or the senior management like you mentioned, but also it could have implications negatively on employees too, right? Because if now all of a sudden it's like, oh, look, the health plan doesn't look great or the time off vacation schedule doesn't look great and the company retirement plan, all of a sudden now the retention is impacted. How does that work? Yeah, absolutely. It's a, it's just another part of the benefits package. And so what I wouldn't

want is for an employer that is struggling with retention or attraction of new talent to be missing an opportunity to have a highlight in their benefit package, to have a retirement plan that meets and exceeds all of the needs of their key employees that they already have as a retention tool, and to attract new talent to come into their organization. So it's a key component. It's a key component. Yeah, for sure. So now let's talk about diversification and risk management. So how have these options in different investment options for these plans? How is that given benefits and also provided problematic aspects for employees if they don't have a broad enough diversification? Yeah, this is a double-edged sword here. And I've seen it in plans that we just reviewed over the last week, actually.

were speaking with an HR representative who was in charge of a retirement plan of a notably sized company, a couple hundred employees and I don't know, 20 million or so in assets. And one of the comments that she made was that they, they're often adding investments to their plan, but they never remove anything. And so they had pages and pages of investment options for their employees to choose from. And I don't know about you, but when I'm presented with a menu at a restaurant that just has too many pages, it's really hard to pick what you want. Right. When you confuse, you lose.

Right. So while I think that you need to have reasonable choices and options for your employees and your participants to choose based on what their goals and objectives and what their risk tolerance is, you can't have, you don't want to have too many. So understanding how to find that balance is delicate. And it's something that you need to take a collaborative approach. working with an advisor that it's familiar with both ends of the spectrum to help you find something that meets the needs at that time. And then it needs regular review because the needs

change over time, just like these retirement plans that, you know, they often start because the company started. And then it sits on the shelf and the company grows and their needs and whatnot change over time. But the plan doesn't, it hasn't been given an opportunity to evolve with the changes of the company. And so, you know, by paying closer attention to it and working with a firm that that helps make that priority, you'll help eliminate that from a risk in the future. Yeah. Well, Sean, let's kind of take all of these flaws and misconceptions that you've mentioned. And can you think of an example or a case study without mentioning names or anything where maybe someone came to you, you assessed their company retirement plan, you noticed some of these flaws, you pointed them out,

you implemented some things. What was the beginning or the beginning and end? contrast after a period of time. What were they experiencing after you implemented these? Sure. Good question. So one of the things that we're able to do is give people, like I mentioned earlier, a grade, you know, give them a feel for where they currently stand. And I don't like making too big of a deal out of all the flaws and the problems because a lot of times I'm dealing with situations where people are quite proud of what they've worked hard on. They just don't know what the other options are. And so I like to try to take a well-rounded broad approach that has a, you know, small implementing steps in the beginning with, you know, longer term, we'll make,

you know, continued evolution and upgrades and enhancements and improvements along the way as the relationship continues. And so one of the things I'm able to do is often take people or plans that maybe fall in the 50 or 60 percentile. And more often than not, inside of 12 to 24 months, we're able to move their metrics up into the 80 and 90 percentile categories across a number of different metrics. The key ones are participation, both from an employer standpoint, like how often the company is contributing to the plan in some form of a match, as well as how many and what the participants are contributing. Sometimes they put in just a little bit. Sometimes they don't put anything.

Sometimes they put in a lot. And so if a plan has good participation and healthy contributions, then they'll rate well because it's a plan that everybody's on board with. Being well received. And the other side of things is with the administrative fees that we made numerous references to. A lot of times just being average, you don't have to be there. So I'm able to take people that are in the 20 and 30 percentile and move them way up into the 90s. And that's not a difficult thing to do because there's so much waste in most of the. these plans. It is very simple for us to come in and find opportunities to save them at least 32%

and more often than not, it's somewhere between 32 to 65% in their overall plan fees. And that's a huge claim. That's real money. Yeah, it's absolutely real money. It makes a real difference, especially as time goes on because I don't know if you've spent much time looking at, you know, the power of compound interest, but it is very sensitive to time. The longer you go, the more significant. and it's exponential. So saving something now, even something small really adds up over time. 100%. Well, it's been so neat learning some of these techniques, Sean. If someone is interested in reaching out and connecting with you and maybe having you take a look at their plan, what's the best way that they can do that? A great question. It's really probably easiest for them to just go to our

website. If you just go to full focus financial.com, you'll see some information there that focuses on awareness and opportunities specific to retirement plans and 401K plans. So you can poke around there and click on Learn More Opportunities. And then you'll see contact information there where you can set up a meeting with us. And we can do a specific analysis of whatever plan you currently have or you'd like us to look at and show you what we can do. Great. Well, Sean, thank you so much for coming on today. It's been a real pleasure talking with you. Thank you, Mike. Appreciate it. You've been listening to Influential Entrepreneurs with Mike Saunders. To learn more about the resources mentioned on today's show or listen to past episodes,

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