Plan Prospecting Tools only show you part of a Plan’s problem

As a retirement plan provider, tools like Brightscope, fi360, Fiduciary Benchmarks, and FRA Plan Tools among others, are great resources to prospect prospective clients.

Thanks to the information provided on the Form 5500, these tools can let you know about the costs of the Plan as well as many of the potential issues with the plan such as a low participation rate and whether the Plan has a proper bond.

These reports are not the Holy Grail; they are imperfect tools because all they report is what appears on a Form 5500. If there are issues with the Plan that don’t show up on the Form 5500, you won’t know about it.

I remember my old law firm scored an 85 with their 401(k) plan on Brightscope; it’s actually still the same score. The plan had low fees and it had a generous safe harbor/new comparability contribution of 5% to non-partners.  The eligibility was only 3 months. The problems with the Plan when I was there was that the plan had no financial advisor on the Plan. The plan’s investments weren’t reviewed for 10 years, there was no investment policy statement, and plan participants weren’t getting any investment education. So the major issues that the plan suffered from would never show up on any of these plan-prospecting tools.

These tools are like problems with a car, it only shows you what’s visible and if you really want to know what’s wrong with the plan, you will have to lift up the hood. So just stating to prospective clients that you’ll be cheaper than the incumbent provider, get the big picture from the plan sponsors and what maybe wrong. The only way you’ll find out the full story of what’s wrong with the Plan is when you have the plan documents, valuations, and fiduciary materials reviewed. Then you get the full picture and then you can hammer home the point why you are the right fit for a client.

Prospecting tools like Brightscope are like golf clubs. Consider them the driver, but you need woods, irons, and a putter to win the hole.

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A Good Plan Sponsor is the key to a Good Retirement Plan

I was a fit at my old law firm sort of like how my son’s toddler clothes fit him at age 7.  I wasn’t a good fit because I didn’t take myself too seriously, I tried to push for flat fee billing, and I tried to break down difficult retirement plan concepts into Basic English for my clients and for the financial advisors that I was working with. The way I empathized fiduciary responsibility for plan sponsors then and now is that it isn’t brain surgery and clearly that’s a threat when you have to charge $300 an hour for that legal advice because when you charge a premium, you can’t make the advice that much basic.

The fact is that like keeping a healthy mouth, keeping a healthy retirement plan doesn’t take that much work. It takes dedication and time, but ultimately, a successful retirement plan always requires one constant: a plan sponsor that takes their fiduciary role seriously. So a plan can have the best providers out there and the best fund lineup out there, it’s still probe to problems if the plan sponsor is negligent in their duties. A plan sponsor committed to fiduciary responsibility is the one constant for having a great retirement plan.

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Retirement Plan Professionals That Plan Sponsors Should Avoid

My latest JDSupra.com article can be found here.

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Arrogance is a bad trait for a 401(k) plan decision maker

Regardless of the business you’re in, one of the worst thing you can do in being the decision maker for your retirement plan is that you know better than most retirement plan professionals.

No plan sponsor likes to get the unsolicited phone call from the retirement plan professional that their plan is too expensive or that the funds should be replaced. However, when you keep on running a plan so poorly, maybe the problem could be with you and there is nothing wrong with admitting that you could use some help. Retirement plans are completely different from any type of business or human resources function, so its OK to seek help. The worst thing you can do is think that you know best especially when you don’t have the background to make an educated decision.

I have always mentioned the certain issue of a former human resources director at a former place of employment. She clearly runs the human resources department as her own little fiefdom. I assume that, because her poor management of the firm’s 401(k) plan would get her fired at any place else. The 401(k) plan was poorly run before I arrived at that firm. The 401(k) plan offered no investment education to plan participants and investment options weren’t changed in a decade because there was no financial advisor retained by the firm. While I suggested interviewing certain TPAs or selecting certain financial advisors, she knew better than I did. Of course, the plan is still poorly run. I know that for a fact because I was recommended by outside advisors to help them with a severe plan error. Of course, the human resources director can hold a grudge (I did lambaste her for the past 4 years) and my offer to help was rebuffed. Her management of the 401(k) plan has always led to problems with the 401(k), so how good is it? It would be better for her to have hired a fiduciary who can assume a good chunk of the liability of the fiduciary process of the plan and the day to day administration, but she knows best. She would rather stand Pat, than improve the plan.

Arrogance may work in business, but it is a character trait that spells doom for a 401(k) decision maker.

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Retirement Plan Advisors Advantage

My newsletter geared towards retirement plan professionals can be found here.

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401(k) Pros That Financial Advisors Should Partner Up With

My latest JDSupra.com article can be found here.

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The Rosenbaum Law Firm Review

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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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