At my weekly Rotary meeting (every Thursday morning, if you care to join me), I was introduced to a video that I’d like to share with you.
It is a terrific presentation from Simon Sinek on how great leaders inspire. The discussion revolves around the Why, How and What we do. For most of us, as you will hear, we focus on the What, but it is really the Why that is most relevant.
I have been fooling myself into believing that our clients, prospects and industry contacts truly know WHY KCS was formed nearly 5 years ago (8/1/11). Where has the time gone? But in reality, I’m sure that I / we have focused too much attention on the What and How, and not nearly enough on the WHY!
After nearly 30 years in the investment industry, I had an epiphany! I became more acutely aware of the impending U.S. retirement crisis. I am not sure why it took me that long to truly appreciate the magnitude of the problem, but it could have been that fact that for the 20 years prior to that moment I had been part of an investment management team focused on only a small sliver of a retirement portfolio (forest for the trees syndrome?). None-the-less, I should have been more in tune with the reality of the situation because my family was a living example of the crisis that was unfolding.
On one hand my Mom and Dad were enjoying a terrific retirement helped in large part by my Father’s participation in a defined benefit plan (DB), and also supported by a profit sharing plan and my Mom’s small 401(k). On the other hand, my mother-in-law was not as fortunate, as she had no DB plan and a rather insignificant 401(k) plan. As a single mom who worked many part-time jobs during her children’s early lives (3 daughters), “life got in the way”, and it impacted her ability to save for retirement, as it has for many in similar situations. Unfortunately, it never got any easier for her!
Today, we have a small portion of our private sector work force participating in a defined benefit plan (roughly 14%), and nearly 50% of our private sector employees don’t even have access to a retirement plan through their employer. Oh, how the times have changed from just 30 years ago when roughly 46% of our private sector labor force participated in a DB plan.
Furthermore, managing a retirement program is not easy, especially when one hasn’t been trained to handle that responsibility. We go to great lengths to make sure that plumbers, electricians, doctors, lawyers, etc. are licensed, but we expect individuals who have never taken an investment course to handle the management of their retirement program? Really?
Remember, defined contribution plans were initially used as supplemental income plans for high income earners. They were never intended to be anyone’s primary retirement vehicle. But, we are on a slippery slope as a nation by having nearly our entire private sector being asked to fund and manage their own program. Regrettably, but not surprisingly, the results have been disastrous. Oh, sure, there are examples of individuals who have amassed small fortunes, but they are very small subset. According to the National Institute on Retirement Savings (NIRS), 40 million American households (age 25-64) have no retirement accounts, and the typical working-age household has on average retirement savings of only $2,500!
So WHY is there a KCS? Since our founding, our mission has been to try to get every household or individual an appropriate retirement, one much more like my parents. We prefer that DB plans be preserved, as we fear the social and economic ramifications from our society’s failure to provide a retirement system that supports our employees. As a society we are living longer, but what is the worth of a few more years of life if it is spent in abject poverty?
At KCS, we have shared with our readers the What and How we do what we do, and we are very happy to take the time to further educate you on our approach. Please know that we are different than most asset consultants because we don’t see the current industry practices creating a different outcome at this time. Failure to adjust ones approach may just lead to having a significant percentage of our elderly population (it is worse for women over the age of 65 than it is for men) experiencing a very difficult time in their “golden” years.