Web Being Used To Manage 401
The factors with which Smart’s program — Retirement Smarts — tries to deal are that many people:
- have been given retirement portfolio choices by employers, but little guidance in making those choices;
- are fearful about planning retirement;
- don’t routinely adjust their portfolios to fit their retirement goals;
- haven’t even framed retirement goals; and
- have little sense of urgency about adjusting portfolios to changing conditions.
So far, Smart says, one area corporation has subscribed to his Retirement Smarts program.
It works like this:
The subscription fee for Retirement Smarts — a Web-based advisory program — is $10 per year per employee. The service is available online to every employee and, among other things, includes a quarterly e-mail reminder to workers to balance their portfolios as market conditions change.
The alternative — for corporations that don’t want to buy the subscription — is that employees can purchase the service themselves for $15 a year, provided the employer agrees to promote the service to its work force.
Smart, a native of Oakland County and a U-M graduate who has been in practice here since 1989, stresses that Retirement Smarts is not a one-size-fits-all package.
He told the Business Journal that if, say, United Widget subscribes to the service, Retirement Smarts’ first step is to create a secure data base containing the employees’ accounts and the investment choices that the employer makes available.
Once that’s done, each Widget worker then accesses the site on a confidential basis where he or she executes an eight-item questionnaire that helps nail down his or her retirement goals and establishes his or her risk tolerance.
Based on the questionnaire results, the site then presents investment portfolio mix recommendations to each employee, following up each quarter with reminders to rebalance those portfolios.
“It’s an online guide to help people select intelligently among retirement accounts to minimize risk and maximize their returns,” Smart said.
Smart stresses the program is for all workers, not merely for those people who face retirement in the next few years.
“The best time to start on this is right now,” he said. “The investment environment changes constantly.” He noted no one form of investment has consistently outperformed others over the past decade.
He said that when many 401(k) holders think about retirement they are, on the one hand, frightened of losing their accounts, but still don’t seem to realize that by making the right choices they can very fundamentally change their future — the earlier the better.
“The stakes are pretty high,” he said, “and it’s a constantly changing investment environment.”
He said he often encounters people who rather shame-facedly admit they haven’t looked at their accounts in three years or more.
“If you’re putting an amount equal to $10 a month in your 401(k), over a 30-year-period, the difference between 7 percent and 10 percent will more than double the amount,” Smart said.
Smart founded his firm, Smart Planning, in St. Louis, Mo., in 1987. Two years later, he returned to Michigan to set up shop in Grand Rapids.
He told the Business Journal he began developing Retirement Smarts about two years ago and rolled it out two months ago. He said the program aims at filling a major gap in retirement investing.
Smart noted that, as recently as a decade or two ago, many employers made the contributions to employee pension plans and assumed the responsibility for managing those investments.
“The employer’s interest in managing those investments,” he said, “was that if they did a good job, then the amount that they had to contribute to the employees’ retirement was reduced.”
That interest faded as use of individual retirement plans expanded, he said, so that now retirement planning and management is pretty much a personal thing.
He said some employers still give advice to employees, but it’s often a hit-or-miss and informal thing and — in this time of intense global competition — most employers necessarily must concentrate most of their energy on their core focus.
He said he designed Retirement Smarts to be an addition to companies’ benefit packages to help people manage their portfolio and, over time, gain confidence in doing so.
The offices of Smart Planning are at 99 Monroe Ave. NW in the Comerica Building.