The One Mutual Fund Family Lineup

You must know about the shoemakers’ children and how they go barefoot and have no shoes. In the retirement plan industry, we have retirement plan providers and their employees’ retirement plan.

I know, I have been there. The third party administrator I worked for didn’t have a great plan, it was often alleged we switched platforms to salvage our premier  pricing with a certain insurance company. Don’t know if it was true, but that is what was alleged.

So for me, it’s no surprise that mutual fund companies are being sued by former employees over their own 401(k) plan. While I don’t know all the facts and it will be decided in the courts, one fact (if true) fascinates me.

I often waste time analyzing irrational behavior through rational eyes and I always ponder: “what were they thinking?” So when I hear that part of the complaints is that all of the mutual funds in a mutual fund company’s plan were funds from that fund family, I ask: “what were they thinking?”

When you have thousands of mutual funds out there and hundreds of mutual fund companies, it’s just amazing that any plan sponsor (whether it’s a mutual fund company or not) thinks it’s prudent that every fund on the plan’s lineup is from the same mutual fund company. It doesn’t look right and it doesn’t look prudent, especially when there is no mutual fund company that has superior success in every sector of the market. In addition, any plan that only has funds from the same mutual fund company are often being administered by bundled providers who are mutual fund companies (i.e, plan being administered by T. Rowe Price with only T. Rowe Price funds). How is a plan sponsor able to offer a rational explanation that it was prudent to select mutual funds from one company? I don’t think they can, especially when the mutual fund company is one of the plan providers.

Often in the retirement plan business, if it doesn’t look right, there is usually something wrong. Any plan using the mutual funds from only one mutual fund company is a plan with something wrong.

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Supreme Trouble with Tibble

While the Supreme Court ruled in the monumental 401(k) case Tibble v. Edison that mostly dealt with statute of limitations issues, one could read something into it a little more.

Tibble was the case where the District Court held that a plan sponsor violated its duty of prudence as a plan fiduciary by not monitoring the plan’s investments. While the Court held that a plan’s selection of investments and failing to monitor is a continuing breach, what they said as part of their ruling should make any plan provider or plan sponsor to take pause:

“In short, under trust law, a fiduciary normally has a continuing duty of some kind to monitor investments and remove imprudent ones. A plaintiff may allege that a fiduciary breached the duty of prudence by failing to properly monitor investments and remove imprudent ones. In such a case, so long as the alleged breach of the continuing duty occurred within six years of suit, the claim is timely.”

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It Takes Only One Retirement Plan Participant To Sink An Employer

My latest article can be found here.

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DOL Comment Period Extended

In an announcement that did not surprise me, The Department of Labor (DOL) has announced a brief extension of the comment period on its proposed fiduciary rule and set a date for a public hearing.

The comment period for what the DOL has been extended by 15 days — from 75 to 90 days — which the DOL  said means that the opportunity for public comments on this proposal may be over 140 days.

The dates of the public hearings will take place during the week of Aug. 10, 2015.

The comment period was extended because of the seismic shift that this proposal would have in the retirement plan and brokerage areas.

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A Plan Sponsor’s Foolproof Way To Getting In Trouble

My latest article can be found here.

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My Referrals aren’t for Sale and Neither Should Yours

My word is my bond; at least I try to make it that way. My opinions on which providers are good for plan sponsors aren’t for sale and neither should yours.

When I get asked for referrals, I always try to point out at least three competing providers to plan sponsors because I don’t want any suggestions that I’m just pushing one because it could benefit me and I want the plan sponsor to pick a provider they are most comfortable with.

I just received a call from an irate plan sponsor who felt swindled by a broker for their retirement plan. The broker was referred by the third party administrator who was referred by their attorney. The attorney won’t return calls, there maybe a reason or two why.

Thanks to the popularity of my articles and blog, I get a lot of requests to meet with financial advisors and third party administrators. Of late, I have not done a good enough job in meeting them. I think some of it is my schedule and some of it is remembering how many other plan providers I met and how little business came from it.

Regardless, I have heard of some brokers offering some sort of referral program. I have to clearly state that I have never been directly or indirectly paid for making a referral and I never will. My opinions on who is a good plan provider are my own and it’s not for sale.  I sure could use the money, but there are more things important than money: my reputation and that’s not for sale.

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Simcha Shabbat, June 13th

 Our next Simcha Shabbat will be on:
Saturday, June 13, 2015
at Shabbat Services (9:00 am) in the Sanctuary

At that time we will celebrate any and all Simchas for the months of June  and July.  If you forgot any Simchas from earlier in 2015, by all means please include them.  All Simchas will be announced from the Bima.
Congregant Name:____________________________
Please include the following Simchas:
Name                                        Occasion                                              Date
Enclose your check payable to: Congregation B’nai Sholom-Beth David
Minimum Donation is $25.00.
Deadline is Wednesday, June 10, 2015

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Rabbi’s Discussion Group

The Rabbi’s Discussion Group and Adult Bat Mitzvah Group are cancelledthis Wednesday, May 13th and next Wednesday, May 20th.

Thank you.

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Dealing with a probable Fiduciary rule

I recently spoke to some higher ups at a major brokerage firm concerning the proposed Department of Labor fiduciary rule.

Surprisingly, we were on the same page. Most of them were in favor of some sort of fiduciary rule that would put retirement plan advisors on some fiduciary setting. We also had concerns on how the fiduciary rule would apply to individual retirement accounts (IRA) because unlike retirement plans, there maybe less of a market from advisors to choose for the retiree that had less than $100,000 in IRA assets.

They were preparing to prepare for some sort of fiduciary rule, they think it’s inevitable. I agree. Whether you are a broker or a registered investment advisor, you have to get ready for some sort of fiduciary rule. Nothing is set to stone, but after the last debacle of trying to introduce a fiduciary rule, I’m convinced something will finally be implemented. I don’t expect the rule to be the same as the one proposed because I think there is enough congressional pressure that will be applied to get some concessions.

While a broker maybe concerned with the changes, but I think this fiduciary rule change is an opportunity for everyone including brokers because someone else’s problem can be your opportunity.

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Sorry Lois or How I Started a Law Firm from Nothing

I always talk about my frustrating experience at a certain semi-prestigious Long Island law firm (sorry, Lois). I do it partly to rub my success in their noses because they never had faith in me, but mostly because the way I market myself now is the way I wanted to market myself back there. I could have been a star there, I could have been a contender, I could have been somebody, instead of the bum associate attorney I became.

When I was there, I wanted to use Twitter, I wanted to use Facebook, and I wanted to constantly post articles and blog messages. The bureaucracy of the law firm wouldn’t allow it. Social media was accused of the advertising committee of one of being barred by the legal advertising rules and I had a six-month wait on the publication of my articles because 3 partners had to approve my article before publication and the marketing department was bogged down in producing articles written by the law firm administrator that served no purpose other than his own.  Since I made comments about this abuse of resources, this law firm administrator’s article output was whittled to nothing before he jumped ship.

My message was to offer an ERISA practice that would be available for the small to medium sized plans that thought they couldn’t afford an ERISA attorney with fees on par with what the legal department at a TPA would charge, with the added benefit of an attorney-client relationship.  My articles were going to try to help plan providers recruit and maintain clients, which would open a dialogue with these providers with the hopes I’d get clients through referrals by these providers. Since plan sponsors and plan providers were wary of the never ending possibility of being billed to death by the billable hour, I was going to charge a flat fee.

One of the ideas I had was that I was going to make a run at the clients of the old TPA I worked at. When I left that TPA, I was replaced by two attorneys and a paralegal (perhaps why a few TPAs have outsourced their legal department to my practice, cost effective is my middle name). So when my old TPA was charging $600 for the Section 415 amendment back in 2010, I was going to charge $300. Only problem is that the advertising committee wouldn’t let me say $300. For some reason, I had to say I’d do it in a cost effective manner. After contacting 750 of my old clients, I think I got 1 through this approach. 7 years later, I still think what would have happened had I been able to use $300 in the solicitation letter.

So enough of my life story, It’s in my book. As any plan provider you need to find a message as to why anyone would hire you. Saying you’re cheaper or how the other provider isn’t going to cut it. If you are a financial advisor, the message is about offering a value, how your services will help a plan sponsor’s retirement plan, minimize their liability, and improve the retirement outlook of the plan’s participants. If you are a TPA, it’s how you facilitate the plan’s administration, eliminate the potential pitfalls of plan sponsor’s fiduciary liability, and plan design that can help a plan sponsor maximize contributions to certain employees while making the required minimum contributions to the rank and file.

Like ERISA attorneys, plan providers are a dime a dozen. You need to stand out among the crowd and it’s all about identifying a message that can help explain your services to potential clients and why you should be hired among the crowd. Hopefully, you’ll have better luck in getting your message out that I did those years ago at that law firm.

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