What’s in it for Them?

I made peace with one of the biggest enemies I had professionally and it’s something I’m proud of. We both admitted we were wrong and acted in haste because of a lack of communication and it was good for business to make peace. There was something in it for both of us.

Around the same time I had this fallout professionally, I had a personal relationship that went up in smoke (it was coincidence, I assure you).  Now that relationship has not been repaired because the side who hurt me still thinks they did nothing wrong and there is nothing in it for me to make peace because when friend or family isn’t there for you when you really need them, what use are they?


When it comes to making friends in the retirement plan business or trying to make it in the retirement plan business, you have to understand that the other side needs to find something in it for them.

When I worked at that law firm to try to build a national ERISA practice, I decided to start relationships with financial advisors and third party administrators (TPAs) because the law firm partners weren’t referring me business even though there was something financially in it for them. When I met advisors and TPAs to tell them how my practice would help their plan sponsor clients, there was a little interest. I only started to gain traction when I had my own practice and my articles helped these advisors and TPAs in their marketing.  Some of the time, people will help you. When they discover you could help them, almost all of the time people will help you. It’s human nature for people to be selfish, use that knowledge to help you in your selfish pursuits.

On LinkedIn, I post a lot. One time I posted and some insurance agent that I didn’t know posted after one of my posts and asked me when I can sit down with him and discuss with him what he could do for my clients, First off, I didn’t know him and I thought that was way too forward. Secondly, I think the advisors or TPAs who referred me these clients would have a problem with that. I don’t suppose the agent thought what might be in it for me.

Any relationship in the retirement plan business must be mutually beneficial to succeed. So rather than just looking what’s in it for you, ask yourself what’s in it for the other side.

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Proactive Steps Retirement Plan Sponsors Should Take

My latest JDSupra.com article can be found here.

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You Might Have a Problem With Your Retirement Plan When…

My latest JDSupra.com article can be found here.

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Finding Missing Participants

Missing plan participants is one of the major issues when people leave employment and the plan sponsor has lost touch with them. After their last day of service, some plan participants fall off the face of the earth. The problem is that as a plan sponsor, they are a fiduciary to the plan and are responsible for the assets belonging to those folks who fall off the face of the earth. It becomes a bigger issue when you factor in the required notices and disclosures that all plan participants are supposed to receive.

In the old days, plan sponsors would have guidance from the Department of Labor (DOL) that said that when it came time to locating missing participants, the plan sponsor could use the Internal Revenue Service letter-forwarding program (since discontinued) that would send mail to these missing participants or use a locating service. Many third party administrators advised clients that they could simply liquidate a missing participant’s account and forward that balance to the Federal government as a100% tax withheld payment.

Guidance 10 years ago eliminated that 100% withholding option especially when the guidance as pushing for the use of Individual Retirement Accounts for these missing participants that a plan sponsor could use to park the missing participants’ money.

Thanks to technology, it’s much easier to find people. Heck, I’ve found so many former classmates on Facebook. So it’s no surprise that the DOL issued more guidance regarding locating participants and one of the suggestions is to Google missing participants.

Some of the suggestions that the DOL had in locating missing participants in Field Assistance Bulletin 2014-01

  1. Use certified mail
  2. Check related plan and employer records
  3. Check with the designated beneficiary that the participant listed on their beneficiary form.
  4. Find them online. The DOL says the plan sponsor should use free Internet search tools, such as Google, public records, obituaries, and social media (Facebook, Twitter, etc).

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Prune those 401(k) Plan Investment Lineups

We are a nation of over abundance and we should be grateful for that. The problem is that over abundance can lead to a life of excess. We are often told that more is more and the problem is that there are many times where less is more.

When it comes to participant directed 401(k) plans, one of the greatest examples of over excess is a fund lineup.  There are thousands and thousands of mutual funds out there, so many financial advisors and plan sponsors think they should contain as many funds as they can. You often find plans with 20+ mutual funds in the lineup and I once came across one plan with 53 different investment options. Why so serious about this issue? It’s pretty simple.

Studies have shown that too many funds on a plan’s investment lineup actually lowers the rate at which participants defer their salary in a 401(k) plan. Why? Too many funds, especially in one asset class have the ability to confuse and overwhelm plan participants and overwhelmed plan participants are less likely to defer than those that aren’t.

The solution? Start pruning a plan’s fund lineup. I think 12 are more than enough funds in a lineup, maybe 15 at tops. No need for 25 or 53, there is any reason for three large cap growth funds in any lineup.  Plan sponsors need to have their employees defer in a 401(k) plan for a wide variety of reasons, so why get in the way with too many funds on the investment lineup?


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The Small Things that Create the Biggest Problems for 401(k) Plan Sponsors

My latest JDSupra.com article can be found here.

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How Good the Advisor is often based on how well they play with other plan providers

What makes a good retirement plan financial advisor? Well it takes an attention to detail, an understanding of what the role to entails, and a dedication to the client. In addition, what I find is the way a good financial advisor handles other retirement plan providers.

A good financial advisor will use other retirement plan providers to act as part of their team to offer the best overall retirement solution to their client. They will lean on the third arty administrator (TPA), ERISA attorney, or auditor to assist with their clients and use them as a resource for any questions they may have, as well as a sales resource for potential clients. When I was working for a New York TPA as well as in my practice today, I have helped advisors with potential clients. It’s a feather in an advisor’s cap as it shows a potential client that they offer white glove treatment if they can get a TPA and/or ERISA attorney to offer assistance without being retained first.

The not so good financial advisor sees themselves as an island, they are very possessive of their clients and are very wary of any provider encroaching on that client. They also have no use for any other retirement provider because they don’t value what they bring to the table. They only see other retirement plan providers as referral sources which they are not because most of the referrals that these providers receive are from other financial advisors and in the rare case that they get a direct referral from a plan sponsor, they are only going to refer that client to financial advisors that they have a longstanding relationship with.

Financial advisors should target a few TPAs that they can work with and rely on with any proposals or any questions for potential clients and to assist current clients. They should also seek out an ERISA attorney who has an eye in developing relationships with the hope of getting business later, rather trying to charge for every phone call and every consultation. See them as part of your team to help augment your sales team, but they likely won’t be your sales team.



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An Education Policy Statement is not Magic

Any type of item that keeps you in health is a good thing as long as you use it. So the floss I bought after my last checkup and the exercise equipment that I bought my wife a few years ago that is collecting dust are meaningless if they are not being used.

The same can be said about an educational policy statement that many retirement plan financial advisors are trying to draft for their clients or use as a way to solicit business.

In a nutshell, it’s a gimmick. Not a rip-off like the fiduciary warranty, but it’s not magic because any advisor could help plan sponsors draft one.

An educational policy statement (EPS) mimicked of course after the investment policy statement is really cute marketing, but absolutely of no use if the plan sponsor isn’t going to abide by it.  I like the idea behind the EPS, it’s always a great idea to memorialize fiduciary decisions with paperwork. I just worry that plan sponsors won’t actually provide the investment education that plan participants need in a participant directed 401(k) plan. An EPS is a nice idea on paper, but only effective if it’s not just on paper and being used to offer education.


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Mistakes that 401(k) Plan Sponsors Should Avoid, But Do Anyway

My latest JDSupra.com article can be found here.

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Watch out for Biased and Paid Opinions/Studies

I would say that if that if you ask a retirement plan expert for their opinion, 3,000 experts will yield 5,000 opinions. It’s great to be opinionated, but for the plan sponsor, it can be a bit confusing.

The problem in the industry is when opinion is masqueraded as fact in a study that a retirement plan provider has commissioned. For example, one of the largest payroll providers has just offered plan sponsors a study why it’s a great way to integrate payroll with 401(k) administration, namely hiring this payroll provider to handle 401(k) plan administration. Does one honestly believe that this payroll provider commissioned a study that’s going to say having your payroll provider handle 401(k) administration is a bad idea? Of course not, especially when my articles on the matter are available for free J

Another study was commissioned by a Chamber of Commerce that will not reveal its members that said that changing the fiduciary rule change is going to have 30% of retirement plan sponsors terminate their plan because the rule change will increase regulatory costs and liability. Nonsense. Of course, a brokers association supported the results of the study.

Opinions are important, but understand the role of the person giving it. Is it really impartial or are they really trying to steer you to a certain service or fee arrangement?

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