Industry Insight from Fred Barstein
Turning Sand into Silicon

Just as many experts are wondering how there can be a true recovery from cost cutting and tepid top line growth, we get news from Dubai that has many concerned whether this is just a blip or the beginning of massive deleveraging of sovereign debt.  So while others are pondering the fate of the universe, the Dow Jones Industrial Average or the S&P 500, the only real hope for a genuine longer term recovery lies with savvy small business people like retirement advisors and their clients who are also mostly small or mid-size businesses themselves.  While money and human capital are finite, ideas are not.  Can innovative advisors take what is finite, and seems to be diminishing, and grow with the use of productive and creative ideas?

Legendary economist Paul Romer, who is famous for saying, “A crisis is a terrible thing to waste,” applies the analogy of the use of sand to brilliantly illustrate the creative use of ideas to expand beyond the limit of money and human capital.  The less savvy worker will make sand castles out of sand, while the more enlightened one makes glass.  The highest use of sand is the silicon chip.  All are made from the same material.  The blind squirrel advisor installs a retirement plan which resembles a sand castle and does nothing only to watch it crumble.  A more experienced advisor might install a benefit plan that resembles glass, but it is hard, inflexible, and easily broken – especially during a crisis.  The benefit plan installed and guided by the truly innovative advisor creates a plan more akin to a silicon chip.  The plan changes, adapts, and meets the needs of all constituents as if it were customized for each one and results in lower costs and greater benefits for all.  Never have small and mid-sized plan sponsors recognized the need for a savvy retirement and benefits advisor; and never have they been more willing to make a switch from the advisors who installed and then walked away from plans that crumbled or cracked during the current crisis.  The savvy retirement advisor that learns to grow their benefits practice in hard times is poised for dramatic growth when the real recovery hits.

Gifted advisors cannot accomplish everything alone.  They need to find partners that can supply the tools, capital, and knowledge to help them turn sand into silicon chips rather than sand castles or glass.  While they may not solve the world’s problems or even the economy at large, savvy retirement advisors will find innovative ways to guide their clients, both sponsors and participants, towards a more successful retirement through what seems like a maze of benefit options in a world that does not seem right just yet.

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