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NAGDCA Notes

2016 Leadership Award Winner - The City of New York Deferred Compensation Plan “The Individual Consultation”

Since its inception in 1985, the New York City Deferred Compensation Plan has instituted innovations in plan design and a service delivery model, that have since become industry standard. The Plan was among the first to develop an unbundled open architecture structure using separate accounts, a deemed IRA with traditional and Roth components and the offering of customized target date portfolios using the Plan’s own underlying investment funds. 

In 2008, the New York City Deferred Compensation Plan, partnering with ICMA-RC, founded its Financial Planning Center. The aim of this Center is to provide holistic financial planning and educational services to Plan participants. At that time, New York City was among the few DC plans nationwide to provide its participants with an in-house Financial Planning Center serviced by salaried, non-commissioned Certified Financial Planner™ professionals. One of the key services offered by the NYC DCP Financial Planning Center is the Individual Consultation Service. 

The Individual Consultation (IC) service is a benefit available to all New York City Deferred Compensation Plan participants. It includes: 

·   A 90-minute one-on-one discussion of a person’s goals and review of their current situation.

·   A hard copy personal Financial Plan to take home.

·   An opportunity to address one or more of their financial questions such as college

   planning, estate planning or major purchase decision.

·   Impartial and unbiased education.

 In 2015, the Deferred Compensation Board, in order to highlight this valuable service, voted to expand the IC service by reducing the cost of an Individual Consultation for the first 500 participants to $25 (from the standard cost of $179). The discount will cost the Plan approximately $77,000. The Deferred Compensation Board’s goals were to:

·   Increase the number of participants utilizing the service.

·   Make personal financial planning more accessible to participants who may not feel they need a financial planner or have enough assets to work with one.

·   Build awareness of the vital importance of a good financial plan.

·   Streamline the existing IC process and decrease procedural barriers to participants. 

Financial planning is often perceived as a service for the wealthy. That’s understandable. The more money a person has, the more complex their situation can become. But people who don’t have a lot of money in savings also need guidance. Unfortunately, those individuals often don’t have enough to satisfy the minimum asset requirements of some financial planners which can average $250,000 in investable assets or more.

One can argue that the financial planning decisions of middle-income families are more critical than those of more affluent individuals. There is less room for mistakes which can easily happen. One report found that two-thirds of middle-income families have made a financial mistake that had cost them between $5,000 and $23,000. According to the Federal Reserve Board Report on the Economic Well-Being of U.S. Households in 2014, when asked what types of retirement savings or pension they have, 31 percent of non-retired respondents reported they had no retirement savings or pension whatsoever. 

Recent DOL regulations have highlighted the importance of a fiduciary standard – putting clients’ best interests first. The CFP® professionals supporting the New York City Deferred Compensation Plan act in a fiduciary capacity and do not sell investment products or receive any outside compensation or commissions. They provide uncomplicated financial planning that adheres to fiduciary standards. Plan participants can have the confidence that they are receiving objective, impartial financial planning and education. 

The success of the Financial Planning Center is being measured by the number of IC requests received on a monthly basis and the number of completed financial plans for participants. Since the reduced cost IC became fully available in February 2016, there has been a monthly increase of more than 306 percent in completed Individual Consultations since the same time in 2015. 

For more information on this program and others, visit NAGDCA.org.

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