STAMFORD, Conn. -- Defined contribution plan sponsors are not quite ready for advice, according to executives at General Electric Asset Management Services, who are unveiling a new retirement education program.
The program, called One-on-One, is not advice but rather "near advice," in which participants receive a suggested allocation of money to specific asset classes in their 401(k) plans, explained Jack Boyce, senior vice president of General Electric Asset Management Service.
It is being launched in response to market research that showed plan sponsors preferred a personalized education program. "We did not hear a cry for advice," said Mr. Boyce.
GE Asset Management Service is the financial sales and marketing arm of General Electric Co., Fairfield, Conn. General Electric Asset Management -- formerly GE Investments -- is the investment management arm that manages $115 billion, including General Electric's $26 billion defined contribution plan and GE's family of mutual funds.
The service is being beta tested with a 1,200-employee plan sponsor that is in the leasing business with multiple locations and has a $50 million defined contribution plan, said Peter Chiappinelli, director of institutional marketing. He would not identify the business.
Parent not a client
Parent company General Electric Co.'s policy favors education over investment advice for its 401(k) plan participants, said Melissa Reinke, a GE spokeswoman. But so far, General Electric officials have not indicated the company will be one of the first to use the service, Mr. Boyce said.
"I have no idea what they are going to do," Mr. Boyce said.
In the study done by GE Asset Management Services, plan sponsors indicated they preferred education to advice.
"In our research plan we tested an `advice' concept," said Mr. Chiappinelli. "What we found was that while certain segments of the market were receptive to the concept, another significant segment of the market was not comfortable with a full advice product at this stage. Advice is a dicey topic for plan sponsors today."
Most of the plan sponsors surveyed, 62%, were interested in investment education to help employees make better investment decisions, the research indicated.
About 36% were concerned that their current materials and efforts are not working, while 32% said personalized education would be a valuable benefit for retaining and attracting employees. Close to 30% of those responding indicated they wanted to reduce the inquiries and burden on the human resources and benefits departments, Mr. Chiappinelli said.
"Employers are motivated by both a paternalistic desire to help their employees make better decisions and by some self-interest," Mr. Chiappinelli said.
The majority of those questioned, 62%, said an outside party should provide the personalized education service, compared with 32% who stated their current 401(k) provider should do so, according to the study.
Because of the study, GE Asset Management Service's new education program does not recommend in which funds participants should invest. It also is not financial planning, Mr. Boyce said.
"This is not advice," Mr. Boyce said. "It won't be positioned as advice, and this does not tell participants which funds to invest in." But it does help participants build models and test "what-if" scenarios concerning various deferral rates and investment in various asset classes. It also identifies which funds in a participant's plan belong to which asset class, he said.
"We found that no matter where a plan sponsor stood on the advice issue, there were common concerns and needs that needed to be incorporated into the design," said Mr. Chiappinelli. "These mostly had to do with objectivity, delivery methods, liability issues and accessibility."
GE Asset Management Services has joined with mPower -- new name for participant investment advice provider 401k Forum LLC's parent company-- San Francisco, and Arthur Andersen LLP to make the service both "high tech and high touch," Mr. Chiappinelli said. Participants can access the service on the Internet through an integrated website with mPower or they can speak to a consultant by telephone using a toll-free number staffed with Arthur Andersen consultants, Mr. Chiappinelli said.
However, if there are two investment options in a certain asset class -- large-cap equities for example -- the service will not recommend one of them, said Steve Deschenes, president of mPower.
"We are absolutely doing rigorous work in developing a profile for the plan's funds, but we are not reducing it to a fund-specific choice," Mr. Deschenes said. "It's another way a plan sponsor is given a choice in helping participants."