StephensChoice:A Choosy 401(k)

Gary Millican, the chief financial officer at South Arkansas Oil Co., said the reason his El Dorado firm chose Stephens Inc. as its retirement services provider is simple, literally.

Millican said the 401(k) program SAO converted to a StephensChoice plan two years ago is easy for employees to understand and use. The strong returns haven’t hurt either, he said.

“The first thing is really that Stephens has produced positive results for us vs. the plan we had been in,” Millican said. “But the second thing we like is the control that each employee has over the destiny of where their money is going. They can go online at any time and control their investments, and it is truly easy to use.

“Above all else, though, StephensChoice has just been very productive for us.”

Two years ago, Stephens’ retirement services division launched StephensChoice, a platform that allows plan trustees and participants to diversify their retirement investments through a “best of breed” lineup of funds and managers. Companies use 401(k)s, 457s, 403(b)s, pension plans or profit sharing as the vehicle, and Stephens uses a proprietary selection and monitoring process to drive performance.

Tim Hynes, a senior vice president and branch manager for Stephens in Fayetteville, said the firm has nine private client advisors who manage 401(k) plans in Northwest Arkansas.

“We have a filtering system through which we analyze various funds,” Hynes said. “We compare their performance to peer groups and we go through and look at the managers in various asset classes. If they’re not beating their peers, we relieve them of their duties and put someone else in their place.”

A third party administrator (TPA) takes care of the reporting, compliance and administration headaches, and Stephens focuses on what Warren Simpson said it knows best: managing money.

Simpson, an executive vice president and the managing director of Stephens, said the StephensChoice line has seen 40 to 50 percent annual growth in participants. The private firm doesn’t release the dollar-size of its portfolios, but Simpson said there’s been sharp growth.

“Ten years ago, we had no 401(k) process at all,” Simpson said. “We decided to get into it, and we were pretty green. We started out using another turnkey brokerage to handle our retirement investing, but as we got more sophisticated in the business we decided to take it on ourselves.

“Over time, now we’ve developed an unbundled approach so that we can focus on the investments.”

Mimi Hurst, a Stephens vice president and chartered financial analyst, chairs the StephensChoice investment committee. She said part of its genesis began in 2002 when Stephens began serving the state’s 457-retirement plan, the governmental equivalent of a 401(k).

That served as the template for the design of StephensChoice, a process that Hurst said involved many on the Stephens team. It was quickly clear, she said, that the open-architecture, high-touch product had commercial viability.

“We have a very unbiased platform for choosing the best managers per asset class and the control to be able to change them,” Hurst said. “A lot of firms will say they do that, but to the extent that they really hire and fire managers, I doubt they do.”

Hurst said StephensChoice also looks at unique ways to alleviate liability concerns of trustees including starting by tailoring plans to suit their company or participants’ needs.

Ed Frost, Stephens’ director of retirement services, said although StephensChoice uses TPAs, his 20 years in retirement planning help him match the right administrators with the right plans.

It’s not a one-size-fits-all approach, he said.