Value-add program that provides insights to how advisors can enhance their practice by addressing financial wellness with their prospects and clients. Themes include:
� How to identify candidates for a program � Different types of programs available in the market � Considerations for selecting a financial wellness provider
Resources to help position, differentiate, and educate clients on the target date space. Materials include:
� Thought leadership � Product information � Participant education
The fi360 Fiduciary Score quarterly scorecard and fund comparisons help decision makers identify and monitor investments in the course of their due diligence process. Insights include:
� Investment rating system � Investment Highlight Report � Quarterly and average scores � Proposal Report
BrightScopeThis in-depth Beacon™ report provides access to year-over-year plan-specific trend information. It can help you prepare for client and prospect meetings or uncover potential areas where you can make recommendations for plan enhancements. Report includes:
� Plan assets � Providers � Number of participants � Investment lineups, performance, and fees
So much of the financial wellness conversation to date has focused on the potential health care cost mitigation of adopting organizations.
A more effective angle, however, may come in the form of the company’s increased ability to recruit, retain, and allow a happier workforce to retire on time.
This provides advisors with a unique way to address financial wellness and differentiate themselves with prospects.
Wellness Programs Aim to Keep Employees and Employers HappyT. Rowe Price conducted a plan sponsor survey in April 20161 to get their thoughts about financial wellness and other defined contribution trends. When asked what the major objectives of financial wellness initiatives are, plan sponsors responded with:
These responses are almost identical to the common reasons why employers offer an overall benefits package in the first place—to recruit and retain top talent.
Financial wellness programs, for the most part, are focused on more holistic financial education, such as debt management, budgeting, and saving and spending strategies. It takes some connecting the dots to figure out why retirement advisors—who are typically focused on investments, plan design, and fiduciary issues—are the ones proactively addressing something as broad as financial wellness programs.
Why Advisors Are Focusing on Financial WellnessThe willingness of an employer to consider implementing a financial wellness program seems to be driven more by employee satisfaction than a desire to increase retirement savings. Therefore, it’s up to the plan advisor to reframe the discussion with plan sponsors to show the importance of a financial wellness program to improve financial readiness.
The foundational objective of a financial wellness program should be to positively impact the overall financial condition of the participant. This then gives them the capacity to generate increased retirement savings.
However, in our survey, only 34% of plan sponsors polled viewed increased deferrals as a major objective. And only around 20% viewed decreasing cash-outs and loans—actions that could be viewed as financially distressed behavior—as a major objective. This presents the advisor with a huge opportunity to shine
74%
Retaining skilled employees
69%
Increasing employee satisfaction
67%
Improving employee productivity
64%
Competing effectively for skilled employees
Advisors have a huge opportunity to
make the connection between financial
wellness and a workforce that has
saved enough to retire on time.
T. ROWE PRICE ANALYSISAdvisors can enhance their competitive position by addressing the growing demand for financial wellness programs
� Participants will appreciate and respond positively to more holistic financial education that is relevant to their unique needs—such as paying down debt, saving for college, or living within a budget.
� Plan sponsors recognize the potential benefits of “financially fit” employees—less stress can improve productivity and increased retirement readiness can help reduce the need for older workers (heavier users of health care services) to continue working.
� In a world of commoditized investment analysis, advisors can demonstrate their added value by defining an approach to financial wellness that goes beyond traditional 401(k) education.
� Advisors can choose to deliver financial wellness programs as part of the services they offer (perhaps in conjunction with other advisors in their practice) or by partnering with providers who offer financial wellness solutions as part of their participant engagement programs.
T. ROWE PRICE SUGGESTS THAT YOU:1. Determine your willingness to provide and/or partner
to deliver a financial wellness program as an extension of your retirement plan services.
2. Prepare to discuss the link between financial wellness, worker productivity, health care costs, and overall retirement readiness with plan sponsors.
3. Craft your talking points to address this topic with clients using the tips on the flip side of this communication.
ISSUE RECAPFinancial wellness programs are gaining traction
� Over 29% of large plans (5,000+ participants) currently offer a comprehensive financial wellness program (beyond a standard 401(k) education program).1
� 76% of companies were somewhat or very likely to expand their focus on the financial well-being of their employees in 2014.2
� Financial wellness programs not only help participants save for retirement and improve workplace productivity, but they can decrease related health care costs for employers.
1 PSCA’s 58th Annual Survey of Profit Sharing and 401(k) Plans. 2 Aon Hewitt.
Financial wellness programs: an opportunity to differentiate your practice and broaden your reach.Plan sponsors are increasingly seeking to offer holistic financial education that benefits both the employees and the company itself.
A PICTURE OF FINANCIAL STRESSMany Employees See Little Way to Save
48%
38%
52%
Reported their stress over financial issues increased over the last year
Find it difficult to meet their monthly household expenses on time
48% Consistently carry balances on their credit cards
Find dealing with their financial situation stressful
T. Rowe Price’s investment philosophy aligns well with the interests of long-term investors like sponsors and participants. This is reflected in our assets under management, nearly 60% of which are retirement related. Partner with a firm that has over 75 years in the asset management business and over 30 years of retirement plan experience. To learn more about our target date funds, call 1-800-371-4613.
Proven results from a target date leader
At T. Rowe Price, we believe that investment
success comes from balancing market, inflation,
and longevity risks. This principle is at the core
of our target date philosophy—and serves as the
foundation for every decision we make to achieve
the best possible outcomes for our clients.
What sets T. Rowe Price Retirement Funds apart
The numbers and the industry accolades speak for themselves
COMPETITIVE, DIVERSE UNDERLYING INVESTMENTS
1 T. Rowe Price Retirement Funds are composed of 18 predominately actively managed T. Rowe Price mutual funds.
Because of our disciplined process, several of the standalone underlying funds have been closed to new investors. Through T. Rowe Price Retirement Funds, participants can gain access to what have historically been some of our more popular investment options.
AN EXTENDED GLIDE PATH
2 Allocations continue to shift from equity to fixed income for 30 years after the target retirement date. This exposure to equity
helps continued growth potential—in an effort to keep pace with inflation and maintain purchasing power over the long term.
MANAGER TENURE AND STABILITY
3 Our Retirement Funds reflect the collective thinking of some of the firm’s most senior managers. Lead Manager Jerome
Clark has been at the helm since the funds’ inception in 2002.
This depth of experience carries over to the underlying funds’ managers. Firmwide, our portfolio managers average 17 years’ tenure with the firm*—among the longest in the industry.
FUND PERFORMANCE VS. PEER GROUP of the T. Rowe Price Retirement Funds ranked in the first or second quartile of their Lipper peer group over the 3-, 5-, and 10-year time periods.*
FUND PERFORMANCE VS. THE BENCHMARK of the T. Rowe Price Retirement Funds beat their custom benchmark over the 3-, 5-, and 10-year time periods.*
EXPENSES of the T. Rowe Price Retirement Funds ranked in the first or second quartile of their Lipper peer group.*
100% OF OUR RETIREMENT FUNDSbeat their 10-year Lipper average as of 6/30/2015.3
MORNINGSTAR ANALYST RATING™
for the Retirement Funds as of 12/31/2014 .1Past performance cannot guarantee future results. Results will vary for other periods.
*As of 6/30/2015.
“RECOMMENDED FUNDS” T. Rowe Price: One of only two target date mutual fund families to be included in the Money 50.2
EXECUTIVE SUMMARY
■■ The convention of classifying target date glide paths as either “to retirement” or “through retirement” suffers from a number of significant shortcomings that could lead those who rely on it to make misinformed investment decisions.
■■ The allure of “to/through” is that it provides a simple shorthand method for assessing a glide path’s investment objectives based solely on its shape. The problem is that while a glide path’s design objectives will influence its shape, it does not follow that a glide path’s shape can be translated back to its design objectives.
■■ We prefer a classification system that is solidly objectives-based rather than shape-based. Retirement plan objectives tend to be twofold: lifetime income replacement and limiting the risk of capital loss. Because these objectives compete against each other, glide path design involves the decision of how much to emphasize one objective versus the other.
■■ Our approach attempts to directly measure the emphasis placed on each objective. This allows glide paths to be not only categorized by their direction of emphasis, but also ranked by their magnitude of emphasis.
■■ T. Rowe Price offers two glide paths, each of which attends to both objectives, but with different degrees of emphasis.
Glide Path Classification:SENSIBLY REFRAMING “TO VERSUS THROUGH”
Richard K. Fullmer, CFA
It has become customary in the investment industry to employ a shorthand method of classifying target date portfolios as either “to retirement” or “through retirement” strategies based on the shape of their asset allocation glide paths. The purpose of such classification, presumably, is to help investors and retirement plan sponsors identify glide paths that may be suitable for their objectives. This is a noble purpose, one that perhaps arose out of a sense that target date portfolio providers had not communicated their objectives clearly enough, in which case it should not be surprising that some type of classification paradigm arose from the void.
Unfortunately, the “to/through” classification paradigm has serious shortcomings that make it wholly unsuitable for this purpose. The designation between “to” and “through” is a misnomer that serves to confuse more than it does to distinguish. One source of confusion is a lack of agreement on how these terms are defined. Even if a common definition existed, however, the “to/through” classification convention would still be of limited value to investors because its shape-based methodology reveals very little about the objectives a glide path seeks to achieve. Moreover, it forces categorization into one of only two buckets—as if investor preferences were
PRICE PERSPECTIVEApril 2015
In-depth analysis and insights to inform your decision making.
Retirement Plan Advisory Group™ Scorecard System™With heightened fiduciary and regulatory scrutiny, it is more important than ever for advisors and plan sponsors to have a repeatable process by which to select and monitor investment lineups. The Retirement Plan Advisory Group (RPAG) Scorecard System incorporates both quantitative and qualitative factors in evaluating investment strategies.
Call 1-800-638-7780 to request a prospectus, which includes investment objectives, risks, fees, expenses, and other information that you should read and consider carefully before investing. All funds are subject to market risk, including possible loss of principal.
* The Scorecard System is meant to be used in conjunction with RPAG’s sample Investment Policy Statement (IPS). Combined, these factors are one way of measuring the relative performance, characteristics, behavior, and overall appropriateness of a fund for inclusion into a plan as an investment option. Each plan may have its own IPS, which should be reviewed prior to making any fund changes.
** For the periods ended 9/30/2016, RPAG categorized the T. Rowe Price Retirement 2005 Fund as Moderate. For the periods ended 3/31/2016 and 9/30/2016, RPAG categorized the T. Rowe Price Retirement 2030 Fund as Aggressive. For the periods ended 3/31/2016, 6/30/2016 and 9/30/2016, RPAG categorized the T. Rowe Price Retirement 2035 as Aggressive.
6
* The Scorecard System is meant to be used in conjunction with RPAG’s sample Investment Policy Statement (IPS). Combined, these factors are one way of measuring the relative performance, characteristics, behavior, and overall appropriateness of a fund for inclusion into a plan as an investment option. Each plan may have its own IPS, which should be reviewed prior to making any fund changes.
About the Retirement Plan Advisory Group (RPAG) Scorecard SystemThe RPAG Scorecard System is a proprietary, institutionally based investment scoring system established by RPAG that incorporates both quantitative and qualitative factors. The Scorecard score is based on 10 screens, which include style analysis, risk/return factors, peer group rankings, and certain qualitative factors. The Scorecard System is built around pass/fail criteria, on a scale of 0 to 10 (with 10 being the best). RPAG uses separate methodologies to assess active, passive, and asset allocation strategies. Active and asset allocation strategies are evaluated over a 5-year time period, and passive strategies are evaluated over a 3-year time period. The RPAG score is calculated on a quarterly basis and is 80% quantitative and 20% qualitative.
The RPAG score represents the analysis and opinion of Retirement Plan Advisory Group alone. Neither T. Rowe Price Retirement Plan Services, Inc., T. Rowe Price Investment Services, Inc., nor any T. Rowe Price affiliate (T. Rowe Price) is affiliated with Retirement Plan Advisory Group. T. Rowe Price does not select investment options for retirement plans or provide investment advice with respect to that selection. This material is provided for general and educational purposes only and is not intended to provide legal, tax, or investment advice. This material is not individualized to the needs of any benefit plan, nor is it intended to serve as the primary basis for an investment decision.
Past performance cannot guarantee future results.The funds shown in the above list were selected by T. Rowe Price as representative of those offered in the T. Rowe Price defined contribution retirement channel and may change quarterly. This material is not intended to be a recommendation of these funds. The scores are not intended, nor should they be used, as the sole source of information for reaching an investment decision. A high RPAG score does not represent a manager’s skill at selecting securities for investment and does not assure that a fund will have positive investment results. Funds are categorized based on RPAG’s category designation for the most recent quarter. For RPAG Scorecard information for any T. Rowe Price fund, please contact us at 1-800-371-4613. This material is for Institutional Investor or Financial Professional Use Only and is not intended for use with retail investors.
T. Rowe Price Investment Services, Inc., Distributor.C1C567XFE 2/17 2015-US-16451
International/Global EquityINTERNATIONAL LARGE-CAP VALUE
T. Rowe Price International Value Equity TRIGX 8 9 9 10
INTERNATIONAL LARGE-CAP BLEND
T. Rowe Price International Concentrated Equity PRCNX – – – –
T. Rowe Price Overseas Stock TROSX 10 10 9 10
T. Rowe Price Spectrum International PSILX 9 10 9 10
INTERNATIONAL LARGE-CAP GROWTH
T. Rowe Price International Stock PRITX 7 6 3 2
Fixed IncomeCORE FIXED INCOME
T. Rowe Price Inst’l. Core Plus TICPX 10 10 10 10
T. Rowe Price New Income PRCIX 9 8 5 5
T. Rowe Price U.S. Bond Enhanced Index PBDIX 7 8 5 5
GLOBAL FIXED INCOME
T. Rowe Price Global Multi-Sector Bond PRSNX 8 8 8 8
T. Rowe Price International Bond RPIBX 4 4 4 4
CONSIDERATIONS FOR SELECTING A FINANCIAL WELLNESS PROVIDER
As financial wellness increases in popularity, it becomes critical to develop a valid framework for selecting a financial wellness provider.
Providers offer a variety of tools, resources, and services. Due to the diversity of offerings, if employers can effectively communicate their highest-priority components of a financial wellness provider, they may be better suited to navigate what is becoming an increasingly complex landscape.
Here are some considerations that employers may want to incorporate into their evaluation process. This list only serves as a framework to start their evaluation—the needs and priorities of every employer may differ.
WELLNESSWORKS
ADVISOR/PLAN SPONSOR USE ONLY
What you receive You now have access to customized reports that present a variety of plan-specific statistics from BrightScope’s database of retirement plan information.
In addition to an evaluation of plan health, BrightScope’s in-depth Beacon™ report gives you access to year-over-year trend information, such as:
n Plan assets n Providers n Number of participants n Investment lineups n Investment performance n Investment fees
How to use the information You can access comprehensive plan information with a phone call or e-mail. This takes the legwork out of locating and organizing data—so you can focus on individual sponsor concerns or refine your value proposition.
Meeting preparation is tedious. But having key information—such as fee benchmarking data, how long an investment has been in a lineup, and annual asset trends—ahead of time lets you walk in with best practice recommendations and discussion points at the ready. You’ll look more prepared, experienced, and knowledgeable in the eyes of your clients.
Get started today Contact your T. Rowe Price representative with the name of a client or prospect. Using BrightScope’s database, T. Rowe Price will produce a report and send it to you.
We can also provide a guide that explains each section of the report, how to position information with clients, as well as provocative questions to start engaging conversations.
Not sure who to contact at T. Rowe Price? Call our internal sales desk at 1-800-371-4613.
FOR INSTITUTIONAL INVESTOR USE ONLY
T. Rowe Price and BrightScope are not affiliated companies.
Who is BrightScope?BrightScope is a nationally recognized financial information company that offers detailed investment and provider data on 50,000 defined contribution (DC) plans, covering more than $3 trillion in assets.
Using a plan’s Form 5500 and financial audit information, BrightScope is able to aggregate and organize vital statistics that DC professionals can analyze to enhance plan design and improve retirement outcomes.
C1TIL4GS5 2/152015-US-7618
Powerful rePorting. exPert analysis.T. Rowe Price has partnered with BrightScope to provide you with comprehensive, plan-level data that allows you to have higher-value interactions with clients and prospects.
USERGUIDETURN PLAN DATA INTO MORE SUCCESSFUL DISCUSSIONS
BrightScope Customized Plan Reports
FOR INSTITUTIONAL INVESTOR USE ONLY
Provided by T. Rowe Price
4 | TURN PLAN DATA INTO MORE SUCCESSFUL DISCUSSIONS
SECTIONS 3 & 4: Providers & Participants
LOOK DEEPER:
Take note of how long a plan has partnered with a particular recordkeeper or provider and how long ago they may have made a change.
FOOD FOR THOUGHT:
n Are there opportunities for you to work closer or in better sync with other providers listed?
n Could you obtain plan data or intelligence more easily from the other providers?
n If the plan has been with its current providers for three to five years, have those providers periodi- cally reassessed plan asset growth or average account balance versus fees charged? Provided the lowest-cost share classes available? Introduced new products and services?
WHAT IT IS:
The plan’s top three providers by role, as listed on each year’s Form 5500 for which data is available.
LOOK DEEPER:
Much like plan asset trends, participant trends can reflect several factors of plan health:
n Is the plan growing or shrinking in size?
n Is the rise or fall in participants due to company growth (or reduction), demographic changes (e.g., baby boomers retiring or a recent influx of young employees), or recent plan design enhancements (e.g., implementation of auto- enrollment)?
FOOD FOR THOUGHT:
n If the number of participants has grown quickly, what has the sponsor done to address or enhance plan design to accommodate a broader participant base?
n Has the sponsor considered a possible increased fiduciary responsibility to provide a retirement benefit that will help get their employees to a successful retirement?
n Do you, as an advisor, want to take on (or continue to service) a plan with a shrinking participant population?
WHAT IT IS:
Active (eligible) participants and participants with balances as listed on each year’s Form 5500 for which data is available.
Participants
Providers
BRIGHTSCOPE USER GUIDE | 3
SECTIONS 1 & 2: Plan Overview & Plan Assets
LOOK DEEPER:
Knowing the industry, you can now use that information to benchmark the plan against its peer group.
FOOD FOR THOUGHT:
n Use surveys, case studies, or other well-regarded studies to benchmark the plan relative to peers.
n Do you advise other plans within that particular industry? If so, you may be able to benchmark it using data you already have.
n Use T. Rowe Price’s free benchmarking site: troweprice.com/referencepoint. It comprises plan data from more than 800 full-service plans and 2 million participants.
WHAT IT IS:
Basic company information as filled out on the previous year’s Form 5500.*
LOOK DEEPER:
n Is the plan growing or shrinking in asset size?
n Is the rise or fall in assets due to market conditions, company growth (or reduction), or recent plan design enhancements?
FOOD FOR THOUGHT:
n As the advisor, is the growth or reduction in assets aligned with the level of service you’re providing?
n What is the return on investment you’re receiving based on the amount of time spent servicing the plan?
n Should you reconsider your level of service, fees, or willingness to retain them as a client?
WHAT IT IS:
Plan net assets and plan net flows as listed on each year’s Form 5500 for which data is available.
Plan Assets
Plan Overview
* All data shown in this brochure is hypothetical; no actual plan data is shown.
“fi360” and “fi360 Fiduciary Score” are registered trademarks of fi360, Inc. T. Rowe Price Investment Services, Inc., Distributor
